Both Prime Minister Justin Trudeau and President Donald Trump issued statements congratulating Boris Johnson on his recent overwhelming electoral victory, pledging to co-operate on “issues that matter to both of our countries”. One of these issues will be that of trade between our countries and the U.K. when it leaves the European Union (EU) with the implementation of Brexit. Although the U.K. now looks set to leave the EU on Jan.31, 2020, an “implementation period” will maintain its existing trade agreements through to Dec. 31, 2020. Currently, Canada’s trade with the U.K. is covered under the terms of the Comprehensive Economic and Trade Agreement (CETA) negotiated by Canada with the E.U. Donald Trump’s United States doesn’t currently have a trade agreement with Europe. Of course, Boris Johnson would love to enter into a free trade agreement with the U.S. Good luck on that one.
The UK is by far Canada’s most important commercial partner in Europe and our fifth largest trading partner globally. According to Global Affairs Canada, two way merchandise trade in 2018, reached over $25 billion. However, Canada is not expected to make any moves on trade with the U.K. until it sees what happens with the outcome of U.K. trade negotiations with the EU. As it now stands, British trade policy is perceived as being in a mess, especially in the financial services and agricultural sectors. Depending on how things go with Brussels, the powerful U.K. banking industry may want more access to Canada’s market. It’s very unlikely that Canada is going to be willing to give them something in that area. The Canadian banking and financial services sector is quite highly regulated and restrictive.
As for the U.S., next to the EU, the U.S is the top trading partner with 13.3% of total UK exports going to the U.S. in 2019, totalling about $64 billion (U.S.). It’s much more important for the UK to have access to American markets than it is for the U.S. to have increased access to UK markets. Trump has already made it clear that Boris Johnson wants to do business with the U.S. “so badly” — but at what costs? For example, concerns have been raised that parts of the Britain’s publicly-funded National Health Service (NHS) could be made available to U.S. markets by a Conservative government.
Whatever the case, as a result of the new Conservative government’s desire to move quickly on Brexit, 2020 will bring about some interesting and often troubling trade and domestic issues for the U.K. It is certain that Britain’s leaving the EU will lead to renewed independence initiatives in Scotland and the question of the potential union of Northern Ireland and the Republic of Ireland, both regions which strongly preferred to remain as part of the EU. Whether Brexit will lead to better economic conditions in the U.K. will be a determining political factor for the new government. Meanwhile, Canada and the U.S. can only sit back and observe the outcome before making any further trade-related moves. Many North American businesses which have U.K. subsidiaries are sitting on their hands and postponing any planned investments. Unfortunately, the British people are the ones who have to deal with the economic vulnerabilities and political uncertainties resulting from Brexit.
FROLITICKS 