Canada-EU Trade Deal Could Survive Brexit in U.K., Freeland Says

  • Trade minister seeks to ‘build on’ CETA after passage by EU
  • Canada is open to talks with Japan if TPP fails: Freeland

Trade Minister Chrystia Freeland says Canada will seek to build on its EU trade deal within the U.K. once Brexit occurs, rather than striking a separate bilateral pact.

The Canada-EU Comprehensive Economic and Trade Agreement is set to go into force provisionally in early 2017, about the same time the U.K. only begins official talks to exit the European Union. The timing leaves Freeland optimistic the pact will take effect in the U.K. -- and, once it does, both sides can reach a deal to preserve it.

“If CETA can be passed by the European Parliament, we will have a trade deal with Britain,” Freeland said in a Dec. 21 phone interview from Toronto, when asked if Canada will begin bilateral talks. “And the job at that point would be to build on it and make sure nothing happens to undermine it.”

The U.K. is Canada’s biggest trading partner in the EU. Freeland signaled she’s optimistic CETA will kick in and remain in effect even after any U.K. withdrawal.

“Whatever Britain does, whatever formula it finds with the EU, I think we are determined on both sides of the Atlantic to preserve that CETA-level of closeness, or get even closer,” she said. “But we’re already going to have CETA, which is a very close trading relationship.”

Prime Minister Justin Trudeau’s government is expanding free trade at a time when protectionist sentiment is increasing globally -- having already revised CETA to calm fears before reaching a deal this year. The deal would add 12 billion euros ($12.5 billion) to annual EU economic output and C$12 billion ($9 billion) to Canada’s while increasing two-way trade by about a quarter, according to estimates from the two governments.

Bucking Trend

Provisional enactment of CETA will allow Freeland, 48, a former journalist and author, to shift at least part of her focus to other files in her second year as one of Trudeau’s top economic figures. One highlight of the first year “absolutely is the extent to which we’ve managed to buck this global protectionist, even isolationist trend,” she said. Trudeau’s program of raising taxes on the top 1 percent and cutting them on middle-income earners has helped that effort by ensuring the profits of trade are shared more widely, she said.

CETA was delayed this fall when a Belgian region’s holdout scuttled a planned signing ceremony. At one point during talks to win support, a frustrated Freeland walked out and said it seemed impossible that the EU could reach any trade deal. Ultimately, Belgium agreed to the pact.

Freeland sees opportunity amid anti-trade sentiment in other developed economies, saying they could be more inclined to trade with countries like Canada whose wages, labor rules and environmental standards wouldn’t undercut their own.

“Progressive trade is about being sure that labor and environmental standards are part of trade agreements. That is one of the real strengths of CETA. And I think that is something that people are going to quite rightly demand of trade agreements, and something that Canada really is championing,” she said.

TPP and Trump

Canada’s other major proposed deal, the 12-nation Trans Pacific Partnership, looks to be dead amid opposition from U.S. President-elect Donald Trump. Freeland said she isn’t jumping to conclusions, but that the deal can’t proceed without the U.S.

In the meantime, Canada remains in close contact with the other TPP signatories and would be “very open” to bilateral talks with Japan, she said.

While “it’s important not to be precipitate in making judgments” about the TPP’s fate, “I have been talking a lot with Japan all year, and we are very open to any kind of a conversation with Japan,” she said.

Trudeau visited Japan in May and said both countries have left the door open to a bilateral deal if the TPP were to fail. Canada, with its population of 36 million, must remain a trading nation to maintain high-wage jobs and has “strong national consensus” in favor of an open society, Freeland said.

Open Borders

Canada’s openness to trade and immigration is going to “show more value for us, even more value, in the years to come” by attracting a skilled workforce. Freeland committed to focusing in 2017 on ensuring small and medium-sized businesses “are a focus of our trade agenda” and benefit from sprawling deals such as CETA. Canada earlier pledged C$350 million in funding for dairy farmers impacted by the deal.

The country is not immune to protectionist sentiment that fueled the Brexit vote and the U.S. election result, she said, but can fight it by ensuring trade agreements benefit middle class workers, a key plank of Trudeau’s economic policy.

“When people talk about building support for trade, they don’t often talk about domestic policies but I think they’re absolutely essential,” she said. Fear of a hollowed-out middle class “is driving so much of the protectionist impulse and the xenophobic impulse in many countries around the world.”

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