No deal on Cheddar

by Christian Siviere

While Brexit, the withdrawal of the United Kingdom from the European Union, officially took place on January 31, 2020, the parties had agreed to an interim period, during which it was ‘business as usual’ until January 1, 2021. Brexit became operationally effective after that date.

Christian Sivière runs Solimpex and is an international trade consultant and lecturer. christian.siviere@videotron.ca

We’ve had the Canada-European Comprehensive Economic and Trade Agreement (CETA) with the E.U. since September 2017. To preserve our UK trade, we agreed to cut and paste CETA and transfer it into a Canada-United Kingdom Trade Continuity Agreement (CUKTCA), which came into force on April 1, 2021. The period between January and April was covered by temporary remission orders, enabling Canada-UK duty-free trade to flow uninterrupted.

At the time, CETA was praised as our most comprehensive agreement, a ‘new generation FTA’. It had taken eight years to negotiate, so its instant transfer to the CUKTCA, to which the EU could have objected, was daring but effective.

Brexit was sold to the UK public as a silver bullet that was going to solve all the country’s problems, take control, bring seamless trade, deliver a new era of prosperity and even reduce immigration. But instead of prosperity, Brexit has delivered a mess.

Emigration is currently the highest it has been: with Brexit, about 86,000 EU citizens left the UK. They were ‘replaced’ by immigrants from Asia (mainly China, India and Pakistan) and Africa (Nigeria). Net migration now stands at a historic high: with 745,000 net entries between December 2021 and December 2022, and 682,000 net entries between June 2022 and June 2023.

Economically, Brexit has been a disaster, with UK businesses dealing with delays, complications, extra formalities and costs when trading with the EU, their neighbour and largest trading partner. The UK economy has been lagging its main trading partners.

According to a survey released in December by the Opinium Institute, a majority of Britons feel Brexit has been bad for the economy and has failed the UK. They are negative about personal finance and goods prices, the effect on the health service, and the impact on immigration. Brexit has also fuelled the Scottish Independence and Irish reunification movements. In the 2016 referendum, voters in both Scotland and Northern Ireland voted to remain in the EU.

Back to business, one of the pro-Brexit claims was that leaving the EU’s single market and customs Union would turn the UK into a champion of trade, enabling it to make better trade deals with the world. This is an interesting fallacy: how would a relatively modest entity, the UK, get better deals than a much larger one, more than six times its size?

The reality is the UK was able to get trade deals, but on less favourable terms than those the EU had made. For example, in the FTA with Japan the UK had to agree to eliminate import duties on auto parts immediately, whereas the EU eliminated them over several years. On cheese, Japan refused to give quotas for British cheese, and instead offered to give the UK any quotas not used by the EU.

This brings us to the situation with Canada, where something similar happened, as we agreed to give some cheese quotas to the UK under the CUKTA, on an interim basis for three years. And rightly so: how could any Canadian government justify giving additional cheese quotas, over and above those conceded to the EU, which included the UK then.

Will the EU agree to reduced quotas, enabling us to give some to the UK? Of course not! Losing their cheese quotas was just one of the many, predictable, negatives consequences of leaving the EU.

On our side, we would like our hormone-fed beef to be able to access the UK market, which is something the UK is unlikely to agree to, as it would jeopardize their own exports to the EU. The EU does not allow hormone-fed beef and would likely ban all beef imports from the UK if Canada got this back-door entry into Europe.

Meantime, after two years of negotiations, the Canada-UK trade talks broke down. This amounts to political posturing more than anything else, and it sends the wrong signals to the public.

This is particularly true for Canadian SMEs, which are focusing on the US market and might assume from this bad news about Canada-UK trade negotiations that there is no trade deal in place. In fact, we have a perfectly fine trade deal, mirroring the CETA agreement with the EU, the one we called our most advanced.

Our importers and exporters can benefit from duty-free entry for most products in both directions, and can develop business with certainty, both with the UK and the EU, to lessen our dependence on the US market. Unfortunately though, our governments are sending the wrong signals, almost misleading the public, when we need clarity.

Some may lament that British cheddar might become in short supply in Canada due to the expiration of the temporary duty-free allowance. But let me mention two facts, to counter this: first, we make great cheddar in Canada, and secondly, thanks to CETA, we get superb European Union cheese in our stores, so Canadians will survive a shortage of British cheddar!