On November 16, 2020 Mark Agnew, Senior Director of International Policy, addressed the House of Commons Standing Committee on International Trade on matters related to Canada-UK relations, with a focus on trade issues.
Mr. Agnew’s opening remarks are as follows (check against delivery):
Thank you madam chair and honourable members for the invitation to speak as part of the committee’s UK study. It is a pleasure to be back here again.
As committee members will appreciate, the UK is a significant trading partner for Canada as our third-largest goods export market and second-largest destination for FDI abroad. Importantly in the context of the European Union, it accounts for 40% of our exports to the EU-28.
Despite those impressive rankings, it is still a small overall proportion of our global trade share behind the US. The relationship has potential to grow. Britain is an ideal market for Canadian companies seeking to diversify away from the US given its shared language and ways of doing business.
With the EU separation question firmly decided in the UK, we need to look ahead to dealing with the world as it is. This reality means that once the UK’s transition period with the EU ends on December 31, the UK will no longer be a party to CETA. Given the UK accounts for 40% of Canada’s merchandise exports to the EU, Brexit matters for Canadian businesses.
The Canadian Chamber has not completed our own in-house modelling, but some external work serves as a rough guide. Canadian economist Dan Ciuriak conducted an analysis in 2018 as part of the British government’s CETA impact assessment. The study found that by 2030 the value of the UK’s participation in CETA was worth about £1.1bn – or approximately C$1.9bn – in Canadian exports to the UK per year. While not a precise measurement given a)we do not know the final architecture of the UK’s trade arrangements with the EU and Canada; b)it is a projection out to 2030; and c)the UK’s MFN tariffs diverge from EU tariffs, the study provides a rough signpost on the imperative of securing a Canada-UK trade deal.
I would like to now be more specific on the immediate implications of not having a transition agreement in place by December 31.
Number one are tariffs. Canadian businesses will lose preferential access to the UK market, thereby making our products less competitive. Some examples of where products would face tariffs include:
- Lobster products with tariffs of up to 10%
- Plastics under HS 3908 with tariffs of up to 6%.
- Vehicles under HS 8703 with tariffs of up to 10%
- Beef products under HS 0201 with ad-valorem tariffs of up to 12% and specific unit tariffs per kg. I should note here too that products like beef that have a CETA TRQ. Any TRQs transposed into a Canada-UK agreement need to be commercially viable quantities for exporters to use them.
Number two is regulatory cooperation. The CETA provides a framework for critical regulatory dialogues to occur on agriculture non-tariff barriers and through the conformity assessment protocol. Regulatory cooperation is not glamorous but it is critical. Our trade agreements have an important role in shining a spotlight on regulators to advance issues. Agriculture NTBs have been problematic in the EU context and we hope the UK will take a different approach.
Finally, number three are services. The CETA’s temporary entry chapter provisions on intra-company transferees means that Canadian companies can bring specialized talent to work at a Canadian operation. The contractual service suppliers’ provisions means specialized skills can be brought in to fill supply chain gaps. The CETA provisions on these entry categories reduce business burdens, and without them in a UK context companies will need to use other routes that are more cumbersome.
Simply put, if CETA matters then transitioning it to a bilateral agreement also matters. We have been working closely with our UK counterparts at the Confederation of British Industry to advance this and will continue to do so. We hope this committee will be able to facilitate expeditious passage of the implementing legislation once the agreement is finalized.
As members of the committee will appreciate, everything you do in trade builds on what came before it. CETA was a gold standard agreement when it was negotiated, but the Canada-UK transition agreement should be seen as the starting point for going further. I would like to highlight quickly five specific areas in that regard.
First is digital trade. Since the CETA’s negotiation, global discussions on digital trade rules have taken on a much greater focus, including at the WTO and our digital trade chapters in the CPTPP and CUSMA. Discussions with the UK on digital trade should support cross-border data flows.
Number two is regulatory cooperation. The future gains on merchandise trade will be driven by reducing non-tariff barriers. This is particularly important for Canadian agriculture exporters where it has been tough slogging in the EU as I alluded to a moment ago. But we can also do forward looking work in areas like health sector procurement and cyber security.
Number three is critical minerals. The global supply of rare earth minerals that enable the production of many hi-tech products remains dangerously concentrated. Future discussions should facilitate greater private sector production and movement of these rare earth extractive products.
Fourth is trade facilitation. The pandemic has emphasized the value of the efficient movement of goods globally. The UK and Canada should explore opportunities to introduce additional measures to modernize customs processes.
Finally, number five is labour mobility. Enhancing the ability of companies to attract talent and access service contracts abroad is critical to diversify what we are exporting. Activities like after-sales servicing can be more lucrative for companies than the original export itself, so we should be ambitious on how we approach this business activity.
Without a bilateral agreement in place, it will be that much more difficult to go further on these five areas and others.
for your attention and I look forward to your questions.
 See Table 7 from Ciuriak Consulting Inc, January 2018 “The Impact of the EU-Canada Comprehensive and Economic Trade Agreement on the UK.” Link available here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/708803/Impact_of_the_EU-Canada_Comprehensive_Economic_and_Trade__Agreement_on_the_UK.pdf.
See also UK Department for International Trade, May 17, 2018 “Impact assessment of the Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada.” Link available here: https://www.legislation.gov.uk/ukia/2018/82/pdfs/ukia_20180082_en.pdf