Brexit A New Trade Agreement – Part Three
Author: Blake C. Goldring
June 28, 2018
Preparing for Brexit Not Just a British Challenge
I recently participated in a “Preparing for Brexit Not Just a British Challenge” Panel with the Right Honourable Lord Mayor of the City of London and the Honourable Michael H. Wilson, Chairman of Barclays Canada.
Canada has a significant financial services presence in the UK. In fact, Toronto and London are at the heart of the Canada-UK commercial relationship with both cities listed among the top 10 global financial centres.
Canadian pension funds are some of the biggest institutional investors in the UK, while our banks have created long and successful business relationships and jobs on both sides of the Atlantic.
The UK is Canada’s second most important destination for investment abroad. There are more than 1100 UK firms owned or controlled by Canadian interests.
Canada and the UK have significant ties in trade and investment that account for about 40% of Canada’s relationship with the EU. This is well above the UK’s 15% weight in the EU economy.
The UK is by far Canada’s most important commercial partner in Europe and, from a global perspective, is our third largest export market after the United States and China.
Given these numbers, there is no doubt, that our relationship will be impacted on several levels with the UK’s exit from the EU. Many Canadian firms had viewed the UK as a springboard for accessing the larger EU market.
While the UK remains in the EU, it is subject to the provisions of the provisionally implemented Canada-European Union Comprehensive Economic and Trade Agreement (CETA). CETA was initiated to create jobs, strengthen economic relations and boost Canada’s trade with the world second-largest market.
This progressive free trade agreement covers virtually all sectors and aspects of Canada-EU trade in order to eliminate or reduce barriers.
CETA provides substantial access in goods and services markets, while easing labour mobility and opening up public procurement. Some of that access could be reduced when the UK exits the EU.
Given the time needed to ratify CETA in all EU Member States, there is a possibility that the UK will have left the EU by the time CETA comes fully into force. The UK will need to renegotiate its trade agreements with non-EU countries after Brexit.
And most businesses – regardless of their geographic location – will need to reassess their position to take advantage of the opportunities and mitigate risks.
Depending on the Brexit outcome, there are a number of continental European cities that might replace London as the financial center for the EU. Favorites include Frankfurt, and Dublin, with Amsterdam, Warsaw, Luxembourg, and Paris as other possibilities.
Given the uncertainty that exists regarding the level of access the UK will retain to the EU market, Canadian financial services have not made final decisions on the future of their operations in the UK.
Until negotiations to leave the Eurozone are well underway, I believe it will be difficult for Canadian financial services firms to determine what their post-Brexit presence will look like, at the same time, I am optimistic that Canada can negotiate a CETA-like trade deal with UK providing the access that was originally negotiated with all 28 EU member states.