The ‘SuperCanada’ option remains the best basis for a UK-EU trade deal

The ‘SuperCanada’ option remains the best basis for a UK-EU trade deal

For several years now, I have been arguing for a ‘SuperCanada’ (or CETA+++) bespoke deal with the EU to replace our EU membership. In the next few weeks, it’s very possible this will become the UK’s agreed position after Cabinet level discussions.

I would be relieved rather than celebratory if this were to be the case, as I honestly believe SuperCanada works for all sides and avoids many of the complications of trying to half stay in the EU, Single Market, EEA or, critically, the EU Customs Union.

We’d be simply like many other free, sovereign, independent nations – such as Japan, the USA or India – seeking a friendly and mutually advantageous trade deal with the EU.

My proposed ‘SuperCanada’ model – the latest version of which you can find here – is based on nearly 10 years’ experience of EU trade deals in the European Parliament, specifically working on Canada’s CETA deal (the Comprehensive Economic and Trade Agreement) – including meeting Prime Minister Trudeau in Strasbourg and Chrystia Freeland, the then Trade Minister, in Ottawa.

I am now working on the EU-New Zealand trade deal, which is 80% based on CETA. Australia too is following this CETA model. So if the UK were to adopt and improve on CETA, we would be in the company of fellow Queen-loving, English-speaking, English law and democracy-abiding, free-trading nations. Fundamentally we need to think of ourselves now as more Commonwealth Anglosphere and less European Stratosphere.

CETA is the best and most comprehensive trade deal the EU has done to date with any nation – and Canada is only the EU’s 12th largest partner, while the UK is set to become the largest single partner for the rest of the EU (‘the EU27’) after Brexit.

In the very short timescale we have, SuperCanada has the advantage of being very familiar to the EU, its Council, the Commission and people like the Trade Commissioner, her trade advisers, the Chairman of the Trade Committee, and MEPs. This is because CETA remains fresh in the memory of all groups and parties who voted on the deal just over a year ago. I know because I have spoken to many of them about SuperCanada and they get the model.

Canada now has 99% access to the EU Single Market (92% in agriculture) with no free movement and not a cent in payments to access that market nor for regional payouts. How much better could we do as the EU’s number one customer?

We currently have no tariffs, no quotas and compliant EU laws, so if we just replicate the status quo of EU membership in a Free Trade Agreement, it could be very straightforward.

Yes, the EU may be politically resistant to giving the UK too good a deal – but the inconvenience of loss of Single Market benefits such as EU passporting rights may be enough revenge for avoiding what is now worrying the EU more and more: the prospect of a ‘no deal’ nightmare.

On that, we need to understand what the EU needs from us, not just what the EU might give us (if we’re lucky). Let’s be clear: the UK is the second largest importer after the USA, has an annual trade deficit with the EU of £75 billion, bigger than some economies, and is the sixth largest world economy.

From the EU’s perspective, 4% of the Dutch economy and 3% of the Belgian economy would disappear without a deal. The UK is the second largest export market for Germany, Ireland and Poland, third for Denmark, fourth for Belgium, France and the Netherlands, fifth for Spain, Italy and Sweden. My earlier paper on this, The UK Market from EU Eyes, is available here.

It’s also the case that EU economies are far more dependent on exports than the UK: while UK exports to the EU are just 12% of our economy (16% to Rest of the World), Ireland’s exports to the EU are 61%, Belgium 59%, the Netherlands 56% and Germany 26%.

So if that’s the Canada deal, what are the extras – the ‘Super’ or ‘+++’ – items – and how will they be handled in negotiations?

On goods, CETA faced much agricultural protectionism, mainly French, that retained 8% of tariff lines. With the UK being the largest market for Champagne and a huge consumer of French cheeses (tariffs outside the EU rise to 40%) the likelihood of maintaining the status quo of 100% tariff-free access is a sensible ‘plus’ for all parties.

On services, and especially financial services, while the EU boasts CETA has more on services than any other trade deal, it is inadequate for our purposes with 70-80% of our economy being services. But then most global trade deals do not cover much in services, nor does the EU services market really exist now; it’s the least developed part of the Single Market.

The restrictions on services don’t tend to be like tariff lines on goods (e.g. 12% on non-EU wines) but are ‘non-tariff barriers’ such as the need for licensing to sell and approvals such as those ‘EU passporting’ rights on financial services.

These rights are often better delivered legally through a negotiated deal from outside rather than trying to horsetrade from within the EU, as this lack of progress demonstrates.

The EU operates within a wider World Trade Organisation (WTO) framework – and the UK will regain our influential WTO seat post-Brexit. There are WTO agreements on services (General Agreement on Trade in Services and the paused Trade in Services Agreement) that set terms on services in EU deals from on high.

As for handling ‘regulatory equivalence’ or ‘regulatory compatibility’, SuperCanada proposes technical committees managing convergence and/or divergence to assess what the impact is of new regulations or removing existing ones. It is right that this is done at a micro level, even on a sectoral basis such as for chemicals or financial services, and without a rigid agreement at macro level. Even the EU jealously guards its ‘right to regulate’ in all its trade deals. These can all be built into SuperCanada.

Investment is likely to be a separate agreement as new EU trade deals are taking out portfolio investment and the controversial Investor State Dispute Settlement system altogether. This results from a European Court of Justice decision on the EU-Singapore trade deal that ruled that the EU can agree all trade deals at EU institution level and not have to go to 36 national/regional parliaments, including the Wallonian parliament that originally voted down the Canada deal, if it is not a ‘mixed’ agreement, thereby potentially saving up to six years for ‘ratifying’ the deals (though provisionally applied anyway).

Other agreements such as a political Strategic Partnership Agreement (SPA) which Canada has are possible, and with similar deals with Australia and New Zealand, a customs agreement and other such deals will follow.

Given the size, importance and closeness of trade between the UK and the EU, basing a new bespoke UK-EU trade deal on the well-proven Canada CETA model has many pluses – excusing the pun. It is sensible and time saving to use a template, whilst ensuring that the UK obtains a deal significantly better, wider and deeper than CETA.