What lessons can we learn from the impending failure of the CETA free trade deal between Canada and the EU, other than the obvious fact that our ever-pessimistic news broadcasters are, in reporting the development, looking through the wrong end of the telescope by suggesting it is bad news for the UK?
The first lesson, as James Skinner argued here yesterday, is that we were right to leave the European Union. If the EU cannot cut a deal with as willing a partner as Canada, then its prospects of achieving the same with the other key economies of the USA, China, Japan and India, to name a few, is low to the point of zero.
Secondly, the idea that this puts the Prime Minister and Brexit negotiators on the back foot is far too pessimistic. For a start, the UK – as an existing member of the EU – is in complete compliance with existing EU laws and regulations (the Acquis Communautaire) and so does not have to match up to those requirements for goods and services going to the EU. There are no technical grounds for rejecting a deal with the UK.
Thirdly, Canada’s trade with the EU is more important to it than trade with Canada is to the EU – the opposite is the case for EU-UK trade. Canada is the twelfth most important trading partner of the EU, accounting for only 1.7% of the EU’s external trade, while the UK is the EU’s largest market, accounting for around eight times the Canadian amount and giving the EU a £110 billion surplus against the UK.
Thus the EU has far more at stake in securing a deal with the UK than Canada and the EU have together in securing a deal between themselves. For the EU-UK negotiations this could become the crucial factor, even for small protectionist EU regions like Wallonia which have more reason to see advantages in maintaining preferential access to the UK market.
But even if the doubters are right, and a deal with the EU cannot be secured due to the self-interest and bloody-minded self-harming of affronted European politicians, the UK is in the better place. We will be free to secure our own trade deals with a kaleidoscope of growing economies while the EU will continue to stagnate.
The EU is the world’s economic growth deadweight holding everyone back. No other region has had such poor economic growth for a generation. UK trade with the EU has dropped from 63% of goods and services in 1999 to 43% today and is expected to be at 35% by 2025.
The UK can quickly secure trade agreements with fast-growing economies of the world, for it will not have to wait on the word of Wallonia, and such deals are already being teed up with India and at least 26 other nations having expressed an interest in bilateral deals with us.
The UK’s economic interests no longer coincide with those of the EU, and certainly not Wallonia. Better, then, that we accept this and make it clear to our friends in the EU that we are willing to negotiate a deal in the two years that follow from the triggering of Article 50, but that for us ‘no deal will be better than a bad deal’ and we shall be willing to forego preferential access to their internal market if the price is too high or the talks take too long.
We could have access to the EU’s internal market on the same terms as Canada, the US and other important economies do, while we build our new future as a globally-trading, international and outward-facing economy, prospering as a result.