British exit vote threatens CETA

Those hoping and fearing the impact of the Canada-European Union trade deal can hope and fear a bit less, economic experts say.

The Comprehensive Economic and Trade Agreement is much less likely to be approved by the EU now, and the United Kingdom might not be part of it anyway.

“This could be the beginning of the scuttling of CETA,” said Al Mussell, an economist with Agri Food Economic Systems in Guelph, Ont.

Food industry expert Sylvain Charlebois of Dalhousie University had similar thoughts as soon as he heard that the U.K. had narrowly voted to leave the EU in the June 23 referendum.

“Right now CETA is on life support,” said Charlebois.

British voters chose “leave” versus “remain” by 52 to 48 percent in a referendum on whether the country should stay in the EU. That immediately created a political crisis in the U.K. as British Prime Minister David Cameron and much of the opposition Labour shadow cabinet announced their resignations.

It also created a stock market rout and worldwide anxiety.

The referendum results are ex-pected to have a long-term impact on the futures of the U.K. and the EU, but they will also have more medium-term effects because many non-EU related matters might be ignored or neglected, including CETA.

The agreement, which provides much more room for Canadian and European goods to be sold into each other’s markets, was on the cusp of being approved this year and implemented in 2017.

However, Britain’s impending exit from the EU has many doubting that the trading bloc’s 27 remaining members will put the CETA up for approval by their parliaments.

Mussell said not only are the continental Europeans distracted by the referendum results, but many are less committed to expanding trade than are the British.

“Who’s going to really push for freer trade with Canada?” said Mussell.

Domenico Lombardi of the Centre for Governance Innovation think-tank said the U.K. was a driving force for CETA approval.

“The U.K. had expended a lot of political capital, a lot of leverage, for getting other EU members to agree on the final deal,” Lombardi said in a Bloomberg radio interview.

The same applies to the U.S.-EU trade deal, which has not even been negotiated yet.

The EU is “not likely to even start the negotiating phase” of the proposed agreement and will likely have less desire to do so as it be-comes mostly internally focused and “not really the ideal trade partner you want to deal with,” said Lombardi.

CETA was seen as a big win for Canadian agriculture, cracking open the generally closed European markets to Canadian pork, beef, crops and food products. In exchange, Canada opened some of its own protected cheese market. Canadian agriculture was seen as a bigger beneficiary of the agreement than most other economic sectors.

Most say it is too early to tell if Canada could forge better trade relations with the U.K. outside the EU.

Most say it’s too early to tell. Mussell said Canada had a booming agricultural export business with the U.K., as did many countries in the Commonwealth, before the U.K. joined the European Economic Community. The U.K. had to end preferential deals with former colonies and over time had to adopt the EU’s trade distorting policies.

“There was a huge market in cheddar cheese,” said Mussell.

Apples were also a significant export business.

“There may be some opportunity to rebuild some of that.”

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