The Brexit vote is creating new urgency – and momentum – in Europe to get on with its free-trade deal with Canada, federal Trade Minister Chrystia Freeland says.
European officials are eager to show the world that the European Union still works by ratifying and implementing the Comprehensive Economic and Trade Agreement (CETA) in the next few months, said Ms. Freeland, who has been talking to key European trade ministers in recent days.
"If anything, the political momentum for CETA is even stronger than it was before … because the EU is very determined to show it's able to move forward," Ms. Freeland said in an interview Tuesday. "CETA is a great opportunity for Europe to do that."
For now, Britain remains in the EU and has not yet triggered formal divorce proceedings, she pointed out.
"My officials and I are doing scenario planning on a number of fronts," Ms. Freeland said. "It is far, far too early to make assumptions about which of those possibilities will come to pass."
Many trade experts say Britain will have a strong incentive to find a way to stay in the European common market and that could make it eligible for inclusion in CETA even if it leaves the EU.
Nonetheless, Canadian officials and many trade experts remain concerned that the Brexit vote could stall the massive trade deal and cast uncertainty on Canada's broader economic relationship with Europe, a market of 510 million people.
Gordon Campbell, Canada's High Commissioner to Britain, says the decision by Britain to leave the EU has thrown up a series of challenges to the trade deal. He said he still believes CETA has a chance of being ratified, but the uncertainty swirling around the British government in the wake of Brexit is a problem.
"The Conservative Party is searching for a leader now, the Labour Party is not very happy with its leader now, and you have to have an agenda, you have to know where you want to go," Mr. Campbell said in an interview after a conference with Canadian business leaders in London. "Canada is basically saying, look, we are good friends of the United Kingdom and we are good friends of the European Union and we want this to work. But you've got to be, sort of, helping us make it work."
The United Kingdom should realize "there is a whole bunch of the world that's waiting for them to decide what they are going to do," said Mr. Campbell, whose term ends in August. All Canada can do is wait, he said.
On Tuesday, the European Commission moved to accelerate and simplify the ratification process. Commission President Jean-Claude Juncker told an EU leaders' meeting that the commission would make a proposal July 5 that the trade deal should be an "EU-only" agreement, according to Reuters. If the process is accepted by all EU countries, the trade deal would not require votes in the parliaments of all 28 member states.
The 28-country trading bloc is the No. 2 destination for Canadian exports, after the United States. Britain is Canada's main customer, accounting for 42 per cent of the $40-billion in goods sold to the EU last year. The largest EU exporter to Canada is Germany ($15-billion in 2015), followed by Britain ($8.6-billion).
The uncertainty surrounding Brexit and CETA has left many Canadian business leaders worried. Privately, some Canadian trade officials doubt CETA will be ratified, given the upheaval Brexit has caused the EU. While the deal has been signed by Canada and the EU, it must still be approved by the European Parliament and EU governments.
Brexit has created a myriad of technical complications. Parts of it may have to be renegotiated since Canada made some concessions with an eye to gaining access mainly to the British market. For example, Newfoundland and Labrador gave up some protections for its fish plant workers in return for greater access for seafood products. Canada may have to consider whether to renegotiate those concessions, trade officials said privately.
The EU also agreed to import certain quotas of Canadian meat products, despite fierce opposition from Ireland, France and other countries. Without Britain, the other EU countries will now have to absorb the Canadian quota, which will likely raise more concerns from EU farmers.
"One of the trickier technical things will be if the U.K. hasn't finished [negotiating its exit from the EU] and officially becomes part of the CETA, but then is removed from the CETA as it sheds it status as an EU member state," said lawyer Christophe Bondy, a former Canadian trade official and now a partner with Volterra Fietta in London. "It's part of the larger uncertainty that flows from not knowing what the U.K.'s relationship to the EU is going to be and what they are even looking for in that regard."
As long as there is uncertainty about Britain's relationship with the EU, Canadian companies won't know where or if to invest, pointed out Jason Langrish, executive director of the Canada Europe Roundtable for Business. "Businesses are not going to be able to make use of this agreement as quickly as anticipated because of the uncertainty," he said.