Mark Entwistle and Ulf Gartzke are the managing partners of Atlantic Advisory Partners, a Canada-EU business advisory practice launched by Acasta Capital and Spitzberg Partners.
The decision by a majority of the British people to leave the European Union, the institutional embodiment of the greater European project, will have far-reaching consequences and repercussions – including for Canadian business.
The interests of Canada and the EU in the future of Europe are tightly intertwined in the form of the unprecedented Comprehensive Economic and Trade Agreement (CETA), which promises Canadian companies and their workers valuable access to a huge EU market of 28 (soon 27) countries with more than 500 (soon 440) million people. The Brexit vote does not change at all the fact that Canada has a historic and major transatlantic project at stake and it must manoeuvre through this current period of turmoil and uncertainty in Europe.
While Britain's departure from the EU has disappointed many in Canada, who believed that a stable and prosperous Europe was better served with Britain in the fold, the immediate reaction in European capitals, and especially in Germany as a cornerstone of the EU, has been highly emotional. For the solemn supporters of the EU, it was as if tragedy had struck, like a death in the family. For the energized groups of the political far-right, vehemently opposed to the EU, it was a moment of excitement and sense of unprecedented opportunity. According to the formal EU process, there is a two-year time limit for negotiating the exit of a member state. While Brussels hopes to accelerate the process so that it does not become a distraction feeding anti-EU sentiment in other countries, it is not yet clear what the Brexit timeline will ultimately look like.
It will be important for Ottawa (and Washington for that matter) to respect a grieving period in the short term, since an aggressive push on free-trade agreements such as CETA (or Brussels's much more controversial TTIP deal with the United States) could be perceived in Europe as risky at a time when the EU body politic is vulnerable.
Trade deals are always easy targets and rallying cries for anti-EU campaigners. But new needs will emerge and the situation will pivot.
Britain could well seek to remain in the EU's free-trade area in an arrangement similar to that in place between the EU and Norway, but the mood on the continental side of the table will be loath to reward a country for causing such political damage with the continued economic benefits of association. This would both show weakness to supporters and further embolden Euroskeptics.
It is likely that the EU will demand considerable concessions from Britain should it wish to continue to participate in the free-trade zone. "It is not an amicable divorce," declared Jean-Claude Juncker, President of the European Commission, the EU's executive body.
Against this backdrop, the value of CETA with Canada could arguably take on a strategic political and even symbolic importance that it would never have had before the Brexit vote. The EU can demonstrate that it continues to look outward and pursue prosperity on the world stage for its members regardless of Britain's decision, in particular with a country that has close historic ties with Britain. Canada can demonstrate that it continues to believe in the potential of the European project and the EU.
A successful CETA would also reinforce renewed Canadian leadership on the multilateral agenda and provide a timely boost to a rules-based, globalized trade and investment order that is facing huge challenges.
From a business perspective, the Brexit vote will have the effect of bringing Canadian companies to realize that they can no longer rely on Britain as the entry point to the EU. The traditional "We cover Europe from our London office" mantra so often heard from Canadian CEOs became obsolete on June 23. Canadian businesses will now be forced to venture beyond London's familiar cobblestones and into continental Europe – to Frankfurt, to Warsaw, to Stockholm – to forge exciting new ventures and prosper in the European market place, with or without CETA.
In fact, the Brexit shift could be a game-changer for Canadian engagement with the EU, which may not have been possible without the British referendum. For Canada's technology and services sector, the EU offers attractive growth opportunities in a similar regulatory climate, especially regarding important privacy and data-protection matters. Canadian business can also serve a psychological role as the surrogate representative of Anglo-Saxon business culture for EU partners with access to the benefits of free trade and capital pools largely unknown by European business. In addition, the francophone diversity of Canada opens North American doors to those important parts of the EU such as France, Belgium and elsewhere.
There is tremendous potential for development of the Canada brand and narrative in Europe, which has now, in fact, been heightened by Britain's decision to leave the European Union.