This article was originally published in Policy Options on February 9, 2017.
As Canada looks to diversify its international trade and foreign investment portfolio, there are encouraging signs that it is moving to seize blue-chip opportunities being created in the United Kingdom.
The UK is a G-7 country and a permanent member of the UN Security Council. It has the world’s fifth-largest economy as well as a mature trade and investment infrastructure supported by strong demographics. Not only do Canada and the UK share an enviable economic partnership, dating back more than two centuries, we also share a common history and language and comparable legal and financial systems.
As crucial as these competitive advantages are, though, they are by no means exclusive to the Canada-UK relationship. The UK shares many of these commonalities with Australia, India, New Zealand, South Africa and the United States. Still, Canada and the UK share a unique link unmatched by any of those competitors, one that offers each a critical first-mover advantage: the Comprehensive Economic and Trade Agreement between Canada and the European Union.
Despite the UK’s clearly stated intention to extricate itself from the European Union, it will remain part of CETA until any such bifurcation occurs — which guarantees early preferential access for Canada. CETA will be ratified and implemented before any final Brexit outcome, and before any competing country could negotiate a free trade agreement with the UK. This tremendous benefit must be maximized.
Of course, pursuing stronger economic ties with the UK does not mean that Canada should not also seek stronger ties with other EU countries. Brexit in no way makes those laudable goals mutually exclusive. It is decidedly in Canada’s best interests to increase trade and investment with both the EU and the UK — and that will remain true no matter what arrangement is ultimately negotiated between them. Yet waiting to see how the Brexit process will be resolved is not a luxury that Canada can afford in this competitive environment. A failure to act swiftly and shrewdly creates a serious risk of being left behind.
Fortunately, and fortuitously, some in the UK are advocating for Britain to strengthen its economic and cultural ties with Canada, including some influential members of Prime Minister Theresa May’s government. They include the Free Enterprise Group — founded by British Tory parliamentarians, and supported by several members of cabinet — which issued a report in January that identified Canada as one of five priority markets.
Describing a potential post-Brexit free trade agreement with Canada as a “flagship deal,” the report observed that trade with the UK represents between 34 and 42 percent of Canada’s total exports to the EU. The report also noted an idea originally suggested by UK Foreign Secretary Boris Johnson for free mobility of labour between certain Commonwealth countries, such as Canada, Australia and New Zealand.
For his part, UK Trade Secretary Liam Fox — who, like Adam Smith, views free trade as a moral right — spoke before business audiences in Toronto and Montreal late last month.
These overtures must be reciprocated. It was therefore heartening to hear Canada’s exemplary high commissioner in London, Janice Charette, confirm that Canadian officials have been meeting with their British counterparts. In this, Canada is not alone. Australian Prime Minister Malcolm Turnbull was first to advocate an early trade deal with the UK, and his predecessor wrote the foreword to the January Free Enterprise Group report. Similarly, President Trump recently told the Times (London) that under his leadership the United States will move quickly to negotiate a free trade deal with Britain once the UK leaves the European Union.
With so many high-powered suitors vying for Britain’s attention — including, notably, China and India — Canadian businesses can rest assured that a post-Brexit UK will remain a global force in trade and investment. Now is the time for Canadian stakeholders to explore and exploit the opportunities that exist in advanced manufacturing, energy, pharmaceuticals and biotech, information technology and financial services.
This year marks the 150th anniversary of Confederation, when Canada and the United Kingdom redefined their relationship at the dawn of a new age. As our two countries celebrate our past, let’s cement our future.