Implementing the continuity trade agreement between Canada and the United Kingdom of Great Britain and Northern Ireland

by Trevor Kennedy – Director, Trade and International Policy, Business Council of Canada

Remarks to the House of Commons Standing Committee on International Trade on Bill C-18, An Act to implement the Agreement on Trade Continuity between Canada and the United Kingdom of Great Britain and Northern Ireland.

Madam Chair, committee members, thank you for the invitation to take part in your meeting on Bill C-18, An Act to implement the Agreement on Trade Continuity between Canada and the United Kingdom of Great Britain and Northern Ireland.

The Business Council of Canada (BCC) is composed of 150 chief executives and entrepreneurs of Canada’s leading enterprises. Our member companies directly and indirectly support more than six million jobs across the country and hundreds of thousands of small businesses.

Representing different industries and regions, these men and women are united in their commitment to make Canada the best country in the world in which to live, work, invest and grow.

It is has been said many times before, but it bears repeating: Canada is a trading nation, and many Canadian companies rely on the rules-based trading system, as well as our network of bilateral free trade agreements to provide certainty and access to global markets.

Given its prominent role in the economy, we expect international trade to be an important part of Canada’s economic recovery. The facts speak for themselves. Merchandise exports to the world fell 12.3 per cent in 2020 because of the pandemic, a decline of $70 billion. Canada needs to work hard in the years ahead to restore and grow our exports from pre-crisis levels.

The potential loss of preferential market access to the U.K., secured under CETA, presented a serious risk to the recovery for Canadian exporters. The U.K is Canada’s third largest merchandise export market. It was also one of few markets in the world in which were able to sustain our exports levels last year despite the crisis.

The U.K., as a part of the EU, has been a critical component of Canada’s fast-growing transatlantic trade relationship. Before the pandemic, it accounted for 40 per cent of Canada’s merchandise exports and 36 per cent of service exports to the EU. Merchandise exports to the U.K. grew by nearly 12 per cent since provisional application. Canadian exporters had momentum in the U.K. before the pandemic, and it is important that we continue grow our trade.

When I spoke to this committee during negotiations, I mentioned how time-sensitive a Canada-U.K. deal is. Not only did we risk losing preferential market access by reverting to the WTO most-favoured nation (MFN) tariff rates, but many or our peers were negotiating bilateral deals that would have undermined our competitiveness in the market.

Given our existing trade relationship with the U.K. under CETA, and uncertainty surrounding the future of U.K-EU relations during negotiations, the transitional trade deal approach taken by negotiators was the best approach for Canada. The transitional approach provided Canada with an opportunity to take this new relationship into account when we negotiate a long-term trade agreement.

As with Canada’s existing free trade agreements, we want to ensure we reach a conclusive deal in the future with appropriate consultation and assessment of the market opportunities for Canadian firms. The transitional approach will also allow us to do that while maintaining our position in the market.

We were pleased that the Canada-U.K. Trade Continuity Agreement (TCA) manages to preserve our gains under CETA. Like CETA, TCA’s benefits include the elimination of 98 per cent of tariffs on Canadian mechanise exports to the U.K. and will eliminate 99 per cent within a few years. This is in addition to market access opportunities in government procurement and services.

At the same time, because Canada and the U.K. agreed to negotiate a new deal, the TCA does not require that our future trade relationship will be based exclusively on our existing EU agreement.

Our priority today is to quickly ratify the TCA. The existing Memorandum of Understanding between Canada and the U.K. is a helpful stopgap measure but is time sensitive. The U.K. is retooling its international relationships and there is a clear opportunity to reimage our bilateral trade and investment ties with a comprehensive and ambitious trade agreement. We hope both parties can start working on this with stakeholders as soon as the TCA is in force. 

The Business Council of Canada reiterates the importance of swiftly ratifying the TCA. This agreement provides certainty for businesses at a time of great uncertainty. It will help our economy to recover by driving trade and attracting the capital needed to innovate, grow, and improve Canadians’ quality of life through the creation of well-paying jobs.

Thank you for the opportunity to address your Committee. I look forward to answering questions.