Trade between Canada and the United Kingdom

Remarks to the House of Commons Standing Committee on International Trade on trade between Canada and the United Kingdom.

Thank you, Madam Chair and committee members, for the invitation to take part in your meeting on trade between Canada and the United Kingdom, a potential transitional trade agreement.

The Business Council of Canada is composed of 150 chief executives and enterprises of Canada’s leading enterprises. Our members, directly and indirectly, support more than six million jobs across the country and hundreds of thousands of small businesses. For our members, trade is very important.

Canada is a trading nation with 65% of our GDP tied to trade and millions of well-paying jobs across the country connected to the flow of goods and services around the world. We cannot take this for granted. In recent years some of our most important trade relationships have been undermined by rising protectionism and uncertainty. At the same time the multilateral rules-based global trading system, the foundation for post-war prosperity, which has led to increased living standards for Canadians, is at risk.

Given this backdrop, not to mention the economic hardship caused by COVID-19, Canada needs stable and secure bilateral trade agreements, particularly with key partners in the Indo-Pacific and Europe, to both safeguard and diversify our trade. The Comprehensive Economic and Trade Agreement, CETA, has been particularly important in achieving both objectives. At a time when growth in global trade is slowing, our exports to the European Union have grown at a fast rate, 7.7% in 2019, and bilateral trade flows have stabilized.

There is still much work to do to ensure that small and medium-sized enterprises can take full advantage of this agreement and to address some industry-specific concerns, but in the big picture, CETA is working for Canadian exporters.

The U.K., as a part of the EU, has been a critical component of this fast-growing trade relationship under CETA. As of 2019 it accounted for 40% of Canada’s merchandise exports and 36% of services exports to the European Union.

Merchandise exports to the U.K. have grown by nearly 12% since provisional application. Canadian exporters have momentum in the U.K., and it is important that this continues.

The last few years have clearly demonstrated how important the U.K. market is for Canadian business. Early in the Brexit process many expected that Canadian firms would move operations from the U.K., largely based on the assumption that it was being primarily used as the launchpad for business into the European Union.

While we’ve seen some staff move from or to continental operations and have seen the establishment of new satellite offices elsewhere in the EU, for the most part Canadian firms have remained committed to the U.K. This is because it is valued as a market for goods and services providers and London continues to be an important financial capital.

Among Business Council members, at least one third have a meaningful presence in the market, and for some, the U.K. is their only market in Europe.

For these reasons it is critical that we maintain our access beyond the end of the Brexit transition period. The transitional trade deal approach taken by negotiators is wise, given the circumstances. We do not know what the future U.K.-EU trade relationship will look like and a transitional approach gives us the opportunity to take that future relationship into account when we negotiate a trade deal. We also have faced a rapidly changing environment and we have been pressed for time.

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

Japan and South Korea have already finalized agreements to roll over most of their existing EU trade deals. At the same time, Australia, New Zealand and the U.S. are negotiating deals not based on existing frameworks with the European Union. Some of these talks appear to be advanced and if they are in place without a transitional deal for Canada, they could result in Canadian firms losing their market share and first mover advantage that we secured under CETA.

A transitional deal would preserve this important relationship, and we encourage both sides to move quickly to limit disruption at the end of the year. Canada’s transitional deal should be designed to be temporary by including reasonable review clauses or expiry dates. We support this approach as an incentive to drive continued bilateral talks toward a long-term agreement.

Business leaders support the inclusion and swift ratification of a transitional deal to keep Canada-U.K. trade tariff-free, to make the economy more vibrant and competitive, and to drive investment support for the creation of high-value jobs.

Looking forward on the Canada -U.K. trade relationship, we believe there is an opportunity to rethink and enhance bilateral trade and investment ties with a comprehensive and ambitious free trade agreement.

We hope both parties can start working on this with stakeholders as soon as possible.

Thank you for this opportunity to address the committee, and I look forward to answering any questions.