The Brexit trade negotiations may be nearing the end-game with no sign of what will emerge, but Boris Johnson has stated his ambition: “We want a comprehensive free trade agreement, similar to Canada’s.”
This outcome has been trumpeted as the solution to uncertainty about what will happen after the transition period ends on 31st December. Many have taken this to mean that little will change, that seamless, borderless, frictionless trade will result, and that businesses which import from and export to the EU won’t really have to change much.
When you actually look at the deal which Canada has with the EU, you realise that we need to inject a huge dose of reality into this thinking.
The Comprehensive Economic and Trade Agreement with Canada (which took eight years to negotiate, by the way) came into effect in 2017 – and it has still not been fully signed off by the EU states.
The deal gets rid of most tariffs, but not all, with foodstuffs such as poultry, meat and eggs still subject to tariffs. It also increases – but does not abolish – quotas. It does not remove the need for border checks, so goods still have to be examined at ports to ensure they meet regulatory requirements.
The agreement does however cover matters such as geographical indications, opening up government contracts to each party, equivalence of qualifications, and co-operation on standards, all of which certainly grease the wheels of trade.
But – and it’s a huge but – the deal doesn’t cover the all-important (for the UK) service sector, and that includes financial services. Mr Johnson has said he wants to tack financial services onto a ‘Canada-style deal’, but he will have to convince EU governments first, which is a big ask.
So put simply, a ‘Canada deal’ – regarded by most as the very best we can expect – is still likely to include tariffs on some foodstuffs, quotas, border checks, customs declarations, and will not include the service sector, which represents something like 80 per cent of the UK’s economy. This will then fall short of the seamless, frictionless trade with the EU we have come to take for granted.
Many UK businesses are holding off
preparing for the end of transition period, mistakenly believing that a
last-minute deal will be done that will allow them to carry on trading as they
were. Deal or no deal, that is not going
to happen; those which want to carry on trading must make preparations or face
the real prospect of not being able to do business on 1st January.