The Canada Option

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Canada’s relationship with the EU (EU-Canada Comprehensive Economic and Trade Agreement) that took over seven years to negotiate, might have its appeal to the UK as a Brexit option.

The agreement allows both sides to enter into separate deals with other partners. It puts Canada outside the customs union and single market. It provides limited benefits to providers of services.

But the Ceta model would impose costs. Suppliers of goods to the EU would have to meet rules on local content. Suppliers of services would lose favourable access.  And the Irish border problem would remain unresolved.

Although the UK could then strike new trade deals, the important ones eg with the US, India and China would be tough. The easy ones with eg Australia or Canada will be unimportant.

The overall impact is likely to be a reduction in five percentage points in UK GDP after 15 years than it would have otherwise been.   Source: FT February 21, 2018