Headlines concerning the Brexit vote may be on the way out, but that doesn’t mean the domino effect has stopped. In an economic commentary piece, Desjardins Senior Economist Benoit Durocher identifies a trade deal between Canada and the EU as another tile that could tumble.
The Comprehensive Economic and Trade Agreement (CETA) was concluded recently, with the official agreement text having been released on July 5. An “ambitious agreement covering trade in goods and services as well as many other aspects of trade between Canada and the EU”, the deal involves 28 EU member countries (including the UK) and the 10 Canadian provinces.
According to Durocher, CETA still has to be individually ratified and implemented by each party to the agreement. This process may be put on the back burner, however, as the UK’s exit from the EU and its immediate effects on their respective countries have become top priority for many EU members.
Representatives from Canada and Europe, however, have reaffirmed their support, with British Minister David Davis stating that CETA “could serve as a model for future negotiations between the United Kingdom and the EU to establish a free trade agreement between the two zones”.
Even if the agreement gets ratified within a few months, however, Durocher questions the benefit it would have on Canadians considering that the UK will eventually be excluded from the pact. The UK accounts for just over 25% of all goods Canada trades with EU members. It is also the runaway leader in exports from Canada to the EU, and holds second place in terms of Canadian imports from the EU.
The senior economist attributes the UK’s leading position to its significant bilateral trade in gold with Canada, mainly due to the London Metal Exchange’s significance in international trade of precious metals.
Durocher acknowledges that some other EU member countries, including Germany, France, and Italy, conduct fairly high bilateral trade with Canada, and CETA could promote new trade opportunities with other Eurozone members. However, the UK’s departure could mean that the benefit Canada would enjoy from CETA would be less than anticipated.
Still, given the well-established trade between the UK and Canada, he foresees that “Canada and the United Kingdom will eventually negotiate a new bilateral trade agreement based on CETA fundamentals”.
Beleaguered EU may weaken once more as Italy faces challenges
Brexit volatility may last years, says Sprott manager
BoC rate hold points to calming markets: Expert