Lessons from CETA for Brexit

In 2009, Canada and the European Union launched negotiations on a trade agreement, commonly known as CETA (which does not stand for Canada-EU Trade Agreement, as you might expect, but rather the Comprehensive Economic and Trade Agreement). This past weekend they reached a milestone, resolving a few outstanding issues so that the Agreement will soon be “provisionally applied” (after approval by the European Parliament). Full ratification will have to wait for some EU court decisions on the division of powers between the EU itself and the EU member states over certain issues (most importantly, the controversial investor-state dispute settlement provisions), and, depending on the court rulings, may also have to wait for approval by these member states for some aspects of the Agreement.

So if you’re counting, seven years into these trade negotiations, a final implemented deal still has not been concluded. And this is a deal with Canada, which is probably one of the least controversial trading partners around.

This all suggests that EU trade policy may face even more challenges than U.S. trade policy does right now. And this is something that worries people following the Brexit vote, in relation to upcoming UK trade negotiations to leave the EU and to come up with a new set of UK-EU trade arrangements. (They also worry more generally about the prospects for UK trade deals with anyone.) This is from the Guardian:

There are still several more chapters in the stop-start drama over the European Union’s comprehensive economic and trade agreement (Ceta) with Canada. The lifting of the Walloon veto clears the way for 28 EU governments to sign the treaty, allowing it to come into force on a temporary basis.

But 38 national and regional assemblies will have the final say on whether the treaty becomes a permanent legal document. It is a story that is likely to have implications for EU trade policy, but also for post-Brexit Britain.

“This Ceta saga has illustrated an additional layer of complexity that the UK will have to deal with,” said Lourdes Catrain, a partner at law firm Hogan Lovells. 

The British government is wary of parallels with Canada, although a government source acknowledged that Ceta showed “if we do end up in a world of an FTA [free trade agreement] outside the EU it isn’t going to be terribly easy”. …

I’ve written about how the UK should approach trade negotiations after Brexit, and I think the CETA experience confirms my earlier thoughts. If governments focus their trade deals on aspects of trade liberalization that are most beneficial and least controversial – such as lower tariffs, or mutual recognition of product regulations – the negotiations will not take very long and will generate wide support. On the other hand, if they insist on including provisions of questionable value that have strong opposition, such as investor-state dispute settlement, the process could drag on for many years. In my view, this makes a decision on what the UK should include in its trade negotiations pretty easy: Stick with the core trade liberalization issues, and get the deals done quickly.

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