John Boscariol on Brexit, CETA and Britain's huge trade challenge
In her first public appearance on becoming Conservative Party leader, Britain’s incoming prime minister, Theresa May said yesterday that "Brexit means Brexit" and promised to make it “a success.” Nevertheless, Britain now faces a monumental task in rebuilding its trade trade relationships with the EU, as well as with countries all over the world. Senior editor Yves Faguy caught up with John Boscariol, head of McCarthy Tetrault's international trade and investment law group, to discuss these challenges and the impact of Britain’s decision to break away from the EU could have on ratification of the Comprehensive Economic and Trade Agreement (CETA) between Canada and EU.
CBA National: Where are we at with CETA in light of all that’s going on in Europe?
John Boscariol: There are a couple of things. One is obviously the impact of Brexit but the other is the decision [last] week that the Commission will be submitting the CETA agreement to council as a mixed competency agreement, which does throw a very small wrench into things in terms of getting CETA through as quickly as we all want it to get through. The agreement will have to get the approval of the national legislatures of the EU members and that process can take a while. There are some EU countries that are not happy with Canada – Romania is one of them but there are others as well – when it comes to our visa policies. However, that doesn’t stop CETA from coming into force for the most part. It is still possible for the EU to proceed with parts of the agreement that are within the purview of the EU and the EU Commission’s authority. And right now, authorities in the EU have been saying that 90 per cent or more of the agreement [falls] within competency. So what we could see now is the agreement coming into force as anticipated sometime in 2017, hopefully early 2017. However, it wouldn’t be the whole agreement.
N: What would be excluded?
JB: It’s still open to some interpretation. Something like the rather unique investor state dispute resolution mechanism that was thrown in during the legal scrub at the last minute may be considered to be within the competency of the EU members and the national legislatures and therefore, may not come into force. But the portions that involve tariff reduction and market access, for the most part are going to come into force provided the agreement pasts through the EU Council and Parliament.
N: How does the Brexit vote change things?
JB: Some people have said that, “Well, CETA must really be on the rocks now.” I even heard people going as far as saying CETA is dead. I think actually it’s quite the opposite. The EU has been very, very clear that approval of CETA really goes to the integrity of the EU and its ability to negotiate trade agreements. And they view this as a test and an example to the world that the EU will continue to negotiate these agreements despite all the issues around Brexit and they can do it and seal up these agreements successfully. Obviously on the Canadian side, Trudeau and [federal Minister of International Trade] Chrystia Freeland have been very supportive of getting CETA through. In terms of the UK itself, they have already come out and said to Canada that they’re going to support CETA despite the Brexit vote. And frankly, we still haven’t had Article 50 [invoked] under the Lisbon Treaty and that triggers potentially two years of negotiation for their exit. So it could be a long time before the UK actually divorces itself from the EU. And during that time, it’s still part of the EU.
N: What are the different scenarios for the UK in terms of its trade relationships with Canada and other countries?
JB: First, they have to negotiate the break-up. And once they’ve done that, they’re going to have to negotiate a replacement agreement of some kind. There are all kinds of speculation as to what that can be. Secondly, they have to negotiate some kind of agreement with all their preferential trading partners. So the EU has negotiated over – I think they’re at 38 trade agreements with something like 60 countries – and the UK was part of that. When they leave the EU, they’re out of those trade agreements as well. And so the UK faces this mammoth task now of trying to figure out how are it is going to put something else in place to deal with all those free trade agreements it has with all these other countries. That includes CETA. Canada, I think, will take a very positive view on that and negotiate a separate agreement — the U.S. as well. But the third challenge is that even if the UK reverts to obligations at the World Trade Organization, which is kind of the floor right now for trade obligations, it still has to be renegotiated because the EU has been negotiating for the UK for a large number of aspects of its WTO commitments with over 160 countries — things like tariff lines, agricultural quotas and access. So all of this means for the UK just a huge, huge effort that they’re going to have to undertake in the coming years to address all these issues and all these economic relationships with the various countries.
N: What about the notion of rolling over the terms of the existing free trade agreements with the EU into new agreements with the UK?
JB: The problem is with that is it’s a bit naïve and simplistic because when you look at when these trade deals are negotiated, the Koreans or the Canadians negotiating with the EU, it’s all the process of give and take. And for giving up market access on our side, we are getting market access on the EU side, which includes access to the UK market, but also access to the German and French markets. So when the UK comes back to us and says, “Okay, let’s just have a mirror deal, a similar deal”, we’re not dealing anymore with access to the rest of the EU. We’re just talking about access to the UK markets. So they’re assuming that this give and take and the benefits and costs that have been weighed by the negotiators will simply flow over to the UK in a separate arrangement. I don’t think it’s going to be that simple.
N: And we’re hearing that they don’t have enough skilled trade negotiators.
JB: This responsibility has been within the purview of the EU Commission for decades. So although they’ll have people knowledgeable within the UK bureaucracy, they don’t have trade negotiators like those within the EU commission or in the U.S. or even in Canada. So they need to step up their competency now and get trade negotiation skills quite quickly. It’s an extremely exciting time for trade lawyers.
This interview was edited and condensed for publication.
Photo licensed under Creative Commons by AK Rockefeller