Canada-U.K. free trade: Getting it right

Now that Brexit is in the bag, Canada is turning its attention to the details of a bilateral free trade agreement with the U.K. and that country’s possible accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Global Affairs Canada is engaged in widespread consultations on the subject and the Canadian Bar Association’s International Law, Commodity Tax, Customs and Trade, Immigration, and Competition Law and Foreign Investment Review Sections as well as its Canadian Corporate Counsel Association have offered comments on a wide range of issues involved in such a large and significant trade agreement. Here are a few of the most salient ones.

Tariffs, dumping

Canadian goods should be accorded “national treatment” by the U.K. in its market. “This is a cornerstone principle of the World Trade Organization and is in virtually all of Canada’s trade agreements,” the Sections write, adding a “most favoured nation” treatment provision should be included, to ensure that Canadian exporters benefit from the best treatment the U.K. grants to any of its trading partners.

“Tariff elimination is a fundamental component of any free trade agreement,” the Sections say, recommending an accelerated tariff elimination schedule from what is already proposed in the Comprehensive Economic and Trade Agreement, or CETA. However, Canada should reserve its right to investigate and, if necessary, impose trade remedies should there be instances of suspected dumping.

Small and medium sized businesses

The CBA Sections argue a trade agreement “should empower entrepreneurs and small businesses by creating a more seamless transatlantic market.” In practice this would mean streamlining customs procedures to reduce the administrative burden of clearing goods. Both countries should require minimal documentation in digital format and agree to a “single window concept” that would allow businesses to submit all their documents in a single declaration. In addition, both Canada and the U.K. should simplify communications with small and medium sized businesses by establishing a public website and contacts.

Export restrictions

Restrictions, the Sections write, “should be used as a measure of last resort, on a temporary basis, and only to the extent necessary to address critical resource shortages” for instance during a pandemic or other worldwide emergency.

Foreign Direct Investment

As of 2019 the U.K. was Canada’s fourth largest source of foreign direct investment, or FDI, and second largest destination for outbound investment. The Sections encourage Canada to pay close attention to this topic. “We recommend that Canada negotiate treatment for U.K. investors under the Investment Canada Act in any future free trade agreement that is consistent with the treatment of investors originating in jurisdictions with which Canada already has trade agreements.”

Environment, sustainability, integrity, social justice

A Canada-U.K. free trade agreement should include measures to encourage both countries “to work together to ensure high standards for environmental protection in all sectors of the economy and to expand their commitment with more detailed benchmarks,” the Sections say.

Canada and the U.K. should also “reaffirm their commitment to anti-corruption by including a dedicated chapter in a free trade agreement” that would protect whistleblowers and encourage integrity among public officials as well as private sector involvement in anti-corruption efforts.

In order to acknowledge the importance of human rights, a free trade agreement between Canada and the U.K. should emphasize the importance of Indigenous rights in Canada, and include a chapter on trade and gender.

Data security, virtual dispute settlement

The Sections believe data privacy in a Canada-U.K. free trade agreement should be harmonized with other international agreements such as the Digital Economic Partnership Agreement. “A Canada-U.K. FTA presents an opportunity to address nascent technologies or industries that will soon likely play a larger role in cross-border commerce,” they write, such as artificial intelligence and algorithms.

COVID-19 has taught us that remote hearings work well in many circumstances, and the Sections recommend that dispute settlement provisions “allow for remote or hybrid hearings. In the event of a future pandemic or worldwide emergency, remote or hybrid hearings will be crucial to ensure uninterrupted dispute settlement mechanisms.”