Creating a Progressive Canada-UK Free Trade Agreement: Gaining Civil Support in a Post-Brexit World

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This research comprehensively assesses strategies to strengthen support for an inclusive and progressive Canada-UK FTA in a post-Brexit context. Canada and the United Kingdom (UK) have prospered from a productive commercial relationship. Their two-way merchandise trade totaled more than C$25.3 billion in 2016, making the UK Canada's fifth-largest merchandise trade partner and making Canada the UK's eighth biggest export market outside the EU. The UK is the second largest source of FDI to Canada and Canada's second most significant destination for FDI abroad. Brexit has made the future of this relationship uncertain. Various trade and financial institutions, such as Export Development Canada (EDC), the Business Development Bank of Canada (BDC), and the Royal Bank of Canada (RBC) note that Brexit may affect Canadian exports and investments. Brexit could make the UK a less attractive destination for Canadian investment due to uncertainty over the UK's market access to the EU. Further, Brexit could result in Canadian exporters facing the same tariff structure that was in place before the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). This would raise the costs of doing business, particularly for exporters of Canadian services. For these reasons, Canadian businesses may direct more of their business to the EU. Crucial to the future of Canada-UK relations is the possibility of a new Canada-UK Free Trade Agreement (FTA). One issue for analysis, is why there is a growing reaction against deeper economic integration. It is also useful to understand why free trade agreements fail to live up to societal expectations. Who are the losers from free trade and who opposes free trade and globalisation? This research identifies different inclusion efforts that could be made to strengthen the support for a Canada-UK FTA. Our proposal identifies key areas that represent civil society's critique of FTAs that need to be addressed in a Canada-UK trade agreement to gain societal support: 1) Fair and free trade: Providing safeguards to protect environment and social standards, including labour adjustment supports. What are the most effective rules, education and re-training programs that can be embedded in an FTA? 2) Effective consumer protection: including cooperation between consumer agencies to ensure the benefits of free trade agreements are felt and understood by consumers, particularly the vulnerable or marginalised. 3) Smart government procurement policy: Buy National clauses have become an important form of protectionism within government procurement policy, as well as a policy tool to support and nurture local industry and communities. How can a Canada-UK FTA be designed to allow sovereignty in the government procurement space, allowing value for money and local SME development? 4) Sustainble FDI rules: investment chapters and dispute settlement provisions have become a lightning rod for opposition to modern FTAs. Investor chapters offer recourse to businesses affected by foreign governments and often provide closed and secret rulings on important regulatory issues. The investment chapters along with dispute settlement provisions also raise important state sovereignty concerns. How can these provisions be designed to address the main concerns of critics, while preserving investor confidence? 5) How will these negotiations incorporate the positions of the sub-national or devolved regions in both countries? Could we expect a similar subnational government representation in a Canada-UK FTA? Would the devolved regions of Ireland, Scotland, Wales and England have independent representation alongside the Canadian provinces? What impact would this have on the integration level (deep or shallow) of the final agreement?