Does Brexit Contain Lessons for Canada?

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COMMENTARY

by Denis Clark
September 2018

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Does Brexit Contain Lessons for Canada?

Canada finds itself in an uncomfortable position, with our bedrock trade agreement in trouble and the deadline for renegotiation fast approaching. A minority view in the last few weeks has been that Canada can do without NAFTA. The Canadian government, moreover, has been clear that it will not sign a deal that is bad for Canada, though its word has not yet been put to the test.

There is little chance that this will happen, although it grows every day that no deal is reached, and much depends on the whims of the current occupant of the Oval Office. Canadians should have a hard look at the consequences of a no-deal scenario. The British example can be instructive.

Britain and Canada are both heavily dependent on trade with a large, prosperous market. The argument that Canada can go without NAFTA implies that we can replace any cross-border trade that we lose, because other countries will happily trade with us instead, after perhaps a brief period of pain. A similar view was part of the general rationale behind Brexit: that membership in the European Union was actually holding Britain back. Once Britain could “take back control” of its regulations and diversify its international trade, new trading partners would flock to its shores.

On the face of it, this might seem like a fair proposition. The British economy is the fifth biggest in the world, according to the International Monetary Fund. (Canada is 10th). Yet the British government has found that quickly making new trade deals is difficult.

This summer’s batch of trade missions have gone poorly. British Prime Minister Theresa May’s trade trip to African countries in August made headlines for the wrong reasons. First, May was pictured awkwardly dancing with South African children during her visit there, further bolstering her image as uneasy in public settings.

Second, and more substantially, Kenyan president Uhuru Kenyatta chided May on the last day of her three-day visit, noting that it had been 30 years since a British prme minister had visited the country. Kenyatta is no saint, but as British colonial authorities imprisoned his father, an anti-colonial activist who became Kenya’s first president, the argument has a certain resonance. Such trips have the potential to be awkward reminders that the last time Britain was so interested in these parts of the world was when they were part of the British Empire.

These issues of style are troublesome, but Britain also faces problems of substance. The British government has made some headway, in particular by pledging to increase trade with Japan and China. None of these is the type of game-changing deal that ardent Brexiteers hoped for in the wake of their referendum success. Such deals take years.

There are some important differences between Britain’s situation and Canada’s, primarily that Britain chose to leave the European Union, while NAFTA renegotiation was forced upon us.

In some respects we have a better image on the world stage, largely without imperial ghosts. One also suspects that Prime Minister Justin Trudeau is a much better dancer than May. However, there are so many more ways that diplomacy can go wrong, as our recent diplomatic spat with Saudi Arabia or Trudeau’s trip to India show. 

Canada’s trade diversification efforts are promising, according to Brian Kingston, the vice-president of policy, international and fiscal issues at the Business Council of Canada and a CGAI fellow. The Canada-Europe Trade Agreement has been 98 per cent implemented, and we signed the Trans-Pacific Partnership. Yet 76 per cent of our exports go to the United States.

Moreover, if NAFTA talks fail, what exactly would be the new relationship with the United States? Canada’s economy is as integrated with the U.S. as the British economy is with the European Union. The British at least have a commitment from the EU to negotiate a new trade deal, with reports indicating that Germany is particularly willing. Does Canada have such a backstop?

Of course, regardless of what happens with NAFTA, Canada will continue to do a great deal of trade with the United States. This will be true even in the worst-case scenario if the U.S. also withdraws from the World Trade Organization, as President Donald Trump has threatened. But our international trade is hardly diversified despite decades of calls for such measures. The British example shows that trade deals are difficult to replace.

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About the Author

Denis Clark is an assistant professor of British diplomatic history at the University of Calgary.

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Canadian Global Affairs Institute

The Canadian Global Affairs Institute focuses on the entire range of Canada’s international relations in all its forms including (in partnership with the University of Calgary’s School of Public Policy), trade investment and international capacity building. Successor to the Canadian Defence and Foreign Affairs Institute (CDFAI, which was established in 2001), the Institute works to inform Canadians about the importance of having a respected and influential voice in those parts of the globe where Canada has significant interests due to trade and investment, origins of Canada’s population, geographic security (and especially security of North America in conjunction with the United States), social development, or the peace and freedom of allied nations. The Institute aims to demonstrate to Canadians the importance of comprehensive foreign, defence and trade policies which both express our values and represent our interests.

The Institute was created to bridge the gap between what Canadians need to know about Canadian international activities and what they do know. Historically Canadians have tended to look abroad out of a search for markets because Canada depends heavily on foreign trade. In the modern post-Cold War world, however, global security and stability have become the bedrocks of global commerce and the free movement of people, goods and ideas across international boundaries. Canada has striven to open the world since the 1930s and was a driving factor behind the adoption of the main structures which underpin globalization such as the International Monetary Fund, the World Bank, the World Trade Organization and emerging free trade networks connecting dozens of international economies. The Canadian Global Affairs Institute recognizes Canada’s contribution to a globalized world and aims to inform Canadians about Canada’s role in that process and the connection between globalization and security.

In all its activities the Institute is a charitable, non-partisan, non-advocacy organization that provides a platform for a variety of viewpoints. It is supported financially by the contributions of individuals, foundations, and corporations. Conclusions or opinions expressed in Institute publications and programs are those of the author(s) and do not necessarily reflect the views of Institute staff, fellows, directors, advisors or any individuals or organizations that provide financial support to, or collaborate with, the Institute.

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