CETA is not dead, but it’s close.
Since the Brexit vote, Europe is a mess. The pound is dropping, markets are scrambling, and most are wondering how the political establishment will address what appears to be a constitutional vacuum related to exiting member-states. It just speaks to how ill prepared the union was to such an eventuality.
Yet, the biggest casualty of the Brexit will likely be global trade. Canada may be the one country paying the largest price as the Comprehensive European Trade Agreement (CETA) is still under negotiation and will not be ratified any time soon. With so much uncertainty in agricultural policies CETA is undoubtedly on life support, at best.
CETA is an agreement that emphasizes Canada’s relationship with the EU. With a deal in hand, CETA was Canada’s greatest chance to act as a portal between both continents. The United Kingdom is one of our top food trading partners within the EU, but the potential to increase trade in certain commodities was tangible. The plan had merit. While more pork, beef, maple syrup went one way, more good European cheeses and other dairy products came our way.
Indeed, CETA finally created a critical breach in our highly protectionist supply management system, a system of high tariffs on imports and production quotas. All provinces were highly engaged in these negotiations, offsetting potential backlashes from quota-happy provinces like Quebec and Ontario. Unlike the Trans-Pacific Partnership, the political process which led to the deal was a textbook example. Trading implications were potentially transformational for a nation which has mainly been trade reliant for decades.
Meanwhile, Americans were also pursuing their own deal with Europe. Given the anti-neoliberalism undertones between Clinton and Trump, however, it is unlikely that the U.S. and the EU will sign a deal any time soon. Let’s face it, for Europe, Canada was playing second fiddle to the almighty American market. The fear of being overshadowed by the U.S. was real. CETA became our beacon of hope to outshine our friendly southern neighbours, at least for a little while. It was indeed a great opportunity for us to embrace our newly found status as a genuine trading economy.
Brexit, however, has made the situation much more convoluted for all nations involved, including Canada. First, the EU needs to figure out what it will do with its Common Agricultural Policy (CAP). For agriculture, CAP in Europe is a big deal. It represents over 40 per cent of the entire EU budget. More than 55 per cent of farmer income support in Britain stems from the Common Agricultural Policy, which has been in existence since 1957. So CAP comes with extreme political and fiscal baggage. Since it is leaving the EU, Britain will need to find ways to support how its agriculture industry will move forward, which may end up costing billions. Before thinking about new trade deals, farmers will surely want
One approach being advocated over the past few days is the Swiss model. In this case, food sovereignty would be the driving force behind most food and agricultural policies. In other words, the more consumption of locally grown commodities the better. Interesting idea for foodies, but such an approach tends to allow less efficient production systems to emerge, while keeping food prices much higher. Food inflation has not been an issue for the U.K. of late, but it could be should it opt for this approach. As an island, populations often mitigate risks differently, meaning the United Kingdom may find such an approach soothing. This, however, would not be good news for Canada.
Interestingly, more than 60 per cent of farmers voted in favour of Brexit. That support was likely galvanized by prohibitive herbicides regulations and restrictive policies related to genetically modified crops. Now that Brexit is a reality it will be interesting to see how the CAP situation will transpire through negotiations between the Brits and the EU.
Essentially though, it will take months, and perhaps years, to settle the CAP situation in the EU. If CETA is ever ratified soon, agricultural issues would likely be left out. Or else, it is as good as dead.