Canada-EU trade deal lessons for Brexit Britain

The apparent collapse, and subsequent resurrection, of a free trade pact between Canada and the European Union last week might at first glance seem to be of little concern to Britain.

After all, we voted to leave the European Union in June, leaving us free to pursue our own deals with the likes of Canada, with which we have close historic ties and share a head of state in the Queen.

But the fatal blow that might have been dealt to the Comprehensive Economic and Trade Agreement (Ceta) could augur ill for the UK's hopes of avoiding a post-Brexit economic crash. Here's why:

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What is Ceta?

It's a free trade deal that has been seven years in the making between the EU and Canada. In short, it would harmonise a range of regulations and "eliminate" 98 per cent of import tariffs.

Supporters claim it would boost trade between Canada and the 28 EU states by as much as 20 per cent, or £10bn a year, says the BBC.

Why was it in trouble?

Because socialist-led regional governments in Belgium were staunchly opposed to it, which meant it couldn't go ahead. A signing ceremony pencilled in for 27 October had to be cancelled.

French-speaking Wallonia objected to the deal and vowed to protect its important agricultural sector from any competition the treaty would bring.

Belgium was given a deadline of mid-week to make a formal decision on Ceta, but under its devolved governance structure it can't agree a trade deal without the support of its regions. "And if Belgium can't, then the EU can't," says the Telegraph's Matthew Lynn.

Why were they opposed to it?

"The Belgian Socialists' fears echo those of anti-globalisation activists, who say Ceta and deals like it give too much power to multinationals – power even to intimidate governments," says the BBC.

Specifically, there are concerns over a section of Ceta that "allows foreign investors to sue countries if decisions are taken that hurt their investments – a standard feature of Canadian trade… agreements with other nations", says Canada's Globe and Mail.

What has changed?

Wallonia has removed its objections to the deal after agreeing an "addendum" to the treaty that addresses "regional concerns over the rights of farmers and governments," says the BBC. It was signed on Sunday.

The region had been "demanding stronger safeguards on labour, environmental and consumer standards" as well as "more protection for Walloon farmers" from Canadian competition.

The premier of the Flemish region, Geert Bourgeois, has described the change as a "clarification". He told the BBC the original text of the trade deal remains the same.

Will the deal now go ahead?

It has been signed, but it still faces massive obstacles, not least because of the changes made to appease Wallonia.

According to The Independent, the revised treaty requires another round of ratification to authorise the "corporate court" that companies could turn to for legal action. Many regional governments across the continent will have their own vote, too.

A number of these regional authorities could oppose it. Wallonia says it will do so unless there are substantial changes to the current drafting.

The Globe and Mail say the court could be voted down without the Ceta deal collapsing, but it could also be "all or nothing".

Is opposition confined to Belgium?

No – there is wider unrest about these sorts of agreements across the continent, namely a separate trade deal currently being discussed by the EU and US. Some 3.5 million Europeans have signed a petition against both this and the Canadian accord.

In relation to Ceta there have been widespread protests and a number of concessions have needed to be offered to avoid a veto from Austria, Bulgaria, Romania and, most notably, Germany. "Most of the continent is now fundamentally opposed to free trade," says Lynn.

Should the UK care?

Absolutely. Not only might Britain yet retain membership of the single market and thereby benefit from any deal, but the progress of this arrangement is directly relevant to the country's Brexit negotiations.

Put simply, the UK is going to be trying to secure its own free trade deal with the EU. Spain's foreign minister even said this month that a Ceta-style deal is the most likely "template for a future pact" with post-Brexit Britain, says The Independent.

So what does this mean?

Earlier this week, when the Ceta talks were on the verge of collapse, the pessimists had the floor. They say the collapse of Ceta would result in the UK kissing goodbye to any hopes of a "soft Brexit" that retains EU free trade or single market access.

"If Canada can't get [a free trade deal], there is not much chance of us being able to agree anything either," says Lynn. "We'd be better off relying on World Trade Organisation rules, opening up our own markets – and forgetting about the whole thing."

There were already political concerns. Some on the continent, especially in France, have long been agitating to reduce the continent's dependence on London as a financial hub.

Other EU leaders may also seek to ensure leaving the EU is not seen as a profitable course.

Is there any hope things will be different?

Yes there is. Apart from the fact that the Canada deal now looks likely to be signed, the UK may not have to endure the same wrangling given that it's already in the EU and its markets are already set up according to the bloc's rules.

Doing a deal with the UK would not result in a flood of new products hitting the continent. In addition, European manufacturers will still want to access Britain's large consumer market.

Finally, Full Fact points out that under the process for leaving the EU the UK will not have to get unanimous support for a trade deal, but merely majority support from 20 out of the remaining 27 members.

A deal backed by all remaining members would only be required if Brexit happened before trade arrangements had been agreed.

So we not going to be held to ransom by a regional government representing less than one per cent of the total population of the EU. But that doesn't mean a deal will be easy.