BREXIT and CETA - It is just the beginning

Date posted: February 5, 2020 | Author: Chad Swance, Director of Regulatory Affairs and Trade Compliance

Although the UK has officially left the European Union block, the UK and EU still need to endure a tough round of negotiations to define many policy areas including trade, military and law enforcement ties, regulation, financial markets integration, and even fishing rights. The two sides have given themselves until December 31, 2020 to reach an agreement. There is a possibility of an additional 12 months, but the Prime Minister of the United Kingdom is currently refusing to ask for an extension. There is sure to be a few more sensational headlines about negotiations in the coming months.

During the transition period to December 31, 2020, and possibly beyond, the UK would be treated largely as if it were an EU member state. During the transition period, the UK could also be part of the international treaties that the EU has with third countries, such as the Comprehensive Economic and Trade Agreement (CETA) with Canada.

Canada and the United Kingdom have openly committed to negotiating a new “CETA” deal post BREXIT.  Should the UK crash out of the EU at the end of 2020, and no new Canadian deal be reached, the UK would no longer be bound by the EU’s treaties with third countries, including CETA. In this scenario, Canada-UK bilateral trade would no longer benefit from any CETA preferences and would be based on WTO rules, including MFN tariffs on goods. In order for MFN rates to overtake CETA rates in Canada, the Government of Canada would need to amend the regulatory framework around CETA to remove UK eligibility. This process will likely include public notification prior to implementation of Canadian MFN rates applying to UK trade.  

Kuehne + Nagel Canada will continue to monitor the negotiations and update clients as concrete details are announced. For more information on how your organization can prepare for trade with the UK post BREXIT, please contact your local KN representative or reach out to the undersigned.