THE BLOG

Does Brexit Mean CETA?

07/09/2016 14:03

It has been two months since the UK voted to leave the European Union and the UK Government's Brexit strategy is as unclear now as it was then. Not only has the UK Government not come to an agreement as to what it wants, it is ill-equipped to negotiate it.

So far the Prime Minister has stated that 'Brexit means Brexit' and has established two new ministries, the Department for Exiting the European Union and the Department for International Trade, to deliver whatever 'Brexit' means.

The Department for International Trade has secured only 10% of the trade negotiators it needs while the Department for Exiting the European Union gave its first statement yesterday after a summer of silence, which confirmed nothing but the fact that the government has absolutely no clue what its own position is.

Furthermore, it is estimated that the cost of securing the expertise the UK needs will cost £5bn over ten years with some lawyers already on open contracts worth £5,000 a day.

This UK government's uncertainty is echoed by the Labour Welsh Government and the Welsh Conservative branch, who have been exposed as having no firm position on their preferred Brexit scenario for Wales. Their strategy seems to consist of a series of vague measures to mitigate the impact of Brexit on our country. With no instruction from their dumbfounded superiors in London, no progress is being made anywhere.

One option supposedly being bandied about is the Comprehensive Economic and Trade Agreement (CETA) - Canada's deal with the EU. David Davis, the new Minister for Exiting the European Union, has called it the "perfect starting point for our discussions with the commission". Similarly, Boris Johnson has cited it as an example for the UK to follow.

Those close to the negotiations and others who have followed the development of the agreement paint a more nuanced picture. They point to the years of complex negotiations demanded by the deal and the persistent uncertainty surrounding its implementation. Fundamentally, the question of whether the agreement's framework is far-reaching enough to allow the UK to replicate its current level of access to the single market.

CETA, which is yet to be ratified, promises that around 98.6% of goods traded between Canada and the EU will be free of duty. It enables access to public procurement between the two markets and empowers regulatory bodies to accept the standards and tests carried out in each other's jurisdictions. While the trade deal aims to liberalise services, several exceptions are listed.

Under CETA, Canada will have no hand in setting EU regulations or formulating product standards and no access to the banking passport system - an obstacle the UK Government will, no doubt, want to overcome.

Canada's largest trading partner is the United States, accounting for more than 60% of its total global trade in 2014. The EU is Canada's second trading partner, representing around 10% of its external trade. In the seven-year plus interim period of a deal being drawn up, Canada has been able to rely on its trade with the United States.

In contrast, the EU is the UK's biggest trading partner, accounting for 45% of UK exports of goods and services in 2014 and 53% of imports. The UK will not have another trading shoulder to lean on during the drawn-out negotiations and Wales, which has a goods trade surplus of £5bn, cannot afford the luxury of time nor the uncertainty.

Furthermore, the not-yet-hired £5bn negotiators will have to decide whether it will adopt clauses in CETA which allow corporations to launch legal challenges against governments perceived to block them. Similar to the more widely known 'TTIP' agreement, CETA could lead to big German corporations being as powerful as the UK Government, suing it for not giving access to certain areas in the market. CETA would undermine the very notion that underpinned the Brexiteers' campaign ahead of the referendum - the question of sovereignty.

Plaid Cymru has been calling for the UK push for EEA (European Economic Area) membership. Under this model the UK would remain part of the European Single Market meaning there would be no tariffs or other new border measures on UK-EU trade. The UK would continue to adopt all the EU's economic regulation keeping non-tariff barriers between the UK and the EU at a lower level.

The latest export figures show that 37% of Welsh exports by value (£1.12b) went to the EU. This is significantly higher than exports to other parts of the world, with 23% going to the USA and Canada and 15% to Asia.

Unlike a CETA + style arrangement, the EEA already exists as a construct. There are draft treaties in place which the UK government could use when negotiating its position. Uncertainty is economically toxic and the Welsh Government and UK Government should be doing all they can to mitigate this uncertainty. Calling for EEA status is the best way of doing this relatively quickly.

If membership of EEA/EFTA is blocked by Norway (a possibility which Brexit ignored prior to the referendum) then the UK should negotiate a parallel treaty to that secured by Norway, but making specific provision for Welsh farming products to gain tariff-free access to EU markets.

We expect the Labour Welsh Government and the UK Government to vigorously defend the Welsh national interest. We cannot afford to leave the fate of the Welsh economy in the hands of the Prime Minister and her three dawdling Brexiteers.

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