Canadian and Ontario ag sectors monitor Brexit shakeout

Wednesday, June 29, 2016

by SUSAN MANN

Canadian agricultural businesses could scoop up some trade with the United Kingdom as it works out how it will leave the European Union, the world’s largest trading block.

Last Thursday, voters in the U.K. approved a referendum calling for the country to leave the European Union. The vote was 52 per cent in favour of leaving and 48 per cent wanted the U.K. to stay.

J.P. Gervais, Farm Credit Canada chief agricultural economist, says “at the end of the day, from a trade standpoint I’m not so sure that we have anything to worry about.” In fact, Canada could see some benefits.

If the U.K. follows through on the vote and leaves, the trading relationship between the U.K., a net importer of food, and the other European countries in the trading block will be broken, he says. And during the time it takes for the U.K. and the European Union to work out a deal on how to regulate trade between their regions, “I can see our exports to the U.K. actually going up.”

He adds the U.K. and EU have a pretty strong incentive to fix the trading relationship, possibly by providing the U.K. with special status for trade with the EU countries, similar to the deal Norway has, or through a bilateral free-trade agreement, like what Switzerland has with the EU countries.

However, it will take time to fix the relationship and “in between maybe there’s an opportunity for us to actually export a bit more to the U.K. than we’ve done in the past because they’re not going to have the suppliers from Europe,” he explains.

Canada doesn’t export great volumes of food products to the U.K. currently, he notes.

As for what happens with the Comprehensive Economic and Trade Agreement (CETA) Canada negotiated with the EU, Gervais says he doesn’t know. The outcome of that deal will depend on the negotiations between the U.K. and EU.

Gervais says Canada’s International Trade Minister Chrystia Freeland “was quoted as saying there’s probably going to be more momentum for CETA going forward because the EU would want to crystalize their trade relationships with other partners,” such as Canada.

Al Mussell, owner of Guelph-based research company, Agri-Food Economic Systems, has a different take on the situation. He says he read an article that quoted a Global Affairs Canada spokesperson saying there was language in the CETA deal that anticipated the possibility of the U.K. leaving the EU. However, “with that acknowledged, I have to think the Global Affairs people are probably working overtime trying to figure out how they’re going to handle this.”

He adds that “in terms of the CETA deal, I think we would be foolish to not be concerned about it.”

Meanwhile Ontario is keeping a close eye on the events unfolding in the U.K., Agriculture, Food and Rural Affairs Minister Jeff Leal says, noting the U.K. is Ontario’s second largest export market.

“We’re monitoring events very closely as it relates to the decision that was made by the folks in Great Britain this past week,” he notes.

The U.K. and EU are “certainly important commercial partners for Ontario,” Leal explains. “We continue to build economic ties with both as they forge a new relationship.”

Leal adds Ontario wants to ensure it continues having positive trading relationships with both the U.K. and EU.

The Canadian Cattlemen’s Association is also following developments in the U.K. and EU “as they relate to Canada’s beef sector,” according to a June 27 article in the organization’s online newsletter, Action News.

The association says it must decide if it will continue supporting CETA, seek negotiations with the U.K., support both options, or reject them.

It’s clear the CETA deal is an agreement between Canada and the EU. If the U.K. is not in the EU, then it will “not be a party to the CETA,” the article says. Canada needs to assess if its fundamental understanding of CETA’s value is still valid without the U.K..

Mussell says Britain’s vote to leave the EU could have implications for other European countries contemplating leaving the trading region, such as Germany and The Netherlands, and could push them to hold similar votes. Furthermore, the U.K.’s vote “sets a very negative tone for multilateral trade agreements.”

Representatives with Global Affairs Canada and Export Development Canada couldn’t be reached for comment. BF