Insider Economy UK looks to Canada and Australia for EU trade deal template

UK looks to Canada and Australia for EU trade deal template

British Prime Minister Boris Johnson has pitched two models for his country’s trade ties with the European Union after Brexit: a deal based on the EU’s accord with Canada, or the basic terms the bloc has with Australia.

Johnson used the two countries as examples of EU trade partners which do not adhere to the bloc’s rules, something he has vowed Britain will not do from Jan. 1 2021 when the current 11-month no-change Brexit transition period ends.

The EU’s trade deal with Canada entered force in 2017, eight years after talks began, but the EU does not yet have an agreement with Australia.

Below is an explanation of how the EU trades with both countries.

CANADA

Goods:

The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada sets out the removal of tariffs on 99% of all goods types, some over a period of up to seven years.

However, it limits volumes of some exports into the EU of pork, beef and frozen lobsters, reflecting Europe’s traditionally protective stance to its farming sector, along with dog or cat food and track suits, ski suits and swimwear.

Services:

CETA offers far less freedom than banks and other firms based in Britain currently have to do business in the EU.

Canadian financial firms need licences to operate in the bloc and must comply with EU regulations. Both sides must treat each other’s sectors equally, but a “prudential carve-out” also allows for measures to limit access.

There are some restrictions for other service industries too.

CETA seeks to allow temporary stays or permit each other’s nationals to provide cultural and audio-visual services for between 90 days and three years.

About half of the CETA text, which stretches to 1,598 pages, is devoted to “reservations”. For example, the Canadian province of Manitoba requires funeral firms to have a licence while the EU says only German residents can open a pharmacy in Germany.

There is some mutual recognition of professional qualifications.

Customs, rules and standards:

Brussels and Ottawa agreed to smooth customs procedures and try to release goods quickly, but both sides will still carry out import checks, notably of all live animals, 15% of fish products and 10% of animal products traded.

CETA seeks to strengthen cooperation on rules and standards but does not include the level of alignment in state aid, the environment and taxation that the EU wants from Britain.

Both sides should seek to avoid anti-competitive behaviour but there are no shared antitrust rules. CETA has little to say on taxation.

Canada and the EU agreed to notify each other every two years on new or continued subsidies.

The EU made demands on labour and environmental standards, including commitments of the Paris climate change accord.

Both sides can still put in place tariffs to counter what they see as dumping or unfair subsidies.

In the case of disputes, CETA envisages first mediation and then resort to a CETA Joint Committee, made up of members from each side. CETA makes no mention of the EU Court of Justice. Johnson has said Britain will not be subject to ECJ oversight.

AUSTRALIA

Australia is currently negotiating a free trade deal with the EU to improve its market access, but for now largely trades with the EU on World Trade Organization terms. This means it faces some high tariffs on goods it exports to the bloc including its wine.

Australia is not bound by any EU rules but its farmers can send fixed quantities of cheddar and cheese for processing at reduced tariffs, of “high quality beef” at a 20% tariff, as well as grain-fed beef and lamb and goat meat at zero tariffs. Australia shares some of these quotas with other countries and they are filled on a ‘first-come’ basis.

(Reuters)

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