The UK government’s stated position is that when the UK leaves the European Union (EU), it also leaves the world’s largest single market. Membership of this market has provided the UK with free movement of goods, services and capital across Europe as well as preferential trading terms with other non–EU countries and territories.
Today, the EU buys half of all UK exports. Conversely, the UK’s role as a trading partner to the Rest of World has been in decline for decades. The UK now accounts for less than 3% of global trade, half the level of 20 years ago.
But leaving the EU Single Market doesn’t necessarily mean disaster for EU-UK trade.
The Canada Model
This entails an ambitious bilateral free trade agreement with the EU, the Comprehensive Economic and Trade Agreement (CETA).
Extended free trade of goods with some restrictions and customs procedures
Limited service sector trade provisions – financial services is excluded
Mutual regulatory recognition for limited number of sectors
Limits set by each party’s Rule of Origin and Most Favoured National provisions
In short: Offers the least access to the EU single market – but may be an attractive model for building global trade.
Learning from Canada
As the country that meets all of the UK’s post-Brexit ‘red lines’, Canada’s model may provide a template for UK policymakers. But the UK needs to recognise the years Canada has invested in securing trade agreements and building its global trade infrastructure.
If the UK government holds firm on its ‘red lines’ for leaving the EU, it will have to leave both the single market and the Customs Union. If this happens, an ambitious trade policy based on comprehensive Free Trade Agreements with a wide range of trading partners may be a viable way to assure resilience of UK trade in the future.
To find out more contact: Lee Everson, Head of Large Corporate Banking, South West & South Wales.
Mobile: +44 (0) 7775 545021