There is no immediate threat to Canadian trade with France or the U.K. But …
Elections in the U.K. and France have radically altered governments in two of Canada’s historic allies and trading partners. Whether this translates into equally radical policy changes is yet to be seen.
Canadian businesses are asking how these votes will affect trade. They wonder if the Labour-led U.K. government will restart stalled trade talks with Canada or if the new French parliament will vote against CETA, the Canada-European Union trade deal.
While the new British and French governments have far more serious matters to deal with than two Canadian trade deals, the elections in both countries fundamentally challenge Canada’s trade priorities. They also open doors for positive change.
The trade impacts of the French election are potentially far-reaching. The French Senate rejected CETA by a wide margin last March. While more than 90 percent of the Canada-EU deal covering trade in goods and services has been in place since 2017, CETA’s controversial investment rules need to be ratified by all EU member countries to have effect.
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A significant number of French voters oppose these rules, including a planned “investment court system” for foreign investors to challenge public policies before business-friendly tribunals rather than in domestic courts. CETA’s impact on farmer incomes, and the unsustainable growth of Canada-EU trade in polluting or environmentally harmful products like oil, coal, iron ore and meat over the past six years, are also issues.
The new French parliament will likely table CETA ratification legislation with the aim of conclusively rejecting the agreement. The French president would then have to decide whether to notify the EU of France’s decision.
The president could refuse to do this, leaving most of the Canada-EU deal still in place while putting the investment “court” into permanent limbo. This would be the status quo outcome with zero impact on Canadian trade.
If France does notify the EU, things get more complicated. Those parts of the Canada-EU trade deal that fall under European jurisdiction would likely remain in force. However, a “no” vote would challenge the legitimacy of a European trade agenda that is rightly seen as out of step with the times and needs of Europeans.
In this situation, the EU may ask Canada to remove the investment chapter and “court” from the deal so that CETA can be fully ratified at the EU level. Canada should accept this offer if it comes.
The result of the U.K. elections, while possibly less consequential for Canada, raises similar questions about the appropriateness of Canada’s existing trade relations with the U.K.
Prime Minister Kier Starmer’s top priority will be negotiating a better Brexit trade deal with the EU. There is no urgency to restart trade negotiations with Canada since a post-Brexit CETA continuity agreement remains in place indefinitely.
However, the Labour Party manifesto speaks about reforming trade rules, including in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), so that they complement Britain’s green industrial strategy. The U.K. is close to being a full member of the 12-country regional trade deal, which also includes Canada.
Like the investment “court” in CETA, the CPTPP’s investor protections are a relic of the past and a significant threat to democracy. Canadian and U.K. fossil fuel and mining companies regularly use investor-state dispute settlements to sue governments for up to billions of dollars when environmental decisions hurt their profits.
Because of this, many Labour MPs support removing investor-state dispute settlement from the CPTPP, as New Zealand and Australia have done, as a condition of the U.K. joining the treaty. Canada should welcome this idea.
For now, there is no immediate threat to Canadian trade with France or the U.K. But electoral shifts in Europe challenge the outdated rules that govern trade and investment on both sides of the Atlantic. We should welcome rather than fear that challenge.
Stuart Trew is a senior researcher at the Canadian Centre for Policy Alternatives and director of the centre’s Trade and Investment Research Project.
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