Canada-UK trade deal could be delayed

OTTAWA – Further political turmoil in Britain could further delay trade talks with Canada, but experts say Canada’s high commissioner in London is very optimistic.

British Prime Minister Liz Truss resigned on Thursday after a tumultuous 45-day tenure marked by economic policies that rocked financial markets and a rebellion within her political party that eroded her power.

Mrs Truss became the third Tory leader to be ousted in as many years, perpetuating the instability that has rocked Britain since leaving the EU.

Canada’s High Commissioner to the UK, Ralph Goodale, believes relations between the two countries will continue “unscathed”.

“Some of the meetings scheduled this month may be postponed to next month,” he explained. But the issues of vital importance to both our countries transcend political differences.

This includes pending trade agreements. “I don’t expect any kind of delay,” he said. Both countries, at the highest level, are absolutely committed to this path. The process is well advanced.”

However, Canadian trade experts fear the installation of another British cabinet could delay negotiations.

“With a new president and new ministers, it takes time for them to get their files up to speed,” said Deloitte Canada senior economic adviser Trevin Stratton.

“Any deals that are being negotiated could be put on hold for a period of time until a new leader comes in,” said Stratton, who advised the Canadian Chamber of Commerce on how Canadian companies will benefit from Brexit.

Since Brexit, the UK has focused on deepening ties with countries outside Europe, particularly Commonwealth members such as Canada.

A continuity agreement is currently in place, which maintains most of the old EU’s rules until Canada signs a new trade deal with Britain.

Lawrence Herman, a Toronto trade lawyer, says the uproar could hinder a quick conclusion of a new deal.

“Political unrest in the UK will inevitably spill over into bilateral relations, slowing progress in many policy areas, including international trade,” he wrote in an email from Britain.

“While the basic trading relationship will continue, at least until the political situation in the UK stabilizes, there will be no progress in negotiations for a new trade deal for some time.”

According to Raph Goodale, three negotiating sessions on a new deal have already taken place, and a fourth is scheduled for late November or early December, should it go ahead as planned.

Although some issues may be postponed “until the nature of the UK Cabinet is settled”, the agenda for this session has already been set and political direction has already been given to the negotiators.

“I don’t expect any major setbacks in the process,” says Goodale.

Inflation background

As Britain’s priorities shift amid a cost-of-living crisis and recession, it could take some time to finalize the details of a new trade deal.

The loosely regulated economic policies chosen by her party, including unfunded tax cuts, have wreaked havoc in the real world at a time of weak inflation and economic growth.

Stratton points out that these policies have backfired on the pound, with the Canadian dollar gaining against the pound, leading to reduced exports to the UK.

He said Ms Truss’s resignation could bring exchange rates back to normal, while her party had a more stable desire to sign new trade deals.

“This resignation will not have a major impact on our trade relationship, given the longstanding economic ties between the two countries,” Stratton said.

The Anglo-Canadian Chamber of Commerce believes these links have come to the fore because it is much easier to export to Canada than it is to Europe.

“Brexit has leveled the playing field by making it more difficult to do business with Europe,” said Martin Buckle, treasurer of the Toronto group.

“Canada has a very positive image in the UK that people see as the next step in global expansion.”

Mr Buckle believes Britain’s dysfunction will not hamper communications between intelligence and the military, but he expects Canada’s trade talks to go smoothly once resentment from London subsides.

“The civil servants working there have had a lot of training since Brexit, so they’re very smart.”

The Tories say they plan to install a new leader by the end of next week. Despite the opposition calling for an election, they still hold a majority in the Commons.