Thank you, Madam Chair and honourable members, for the invitation to speak as part of the committee's U.K. study. It's a pleasure to be back here and to see you all again virtually.
As the committee's members will appreciate, the U.K. is a significant trading partner for Canada. It's our third-largest goods export market and second-largest destination for foreign direct investment abroad. As Trevor alluded to a moment ago, it's quite important, particularly in the EU-28 context, with 40% of our merchandise exports and 36% of our service exports from the EU-28 going to the U.K.
Despite the impressive overall rankings, it still is an overall small proportion of our global trade share, behind the United States. The relationship, we feel, has the potential to grow, and certainly Britain is an ideal market for Canadian companies seeking to diversify, given our shared language and ways of doing business.
With the EU separation question firmly decided in the U.K., we need to look ahead to dealing with the world as it is. The reality means that, once the U.K.'s transition period with the EU ends on December 31, the U.K. will no longer be treated as if it were a party to CETA by the Government of Canada. Given how important the U.K. is as part of the EU-28's export basket, the short answer is that Brexit matters for Canadian businesses.
The Canadian Chamber of Commerce has not completed our own in-house modelling, but some external work serves as a rough guide for what the potentials are. Canadian economist Dan Ciuriak conducted an analysis in 2018 as part of the British government's CETA impact assessment. The study found that by 2030 the value of the U.K.'s participation in CETA would be worth about £1.1 billion, or approximately $1.9 billion Canadian in terms of Canadian exports to the U.K.
Although this is definitely not a precise measurement, given that we don't know the final architecture of the U.K.'s trade arrangements with the EU and Canada and that we don't know what the U.K.'s final picture will be in 2030, given that the study was done with a 10-year time horizon, and that we also have divergences in the U.K. and EU's MFN tariff rates, it nonetheless provides at least a decent rough signpost on the potential for what a U.K.-Canada trade deal means to the Canadian economy.
I'd like to just be a bit more specific now on some of the immediate implications of not having a transition agreement in place by December 31.
The first is tariffs. Canadian businesses will lose preferential access to the U.K. market, making our products less competitive. Some examples of where we would face tariffs under the U.K.'s global tariff regime include lobster products, with tariffs of up to 10%; plastics under HS 3908, with tariffs of up to 6%; vehicles under HS 8703, with tariffs of up to 10%; and beef products under HS 0201 with an ad valorem tariff of up to 12%, plus specific tariff units per kilogram.
I should add here a note that Canadian beef products have a TRQ under CETA and certainly any TRQs that are transposed into a U.K.-Canada context need to be commercially viable for Canadian companies to take advantage of them.
The second, which we will not have without a transition agreement in place, are the discussions around regulatory co-operation. CETA provides a framework for critical regulatory dialogue to occur on agriculture non-tariff barriers and through the conformity assessment protocol. Regulatory co-operation is not glamorous; it's the nuts and bolts of trade and absolutely critical. Our trade agreements have an important role in shining a spotlight on the work that regulators do to make sure that issues are advancing in a timely manner for businesses. Certainly agriculture non-tariff barriers have been quite problematic in the EU context, and we hope that the U.K. will eventually take a different approach.
The last is service exports. CETA's temporary entry chapter provides provisions on intra-company transferees, and this means that Canadian companies can bring in specialized talent to work in Canadian operations. CETA's contractual service suppliers' provisions mean that specialized skills can be brought in to fill supply chain gaps for Canadian businesses. CETA provisions on these entry categories reduce business burdens and, without them in a U.K. context, companies will need to use other routes that are more cumbersome.
Simply put, if CETA matters, then transitioning it into a bilateral agreement also matters. We have been working closely with our U.K. counterparts at the Confederation of British Industry to advance this and will continue to do so until the deal is done.
Certainly we hope this committee will be able to facilitate an expeditious passage of the implementing legislation once the agreement is finalized.
As members of the committee will appreciate, everything you do in trade builds on what came before it. CETA was the gold standard when it was negotiated, but the Canada-U.K. transitioning agreement should be seen as a starting point for going further.
I'd like to quickly highlight five areas where we think we can do this.
Number one is digital trade. Since CETA's negotiation, global trade discussions on digital trade rules have taken on a much bigger focus. This includes the WTO as well as our digital trade chapters in CPTPP and CUSMA. Discussions with the U.K. on digital trade should support better data flows by Canadian companies.
Number two is regulatory co-operation. The future gains on merchandise trade will ultimately be determined by reducing non-tariff barriers given how low tariff rates are for most products. This is particularly important for Canadian agriculture exporters, as I alluded to a moment ago, where it's been a tough slog in the EU. There's also forward-looking work that we can do in areas like health sciences procurement as well as cybersecurity.
Number three is critical minerals. The global supply of rare earth minerals that enable the production of many high-tech products remains dangerously concentrated. Future discussions between the U.K. and Canada should facilitate greater private sector production and movement of these rare earth extractive products.
Number four is trade facilitation. The pandemic has emphasized the value of the efficient movement of goods globally. Canada and the U.K. should explore ways to introduce additional measures that would modernize customs processing in CETA, and build on the free trade agreement from the WTO.
Number five is labour mobility. Enhancing the ability of companies to attract talent and access service contracts abroad is critical to diversifying what you're exporting, not just to where. Activities like after-sales servicing can actually be more lucrative for companies than the original export itself, so we should try to be ambitious in how we approach this business activity.
Without a bilateral agreement in place, certainly these five areas, and work on other areas like sustainability, will be difficult to go further on.
Thank you for your consideration, and we look forward to the discussion.