Thank you, Madam Chair.
Good afternoon, honourable members. Thank you for the invitation to appear before the Standing Committee on International Trade to provide an update on the Canada-U.K. transitional trade agreement and Canada's discussions with the U.K. towards an agreement based on the Canada-EU comprehensive economic and trade agreement, or CETA.
We thank the committee for its interest in this topic.
As I believe we are all aware, in 2016 the United Kingdom held a referendum on its membership in the European Union, which resulted in the decision to leave the EU single market, customs union and free trade area.
That decision has clear consequences for the Canada-U.K. trade relationship.
For one, the United Kingdom leaving the EU means it can no longer be party to the CETA as of the end of the Brexit transition period, which is December 31, 2020.
Two, after over four decades of EU membership, Brexit will bring about significant changes in the United Kingdom's trade and economic relations with its largest trade partner.
Three, going forward, the U.K. may choose to take new approaches to trade. These will be of interest to close trade partners like Canada. Canada and the United Kingdom have historically enjoyed mutually advantageous commercial relations. Both sides are keen to work together to maintain our strong trading relationship post-Brexit and to seek to mitigate potential disruptions for stakeholders.
In September 2017, when the U.K.'s approach to Brexit was in its early stages, Prime Minister Trudeau and then U.K. prime minister May met to discuss how to strengthen our bilateral relations, including in the area of trade. At that time, Prime Minister Trudeau and Prime Minister May pledged to seek as seamless a transition as possible for our trade relations.
Soon thereafter, officials undertook a trade dialogue aimed at substantively replicating the CETA on a bilateral basis as an interim measure in response to Brexit. As the U.K. was still formally part of the EU until January 31, 2020, it was not able to undertake new international trade negotiations at that time. However, it could discuss a replication of CETA. Our trade dialogue talks advanced in 2018 and into 2019.
A number of CETA chapters could be converted to bilateral provisions in a straightforward manner. Others required some minor technical modifications. A small but important list of chapters required intensive negotiations to turn the CETA obligations into Canada-U.K. obligations. For these areas, we undertook targeted consultations with implicated sectors and have been keeping them informed of developments.
In addition to providing these stakeholders with updates on progress throughout the trade dialogue, we have also been keeping provincial and territorial trade representatives informed via the Committee on Trade, or C-Trade.
As of March 2019, our discussions with the U.K. were quite well advanced.
Then, the United Kingdom unexpectedly announced a plan to offer duty-free access on 95% of all of its tariff lines to all World Trade Organization members in the event of a no-deal Brexit. As this change in approach by the U.K. would have significantly undermined the benefits of any preferential trade agreement between us, we paused these discussions.
Over the months that followed, Canada continued to closely monitor Brexit developments. We welcomed the ratification of a withdrawal agreement between the EU and the United Kingdom in January 2020. That treaty established the current Brexit transition period, during which the United Kingdom continues to participate in the EU single market and benefit from EU FTAs like the CETA. Canada was pleased to confirm its agreement for this arrangement with the EU and U.K., as it offered a longer period of certainty for our stakeholders.
In May 2020, the U.K. released a new most-favoured nation, or MFN, applied tariff schedule called the U.K. global tariff, or UKGT.
Then, in June 2020, the U.K. decided it would not seek to extend the Brexit transition period beyond 2020. Just for reference, the withdrawal agreement provided the option of a one-time extension to the end of 2021 or 2022.
Soon after these events, Canada proposed a resumption of our discussions on a transitional trade agreement that could apply from the end of the transition period.
Minister Ng and her U.K. counterpart Secretary of State Truss confirmed that officials should re-engage in discussions on an interim agreement for the end of this year, with the goal of avoiding a “cliff edge” for business.
Both also agreed that we should look ahead to subsequent new bilateral negotiations to be launched as soon as next year. Despite COVID-19 restrictions, we undertook an intensive schedule of virtual discussions over the past few months. There has been very good progress, especially recently, and we expect to soon be able to announce a conclusion of talks.
A number of steps would then follow to prepare to seek the government's approval for signature and to table the bill in Parliament for its consideration.
This transitional trade agreement will not be like other trade agreements Canada has negotiated. It is an interim measure in response to the unique situation Brexit has presented, where a party to one of Canada's recent trade agreements, i.e., the CETA, can no longer be covered by its provisions. As such, Canada and the United Kingdom also plan to enter into subsequent new negotiations in the near term. Those future negotiations would be best tailored to our bilateral relationship, reflect the interests of the parties and respond to any post-Brexit developments.
Ahead of the launch of any new comprehensive FTA negotiations, the government will undertake consultations with Canadians and follow any policies in place for the notification of Parliament. Officials will look forward to providing this committee with updates on that future FTA initiative.
Returning to the transitional trade agreement discussion, Madam Chair, let me end by saying that throughout the Brexit process Canada has taken a constructive approach in seeking to avoid disruptions for our businesses. We have heard from a number of industry stakeholders, as well as provinces and territories, about the importance of maintaining a preferential trading relationship with the United Kingdom.
The trade commissioner service, or TCS, has been engaging with Canadian businesses on the implications of Brexit. The TCS has done this through a dedicated web page on Brexit for Canadian companies and in terms of direct client service. TCS remains committed to continuing to assist Canadian companies doing business with and in the U.K.
Whatever the ultimate outcome of Brexit, the United Kingdom will remain a significant market for Canadian businesses, and we will continue to work together to build on our strong trading relationship to grow our economies and benefit our people.
Along with my colleagues here today, I look forward to your questions and our discussions.
Thank you.
