Thursday, November 3, 2016

What Canada Can Teach Post-Brexit Britain

By Clive Crook
The Bloomberg View
November 3, 2016

Canada, let's agree, has much to teach the world. Following the signing of its new trade deal with the European Union, its lessons on the future of Britain and Europe are especially timely.

The Economist just celebrated Canada's distinctive achievements with a cover and supporting articles. The magazine was full of admiration for Canada's liberal, outward-looking centrism. Yet what struck me most in these excellent pieces was an observation made in passing: "Brexiteers might justifiably claim that they voted for exactly what Canada already has: control of immigration and the freedom to negotiate trade deals with any country willing to reciprocate."

Indeed they might. They might also wonder why respectable opinion, not least in the pages of The Economist, has refused to take claims of this sort seriously.

Throughout this debate, the core of the supposedly enlightened case against Brexit has been that, in the modern world, sovereignty is a myth. Economies are too interdependent: No country, least of all one with a much larger neighbor, is free to choose. You exercise influence by pooling sovereignty, not by trying vainly to preserve or reclaim it. And so forth.

This position spared its advocates the nuisance of having to weigh the likely costs of leaving the EU (which might indeed be substantial) against the benefits. If the benefits of "resuming control" were but a delusion, there was no real choice to make. That's why, according to papers like The Economist and the Financial Times, you were either a smart Remainer with an up-to-date understanding of the world, or a moron.

Canada proves otherwise. For sure, it's a good international citizen in many respects, a willing pooler of sovereignty in various policy areas -- but it's also a recognizably self-governing nation. It's a middle-sized country with a much larger, more powerful and more assertive neighbor. Yet, as The Economist says, it's different. Its choices are constrained at every turn by forces beyond its control, but evidently they aren't reduced to nothing. Canada has choices to make, and makes them for itself. It's a whole other country.

I fail to see why this model should be dismissed as unviable for the U.K., or irrelevant to Brexit.

Undeniably, getting to a friendly, productive and fully inter-governmental relationship with the EU -- much like the one Canada has with the U.S. -- won't be easy. Brexit is undoubtedly driven in large part by anti-liberal sentiment. This sentiment may lead Britain to turn away from the wider world rather than toward it. And the EU's response is unlikely, at least in the first instance, to be cooperative: Europe won't want Brexit to be judged a success. Because of these risks, I've been a Remainer, albeit a reluctant one.

Yet Canada shows that there's a strong case to be made on the other side. And now that Britain has in fact voted to leave, it shows that there are valuable opportunities to pursue.

Consider, for instance, the new Canada-EU trade deal. The Comprehensive Economic and Trade Agreement not only eliminates tariffs on most goods, it also makes a good start on liberalizing investment flows and trade in services. Granted, a CETA-like deal for Britain would be a big step back in terms of economic integration with Europe -- especially on financial services, which matter a lot for the U.K. economy. It's by no means equivalent to membership of the EU's single market. Nonetheless, it promises a high degree of integration.

The EU insists that Britain can't leave the union and resume control of its borders yet still remain a member of the single market. So be it. That leaves the option of seeking a CETA-plus deal, with liberal access for Britain's financial-services providers in return for, say, preferential treatment of EU migrants and/or generous participation in other joint U.K.-EU endeavors, such as development aid, infrastructure investment, and defense.

Remainers say this can't be done. CETA took seven years to negotiate, and the deal almost collapsed at the end because of opposition in Wallonia, the French-speaking part of Belgium. The prospects for a similarly ambitious deal between the EU and the U.S. -- the Transatlantic Trade and Investment Partnership -- look poor. Therefore nobody should bet on an even bolder U.K.-EU pact in the foreseeable future.

It's true, this will be a challenge. But bear in mind three things. First, a CETA-plus deal between Britain and the EU would make sense for both sides in economic terms; with time, as tempers cool, that logic may assert itself. Second, unlike Canada, the U.K. starts from a position of full compliance with EU rules, which would make an enhanced FTA easier to design. Third, the argument that the EU is no longer capable of forming good mutually advantageous trade pacts with other countries cuts both ways: The harder it gets for Britain or anybody else to strike good deals with the EU, the more Britain has to gain by being free to cut such deals elsewhere on its own.

The main thing is simple. Canada likes being Canada. It's a good neighbor, but would rather not be part of the United States. Perplexing as it may be to many British commentators, that position is not in the least bit delusional. On the contrary, there's a lot to recommend it.


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