The good and bad side of Brexit has been highlighted as the much lauded trade deal between Canada and the EU hits a snag, which could potentially scupper the whole thing.
The year is 2007, Canada and the EU begin a process designed to create a new trade deal between the two regions. Negotiations commence.
It is June 2016, Brexit campaigners highlight the trade deal between the EU and Canada as an example of what can be achieved. They add that since the EU exports far more to the UK than it does to Canada, the imperative for the EU to agree terms with the UK post Brexit would be all the greater. Remain campaigners respond by pointing out that the deal has taken seven years to negotiate, it still hasn’t been ratified, and doesn’t even apply to services.
October 2016, the Wallonia region of Belgium objects to the deal, and since Belgium needs unanimous approval from its five regions, and since the EU needs unanimous approval from all of its 28 member countries, the deal can’t go ahead.
This does not mean that it is dead, it simply means negotiators have to find a fix that satisfies both Canada and Wallonia.
Here are three observations.
Observation number one, it shows how tough it is going to be for the UK to agree a trade deal with the EU. Some respond by saying ‘well forget it then, don’t bother, opt for hard Brexit’. But never lose sight of the fact that many overseas companies, banks and car makers for example, are based in the UK as they see it as a bridgehead into the rest of the EU.
Observation number two, it does rather go to show that the UK, on its own, may be at an advantage in agreeing future trade deals. One assumes it could agree terms with Canada many times faster – assuming that is other countries can be bothered. The US has said that the UK would go to the back of the queue. China’s ambassador to the UK has intimated that if anything Brexit has made China more enthusiastic about trading with the UK. Similar sentiments have been coming forth from India. But equally, never forget, it will take time.
Observation number three, we live in a more protectionist world. International trade makes the world a richer place. When two countries begin to trade more frequently with each other, both of those countries become better off. This is so, because trade allows countries, and indeed companies, to specialise in what they are best at. By definition, this also means some people will be worse off, jobs will be lost in some sectors in one country, and new jobs created in other sectors. The failure of politicians in recent years is to have been unable or unwilling to come up with a method for compensating those workers who lose out, without, at the same time, destroying their incentive to re-train or work in other areas, or even react to adversity by setting up a business.
And that is why we are seeing politicians jump on the protectionist bandwagon.