What is a ‘Canada Plus’ trade deal?

Following the election of a Conservative government with a large majority in the recent December 2019 election, any remaining questions on whether the UK will leave the EU have now been largely removed.

Brexit date has been set as 31 January and the UK will now enter a Brexit transitional period. The focus will now swing to what kind of trade deal the British government can get with the EU before its self-imposed December deadline.

One option that was widely discussed in Conservative circles in the lead up to the election is a ‘Canada plus’ or a ‘Super Canada plus’ deal, but what do these terms actually mean and what would this kind of trade deal mean for the UK economy and the UK plastics industry?

The Canada/European (CETA) trade deal came into force on September 21, 2017. The trade deal eliminated tariffs on 98% of goods traded between the EU and Canada and it appeals to many Brexiteers as it means zero tariffs on most goods but without political alignment to the EU. The UK would be able to strike trade deals with other countries around the world on its terms.

The Canada model also includes co-operation on standards, so that a piece of equipment made in an EU country can go through all its safety and quality checks there without needing to have them repeated in the UK - and vice versa.

Finally, a Canada model means that the UK will not have to adhere to freedom of movements rules and can have full control on the level of immigration to the UK from the EU.
However, the biggest drawback to the Canada model is that the trade deal only applies to goods, not to services and the UK is very much a service based economy. This is where the ‘plus’ in Canada plus comes in. The plus is intended to provide for a trade deal on services to extend the Canada deal on goods.

Looking at the Canada deal in detail, whilst it does have obvious advantages, such as political independence, there are parts of a ‘Canada’ or ‘Canada plus’ deal which need to be considered.

In a ‘Canada plus’ agreement, the UK would not be a member of the single market - so UK products would still be subject to border checks. A ‘Canada Plus’ makes a hard border between Northern Ireland and the Republic a real possibility. The government has discussed using technology to ensure smooth passage. However, this technology has never been used before and isn’t in place yet.

A part of the proposed Canada plus deal would involve the UK and the EU mutually recognising each other’s regulations. This would also eliminate the need for some checks at the border. However, mutual recognition agreements are often difficult and slow to negotiate and typically deal with only narrowly defined products. And they have to be renegotiated every time a regulation changes.

Most experts also suggest that as part of any deal the EU will attempt to insist on a level playing field on things such as state aid, the environment and labour rights.

So, what would a Canada plus deal mean for the UK plastics industry? There would be a lot to take away from this deal that would be positive, most obviously tariff free access to EU markets, markets which make up a large part of plastics exports from the UK. However, there are issues. Most obviously, delays at the ports as goods are checked will create delays and more bureaucracy for British plastics producers. British producers will also need to ensure that they comply with rules of origin requirements. They will need to be able to prove that the products that they are promoting as British plastics products ‘originate’ in the UK as defined by the rules of origin that come out of any EU/UK trade deal.

With any version of Canada or Canada plus the main issue is time. The EU/Canada trade deal, which only covered goods and not services, took 7 years to complete. The Conservative government has announced a deadline of the end of 2020 for the completion of any trade deal between the UK and the EU. The UK government may well need to extend this deadline or face going into a no deal situation. As repeated British Plastics Federation surveys have shown, a ‘no deal scenario’ would create major issues for our industry, and for the UK as a whole, and should be avoided if at all possible.

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