Brexit and Canada: Stopgap Solutions for the EU–Canada Comprehensive Economic and Trade Agreement (CETA) or a New Beginning?

Date01 April 2021
Published date01 April 2021
Subject MatterArticles
International Studies
58(2) 248 –264, 2021
© 2021 Jawaharlal Nehru University
Reprints and permissions:
DOI: 10.1177/00208817211005625
Brexit and Canada:
Stopgap Solutions
for the EU–Canada
Economic and Trade
Agreement (CETA)
or a New Beginning?
Nanette Neuwahl1
This article investigates how Canada’s trade with the EU-27 and the UK might be
affected by Brexit. As the transition period foreseen in the 2019 UK Withdrawal
Agreement has ended, the EU and the UK are no longer one customs area. The
EU–Canada Comprehensive Economic and Trade Agreement (CETA), like other
EU agreements, has ceased to apply to the UK. Henceforth, the policies and
legislation of the UK and the EU-27 will invariably diverge. Taking into account
both the EU–UK Trade and Cooperation Agreement as well as the Canada UK
Trade Continuity Agreement concluded in late-2020, the article shows that the
agreements reached, while providing immediate stopgaps for some of the fallout
of Brexit, also represent potential for a new departure.
Trade, Brexit, Canada, CETA, EU–UK Partnership Agreement, UK–Canada
Trade Continuity Agreement, level playing field, state aids, taking back control
This article attempts to highlight how Canada, as a party to the EU–Canada
Comprehensive Economic and Trade Agreement (CETA), might be affected by
1 Associate Professor, Faculty of Law, Université de Montréal, Montreal, Quebec, Canada.
Corresponding author:
Nanette Neuwahl, Faculty of Law, Université de Montréal, 2900 Edouard Montpetit Blvd, Montreal,
Quebec H3T 1J4, Canada.
Neuwahl 249
Brexit. Although the UK has officially left the EU already on 31 January 2020,
there had been few tangible changes that year. Under the EU–UK Withdrawal
Agreement (2019), trading rules had essentially been rolled over for the duration
of the so-called ‘transition period’. The CETA too had been carried over for the
same period. On 31 December 2020, the transition period ended, and the legal
scene changed noticeably. Together with the bulk of the EU law, the CETA ceased
to apply to the UK at the same time as the UK ceased to be part of the EU’s
customs area. In November 2020, Canada and the UK decided to temporarily roll-
over CETA to the relations with the UK in a Trade Continuity Agreement (UK–
Canada TCA) and on 24 December 2020 the latter agreed with the EU on a Trade
and Cooperation Agreement (EU–UK TCA). The article makes an assessment of
these changes.
The section ‘Main Changes from January 2021 provides an overview of the
most immediate effects of Brexit after the end of the transition period, regardless
of agreements. The section ‘Comprehensive Economic and Trade Agreement
broadly sketches the impact of Brexit on CETA and the options open to Canada,
as well as the attitude taken by the Canadian Government. The sections ‘The
UK-EU TCA and Rules of Origin and ‘Taking Back Control and the Level Playing
Field’ deal with the impact of the EU–UK TCA on Canada, a third country to that
agreement. Of these, Section IV deals with the question, how newly introduced
rules of origin will affect Canada and Section V deals with the options for the UK
to take back control and ’undercut’ the EU by giving state aids or by lowering its
standards of legislation – since this may equally distort relations. Special attention
is paid to the ‘rebalancing mechanism’ provided for by the EU-UK TCA. A final
section contains an outlook for the future.
Main Changes from January 2021
The end of the transition period on 31 December 2020 constituted a legal shift
affecting businesses, especially those established in the UK, that were dealing
with the EU-27. This includes Canadian businesses established or having a
subsidiary in the UK and trading under CETA, as well as companies exporting
from Canada to the EU via the UK as a first destination.
While the overall macro-economic impact of Brexit on individual sectors has
not been definitively assessed, negative effects are no longer being denied even by
UK Prime Minister Boris Johnson, who insisted on the need to ‘get on with it’
regardless of negative effects (Holmes & Rollo, 2020). Fortunately, it was
possible—at the eleventh hour—to escape the worst scenario, trading without a
deal (Monar & Neuwahl, 2020), by the conclusion of the EU–UK TCA on 24
December 2020. This 1,259-page long agreement has been brought into force
provisionally as from 1 January 2021 pending consent by the European Parliament
(EP). If the EU and the UK would not have concluded this free trade agreement,
goods originating in the UK would have been subjected to the common external
tariff of the EU-27 in accordance with the World Trade Organization’s (WTO)

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