Canada Minus

In NAFTA, Canada often feels like a second-class citizen, writes Nick Tyrone, demonstrating why it presents an unappealing model for post-Brexit Britain.

When I moved to Britain 20 years ago, the strangest cultural adjustment I had to make was that the television news, in particular when it came to localised items such as the weather, was actually relevant to me all of a sudden. Growing up in Western Canada, almost all of the media we received came from the US, none of which made any concessions to the Canadian portion of its audience whatsoever. Going back to the weather reports, the ones I watched in my childhood featured a completely greyed-out Canada, going so far as having the weather fronts suddenly halt at this nether region north of the 49th parallel.

Since Britain voted to leave the European Union, Canada has been mentioned as a possible model for how to conduct Britain’s post-Brexit trade policy by many Government ministers and Tory backbenchers of the Leaver persuasion. Perhaps you’ve heard the phrase “Canada Plus Plus Plus” (the number of pluses often waxes and wanes) in relation to this.

Sometimes in the same breath you’ll hear about how wonderful NAFTA is, a trade deal so many Brexiteers often sing about. I think Leavers like it so much because it deals in making it easier for goods and services to be traded while having no Freedom of Movement element. Whatever the reasons for the Brexit-leaning to love NAFTA, I often wonder how much they really understand about the North American Free Trade Agreement in practice – and what that might tell them about post-Brexit Britain. If they seriously looked at how NAFTA actually operates, it might make them think twice about Canada as a post-Brexit model.

Here’s how NAFTA works: the rules of the deal must be rigidly adhered to by Canada and Mexico at all times, yet remain extremely flexible in terms of what the US wishes to do. If any particular American sector feels under pressure from Canadian or Mexican suppliers, the Federal Government will slap a massive tariff on goods from those countries – often effective immediately. That these punitive tariffs either technically breach or least go against the spirit of the deal isn’t relevant – Canada and Mexico are free to walk away if they don’t like it. Which they never will, given the economic upsides of having a free trade deal, even a lopsided one such as NAFTA, is still better than having nothing at all. A bad deal is almost always better than no deal, whatever anyone tells you.

Whatever the downsides of the European Union, it has at its core a Rule of Law principle. The rules are the rules and they apply to everyone equally. If anything, the EU is often a little too overzealous in making sure that there is freedom of competition across the Single Market, ignoring the fact that sometimes poorer countries within the Union really could use more help from the state, aid that could be deemed anathema to an absolute idea of free trade.
This is one of the reasons Jeremy Corbyn and John McDonnell are such ardent Brexiteers: being able to pump mass amounts of state money at moribund industries is the sort of thing the EU exists to stamp out. It is, dare I use the term, Thatcher-esque at times in its zeal against this sort of practice.

It is worth mentioning in light of Canada being held up as a model for post-Brexit Britain that Canada itself doesn’t even have an internal free market. In terms of selling most goods, it is much easier to sell to Germany from France than it is to sell from British Columbia into Ontario. You can say that while Britain doesn’t have this problem now, post-Brexit it might become an issue. I only have to mention Northern Ireland for this to start to seem relevant to the UK.

Leavers have a point when they refer to a post-Brexit Britain being inside of the Customs Union, the Single Market, or both as being a “vassal state”. It would be all rule-taking and no rule-making. However, it is worth questioning how a post-Brexit Britain avoids this anyhow, whatever kind of Brexit comes to pass. As mentioned, the US only really does “you guys are now the vassal state” type trade deals with other countries, something worth discussing if the plan is to replace the EU with the US in terms of large trading partners.

If the plan is to be Canada, it might be worth looking at just how much vassalage will actually be involved. With NAFTA as the blueprint, I can tell you from first-hand experience that being inside of vassal state is no fun at all.