This article originally appeared in the Financial Post.
By David Collins, December 20, 2024
The U.K. recently became the 12th member of the mega-regional “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (the CPTPP), of which Canada was a founding member in 2018. During an era in which trade multilateralism, via the World Trade Organization, remains troubled, regional and mega-regional groups like this one have the potential to reshape global trade dynamics.
For Canada, in particular, the partnership stands to become more important in light of the Trump tariff threat and the possible trashing and certain re-writing of the United States-Mexico-Canada Agreement, which is up for review in 2026. In the event of a full-on tariff war with our southern neighbour, Canada will have to pivot to other trade-friendlier nations, including the U.K. East-west trade will never fully replace Canada-U.S. trade but every little bit will help.
Even before its accession to the trans-Pacific deal, the U.K. was Canada’s fourth-largest trading partner, with goods and services trade valued at $45 billion in 2023. As a source of foreign investment in Canada, the U.K. ranks second only to the U.S., while Canada ranks third as an investor in the U.K.
The U.K.’s bold post-Brexit entry into the CPTPP enlarges the geographical boundaries of what was once considered a purely Pacific-rim agreement. Though China and the U.S. don’t belong to the CPTPP, with the U.K. in it now accounts for almost 15 per cent of global GDP and includes nearly 590 million consumers.
Despite negotiations for the “Canada-U.K. Trade Continuity Act” having broken off last year due to Canada’s refusal to lower its tariffs on dairy, the two countries are still seeking a new, permanent bilateral agreement to replace the Canada-EU deal that the U.K. exited from as a result of Brexit. Given the very real risk of trade hostilities with the U.S., Canada should re-engage with the U.K. and build on our new relationship through the CPTPP.
Although the Indo-Pacific partnership provides significant tariff reductions, a bilateral agreement between Canada and the U.K. would offer even greater market access in specific sectors, such as financial services, advanced manufacturing and innovative technologies. Specific issues like rules of origin, which are crucial for complex supply chains between the two countries, could also be negotiated in greater detail.
CPTPP promotes regulatory co-operation, but a bilateral agreement could establish deeper regulatory alignment in key sectors, thus reducing non-tariff barriers to trade. It could offer enhanced co-operation on standards and conformity assessment, potentially eliminating costly inspections. It could also provide more robust investment protection, with more comprehensive investor-state dispute settlement provisions tailored to Canada-U.K. investment flows.
Given both countries’ strengths in technology and innovation, a bilateral deal could also include more advanced provisions on digital trade than those contained in the now almost decade-old text of the CPTPP. A bilateral U.K.-Canada FTA could encourage further collaboration in research and development, particularly in emerging technologies such as AI and digital identities, and could provide for broader economic co-operation, labour mobility, and environmental collaboration, which are largely missing from the CPTPP.
A Canada-U.K. bilateral pact would reflect shared values and history — we have the same head of state, after all, King Charles III, and we’re charter members of the Commonwealth Anglosphere. We also have common geopolitical interests not necessarily shared by the broader membership of the CPTPP.
The U.K.’s formal entry into the CPTPP is welcome news for Canadians. It represents more than just an expansion of a trade agreement. With the possibility of countries like Costa Rica and Taiwan joining next, it could be the start of a significant expansion of a coalition of those still willing to trade largely tariff-free. In the second Trump era, that is more important than ever.
David Collins, professor of international economic law at City St George’s, University of London, is a senior fellow at the Macdonald-Laurier Institute.
