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17 November 2017

What would a Canada-style Brexit trade deal mean for the UK?

After more than a year, David Davis still hasn’t grasped that the real problem is sovereignty.

By Stephen Bush

Brexit has changed a great number of things about British politics, but the strangest is surely the new habit of describing the inevitable consequences of government policy as a shock or some kind of “blow” to British hopes.

And so it is with the reaction to Politico‘s scoop – they’ve acquired a draft of the commission’s latest thinking on the Brexit talks – which includes, among other things, that Brussels views its trade deal with Canada as the only suitable model for its post-Brexit relations with the UK.

The problem with a Canada-style deal is that it would result in a significant loss of access to both sides’ markets. (The Treasury put the longterm impact on tax revenue at around £35bn for a Canada-style arrangement.)

David Davis’s response in a bizarre speech in Berlin yesterday was that as the UK is “much closer than Canada [and] bigger than Norway”, an unprecedented trade deal is both desirable and possible. I find it troubling that after more than a year Davis hasn’t grasped that the problem isn’t size or proximity, but sovereignty. There’s a trade-off between democratic freedom – the ability of British governments to set its own regulations, strike its own trade deals, have bananas of whatever curvature it so desires, et cetera – and the economic freedom to trade and do business.

(To take an example closer to home: the Scottish government’s freedom to set up a deposit return scheme to improve recycling will restrict the ability of smaller businesses to easily do business on both sides of the border. Not by very much, of course, but by a little.)  

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Where proximity comes into it is that the geographic distance between Canada and the EU means that the economic trade-offs aren’t worth the democratic price that a deeper arrangement would require.

The Conservative government has interpreted the Leave vote as one for maximum freedom. It’s certainly a reasonable interpretation even though you can fairly query whether people are really willing to shoulder the economic price when it actually arrives. What is not reasonable is the repeated refusal to acknowledge the real trade-offs that means in terms of the Irish border and the depth of the trading relationship available, and instead to talk about the value of creativity and the importance of buying and selling prosecco and BMWs.