Why Canada courting the EU isn’t great news for Great Britain

0:01Sky News, the full story first.

0:12The EU is throwing open its doors to Canada but the UK shouldn't assume it'll get the same warm welcome and this is why

0:28I'm Sam Coates and I'm Anne McElvoy Britain has a new Prime Minister and every day from 7.45am we'll help you make sense to the day ahead in just 20 minutes. That means taking you inside Westminster with our forensic insight, sharp analysis and the stories behind the headlines. From the battles in Parliament to the conversations shaping government. We'll set you up each morning for the day ahead in British politics. Hit follow and listen to Politics at Sam & Anne's wherever you get your podcasts.

1:07Canada's Prime Minister Mark Carney is looking for stability, reassurance for things to go his way. So naturally, he went to watch Everton. You are so welcome to Liverpool and obviously to your beloved club, the new home of Everton Football Club. You know, the first time I saw Everton live was in the FA Cup, 1989. A classic match, unfortunately, went the wrong way. Much like his relationship with Donald Trump. Carney crossed the Atlantic to address the European Parliament. And with Canada facing tariff threats from its next-door neighbour, he's got good reason. So I would like to work with you on opening the door for Canada to being the first associate member of the European Union.

1:55Well, you can certainly see why that might appeal. and Carney hasn't exactly been playing hard to get. Canada and Europe are each strong. Europe and Canada are stronger together. Only problem is, no one seems to understand exactly what this new relationship would look like. Anand Menon is Director of UK in a Changing Europe. Anand, I always look forward to our discussions on the European Union, particularly when it comes to topics that I completely do not understand. and this is very definitely one of them. We are hearing that Canada is to become an associate member of the EU. What on earth is associate membership of the European Union?

2:37Well, I suppose the good news for you is you're far from the only person who doesn't understand this because, to put it simply, there is no such thing. Plenty of EU diplomats, EU officials, member state officials in the room were scratching their heads because Ursula von der Leyen essentially made something up that just doesn't exist in reality. Okay, but there are countries, aren't there, which have a relationship with the European Union that does not go as far as full membership, be it to do with the single market, be it to do with anything to do with the customs union. Just explain what those countries' relationships with the European Union look like.

3:11Yeah, you're absolutely right. There are different sorts of economic relationships. So you can have total access to the single market, you can be in the customs union, which means you share a common external tariff with EU member states. But the fundamental difference between those things and membership is membership means you're sat around the table, you get a vote, you have a commissioner, you have MEPs in the European Parliament. If you're not a member state, you have absolutely no say over formal EU decisions. And that's the crucial distinction, I think. But also, I wonder, given just how live a topic this is, I mean, if you're talking about something which is new and which is distinct from full membership of the European Union, you have to presume that whatever is worked out between Canada and the EU will not include, you know, automatic EU citizenship, free movement, a vote in European Union elections.

3:58Absolutely, it won't involve any decision-making power. That's a given because the European Union is very, very clear. There are members, there are non-members, and there are very clear lines between the two. What else it includes, we're going to have to wait and see. Whether it includes anything at all, we're going to have to wait and see because, of course, one of the things that's becoming clear in the aftermath of the speech is not only the fact that this didn't figure in the early drafts circulated in the morning yesterday to journalists, and this was added by Ursula von der Leyen, it seemed quite late, but that many member states simply didn't know about it.

4:29And I think some of those member states are going to be anxious to know the details. And as ever with the European Union, it's going to be really, really hard to get 27 member states to agree on a single mission here. And I suppose what those 27 member states want to know more than anything else is, what's in it for us? I mean, what potentially could be in it for the European Union? Yeah, and I think here, what's interesting is there are quite a few security things. It's signaling to President Trump. It's the ability to talk about rare earths and critical minerals that Canada has in abundance.

4:56So there are things the EU can get from this if the conversations go in that direction. But the thing to bear in mind about Canada, it might be slightly counterintuitive, is in a sense when it comes to trade, this is less of an issue than it might be because Canada is simply so far away. Canada doesn't trade much with the European Union. So the sorts of concerns they have about, for instance, giving the UK special treatment, which is having that market flooded with our goods because we're next door, don't apply in the case of Canada. The problem for Canada is for all these grounds initiatives, for all the talk by Mark Carney about wanting to reorient trade away from the United States, just as our continental-sized neighbour is our biggest trading partner, their continental-sized neighbour remains by a mile their largest trading partner.

5:43The US is far more important to Canada's economy than the European Union is. And I think whilst the Canadians are keen to signal better diplomatic links with Europe, if they start doing things like adopting EU rules, they need to be very wary that this doesn't impede their trade with the United States. So are we perhaps then talking something closer to a revised free trade agreement between the European Union and Canada? I mean, on the one hand, you could have a relatively loose partnership going ahead, or you could go the whole hog to the other end of the spectrum, deep access into the single market, at which point you'd have to think there would be some form of regulatory alignment.

6:20Yeah, which is why I think the Canadians won't want that. The Canadians don't want to be aligned with the single market because it's too far away. There's not enough trade between Canada and the EU and history suggests there won't be because geography is such an important determinant of trade. My hunch is most of the discussion will be around political and security issues about resilience in an uncertain world about things like that. And they'll be rather less about economics, if only because they struggled enough to negotiate the last free trade agreement between Canada and the European Union.

6:49Because as soon as you start negotiating things like that, every member state starts saying, what's in it for us? We're losing more than we're winning with the current tech, so we have to change it. It's a really, really hard thing to do. It's all very well for Ursula von der Leyen to come out and make this dramatic initiative. You get to the nuts and bolts of the details of trade and the winners and losers, it becomes far, far more difficult. So what is the reason that Europe and Canada have woken up over the past couple of days and thought, you know what, we need each other now more than ever?

7:18I mean, is it genuinely entirely down to the current occupant of the White House? It's partly because of the current occupant of the White House. It's partly because of concerns about China. It's partly because of the greater emphasis placed on the resilience of supply chains in the aftermath of COVID. There are lots of reasons. And, of course, this initiative makes perfect political sense on both sides of the Atlantic. Mark Carney gets to show that he's forging this really special relationship with the European Union at a time when the vast majority of Canadians are really upset with the United States and won't Canada strike up friendships elsewhere.

7:52For the European Union, as I say, it shows the continued attractiveness of the bloc at a time when its popularity isn't necessarily very high internally. So both sides have an incentive in making this seem substantive and important. The problem is that there are all sorts of constraints in the way of actually making it substantive and important. I mean, you've nodded very strongly towards this already, but it's worth making the point, I think. More than 70 % of Canada's exports go straight to the United States. So you have to wonder, practically, just how likely is it that Canada can lessen its reliance on the United States in this fashion?

8:30I mean, Canada can lessen its dependence by striking trade deals, by making a real effort to do more trade elsewhere. The problem is what history suggests, and this is the one rule of economics that I think has been proven to be true time and time and time again, is that there is a strong relationship between geography and trade volumes. You trade a lot more with countries closer to you than with countries further away from you. If you go back to the Brexit debates, okay, the Brexiters were quite right when they said, all the growth is in Asia. European economies are growing, the Asian economies are growing really fast.

9:03Where they were wrong was in implying that that would make an enormous difference to us because we're not in Asia, which means that the majority of our trade continues to be with the European Union, even outside the European Union. So I think that is the fundamental issue, is that ultimately geography is going to determine trade. And yes, the Canadians can diversify, but it's very, very hard to see a situation where the United States ceases to be their biggest trading partner by far. Well, given that, we've heard from the White House, we've heard directly from Donald Trump, a pretty furious reaction to all of this.

9:35More tariffs are being threatened. What is it specifically that he is so unhappy about, given that the lion's share of trade will continue to be with the United States. I mean, Lord alone knows it's the simple answer, but I mean, I think... Have a go, have a go. I mean, I suspect he sees this as a personal slight. He stated his desire to include Canada within the United States, so he sees this as a snub, quite rightly, because it clearly was a snub. I mean, for all the rhetoric about this not being aimed at anyone, it was very, very clearly aimed at the United States. I think from the Canadian point of view, they're now resigned to the fact They just have to ride out President Trump, put up with whatever he throws at them, and hope that things get better under his successor, or whatever Trump announces doesn't get implemented in practice.

10:17Bear in mind, in the United States, if you think about the states that border Canada, if you think about Michigan, if you think about New York State, there are businesses and there are politicians in those states who are apoplectic about what's happening because they depend on supply chains, including Canadian firms. and anything that gets in the way of those supply chains affects their profits as well as Canadian profits.

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11:28That means taking you inside Westminster with our forensic insight, sharp analysis and the stories behind the headlines. From the battles in Parliament to the conversations shaping government. We'll set you up each morning for the day ahead in British politics. Hit follow and listen to Politics at Sam and Anne's wherever you get your podcasts.

11:55I mean, if there is a way, we've said this so many times now, but we do not know the detail. We don't know what this relationship is going to look like. We just know that there is the desire to have a closer relationship. I mean, if there is a way for Canada to have closer ties with the European Union, does that mean there's a way for the United Kingdom to do the same? At the moment, I say emphatically no. What Europeans are saying is, bear in mind, Canada isn't eligible for EU membership, okay? Because under the treaties, you have to be a democratic European state. And if you look at a map, then, you know, Canada doesn't fulfill those qualifications.

12:28It can never lead to membership. Membership cannot be offered to a non-European state. And what the Europeans would say is, you chose to leave. Okay, this was your decision. If you want very close links with us, you can rejoin. But what we're not going to do is make special accommodations for you that break our rules, that might give you unfair advantages in terms of accessing our market. You've got some important decisions to make. And P.S., nor are you Ukraine, to whom we feel a special duty because of their unique situation, because they're under attack from Moscow, because they see Europe as a way out of their trouble.

13:03So I think in neither the Canadian nor the Ukrainian case can we lively assume it sets precedence that makes life easier for the United Kingdom. But there are certainly those in Brussels, Strasbourg, who would wish to have the United Kingdom back in the fold. I mean, but is the desire to punish the United Kingdom for making the decision to leave the European Union more of a priority than having the UK economy back and helping the rest of Europe? I mean, at this point, I don't think it's about punishing the United Kingdom. It's about making clear that there are benefits to membership that you can only get through membership, okay?

13:34And I'm not for a moment suggesting there aren't ways the UK can get closer to the European Union. All I'm saying is what the EU are saying is, do you want to get closer to us? There are models for that. You can join the single market like Norway. You could have a customs union. You can become a full member state again. All those paths are open to you, but you have chosen with the Labour government's red lines not to consider those. What we Brussels are saying to you, the United Kingdom, is you're not going to get special carve-outs into bits of the single market. You're going to have to make a choice.

14:04You either stay where you are or you make a bold decision. So what does the European Union want to hear from Andy Burnham right now? I mean, to be brutally honest, the first thing I should say is the European Union don't spend a lot of time thinking about us, right? They've got loads of problems of their own to worry about. Since the Brexit negotiations concluded, they don't wake up in the morning and go to bed at night worrying about the UK. What I think they would be open to is either Andy Burnham saying the status quo is fine, let's be really good friends within the constraints of our current trading relationship, or saying, actually, we want to address the economic impact of Brexit.

14:38Therefore, we'd like to think about joining the single market. Therefore, we might want to have a conversation about membership. Both those things the EU would consider according to long-established procedures. It's just the idea that we will get a special carved out deal of the kind that Canada seems to be inching towards that I think is full of birds. I've heard you argue previously that the European Union is rather more flexible when it comes to countries that are outside of Europe. And I am wondering if we are talking about Canada at this point, I mean, could others follow suit? I've heard Australia, New Zealand, perhaps even being mentioned under this new form of associate membership.

15:16It's absolutely possible, yes. but a lot will hinge on what this associate membership turns out to mean and therefore how attractive it is both to Canada and to other countries. It's perfectly feasible that in two years, I'm the Canadians saying, well, that wasn't worth it. You know, we've got very little out of this. If you want to create a new proper legal status of associate membership, you have to amend the treaties of the European Union, which isn't going to happen anytime soon. So we'll just have to see where these negotiations go. What I think is absolutely the case is the European Union isn't going to start breaking its own rules or giving privileged trade access to the Canadians because they are now called associate members.

15:53What is the gap between the ambition clearly expressed by the European Union and Canada and the reality of this ever actually happening? I mean, in a sense, it's been a success already because she's got all the headlines for it and everyone now thinks, oh my God, the European Union and Canada are becoming very special friends. And I think at one level, that was the purpose of this. Whether or not they can agree on real deals that make a huge difference in areas like critical minerals, we're going to have to wait and see. But negotiations are always going to be much, much tougher than the initial declaration.

16:23Just in general terms, from your perspective, was this wise? Was this a good idea for both parties, given the relationship that Canada and the United States currently have? I mean, Carney and Trump are at loggerheads all of the time, and indeed the relationship the EU has with the White House. I think it's really good politics by both sides, because they both come out with something that they can trumpet as a real success in the face of genuine concerns on the part of the population, both in Europe and in Canada, about an uncertain world and an unreliable United States. Come back to me in two years' time, I might have changed my mind because the worst of all worlds would be to have this declaration, to have all the plaudits around this declaration, and then for negotiations to become acrimonious and fail over two years as the two sides fail to agree anything substantive at all.

17:09Alan, always good to talk to you. Thanks for your time. My pleasure. And that's your lot for today. do remember to get in touch with your thoughts and if you haven't seen yesterday's vodcast over on YouTube with the head of our armed forces, the chief of the defence staff, Air Chief Marshal Sir Richard Knighton why don't you scroll back in your feed for that one we're back tomorrow

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18:09Not available in all states or situations. I'm Sam Cates. And I'm Anne McElvoy. Britain has a new Prime Minister and every day from 7.45am we'll help you make sense of the day ahead in just 20 minutes. That means taking you inside Westminster with our forensic insight, sharp analysis and the stories behind the headlines. From the battles in Parliament to the conversations shaping government. We'll set you up each morning for the day ahead in British politics. Hit follow and listen to Politics at Sam and Anne's wherever you get your podcasts.