For trade bloc, U.K. should look west

British Prime Minister Theresa May, chairing the first meeting of her new cabinet this week, told her ministers she did not want the United Kingdom to be defined by its exit from the European Union. She wanted to build the education, skills and social mobility to allow everyone to prosper from the opportunities of leaving the EU.

Canada can help her to move quickly along that path. Canada has a functioning free-trade treaty with the United States and Mexico. Jointly with Mexico and the U.S., Canada should invite the U.K. to sign on as a partner in the North American Free Trade Agreement (NAFTA).

We may need to change the name to the North Atlantic Free Trade Agreement, but the fewer changes we make the easier the process will be.

Canada was planning to conclude a comprehensive economic and trade agreement with the European Union back in the days when the U.K. was happily part of the EU. The soon-to-be reduced EU has, however, decided each of the 27 remaining member countries will have to study and approve the Canadian trade treaty by its own domestic process. This will be slow work and if one of the 27 members drags its feet, the thing may never see the light of day.

The U.K.’s future trading relationship with Europe is shrouded in uncertainty. Talks about that relationship will not start until the U.K. formally gives notice of its intention to quit, and May will not do that before the end of this year. In the meantime, the U.K. is an orphan among the trading blocs.

The EU up to now has been a bloc of 508 million people in 28 countries with a combined gross domestic product of around US$16 trillion. We can invite the U.K. to take its 64 million people and its US$2.8-trillion GDP out of the EU and add them to NAFTA’s 450-million people and US$20-trillion GDP.

NAFTA is a very different kind of deal compared to Europe. It has no central administration, no intention of running domestic affairs in the member countries and no aim of forming an ever-closer union. It does not promise free movement of people among the member countries. It is therefore free of the irritants that persuaded a majority of Britons to want out of the EU.

For Canada, the advantage could be great. NAFTA, at the moment, has a dominant partner and two junior players. The addition of the U.K. would slightly curtail the dominance of the U.S. and improve Canada’s chances of winning the occasional dispute among NAFTA partners. Annual two-way trade between Canada and the U.K. is around $27 billion, making the U.K. by far Canada’s most important commercial partner in Europe.

The great advantage is the heavy lifting has already been done. Canada and the U.S. agonized over the choices and trade-offs in 1987 and 1988, struck a deal and then broadened it to include Mexico in 1994. Broadly speaking, it has worked to the advantage of all the parties. There is no need to start from scratch and struggle through the difficult trade-offs all over again.