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Canada under the gun to ink U.K. trade deal as Brexit deadline looms

May survived a non-confidence vote Wednesday afternoon.

The resounding defeat of British Prime Minister Theresa May’s Brexit plan puts Canada in a tight race against the clock to solidify bilateral trade ties with its longtime ally ahead of the March 29 separation deadline.

May’s divorce deal was rejected by the widest margin in her country’s modern political history, 432 votes to 202. The stark result highlights deep divisions over the terms by which Britain will separate from the European Union, while upping the odds that it will do so without an agreement in place.

May survived a non-confidence vote Wednesday afternoon. She is expected to update lawmakers on a new Brexit strategy on Monday.

Meanwhile, Canadian officials have been quietly drafting a two-party trade pact to preserve terms met under the newly-minted Comprehensive Economic and Trade Agreement (CETA), says Armand de Mestral, a senior fellow at the Centre for International Governance Innovation, and a professor emeritus of international law at McGill University. The clock is ticking, he warns, and striking a deal that mimics CETA may not be easy.

“Time is short. Even if they agree on everything and they’ve got a full-scale agreement on goods and services, CETA is a 500-page plus document. It’s a very complicated text,” he told Yahoo Finance Canada. “If there is no withdrawal agreement, and the U.K. is going to crash out, that makes it much harder for the Canadian side to put things in place.”

His hope is for a 19-month phase-in period to allow the U.K. to clarify its relationships with countries like Canada, rather a situation where the two nations to cobble together something resembling CETA on the fly.

Canada is the U.K.’s 17th-largest trading partner. The U.K. receives 40 per cent of Canada’s exports to Europe, and draws more Canadian foreign direct investment than any country other than the United States.

Prime Minister Justin Trudeau told the BBC in April that he wants a “seamless transition” from CETA to a standalone deal that will “flip over the day after Brexit.”

Pedro Antunes, the chief economist at The Conference Board of Canada, expects a Canada-U.K. trade deal could come together fairly quickly in order to ensure continued mobility of goods and services. Such a bilateral pact, he said, would be far less complex than the CETA agreement currently binding all of the European Union’s member states.

“CETA is thicker than the bible. Obviously there are nuances that probably won’t be needed for an agreement between Canada and the U.K.,” Antunes told Yahoo Finance Canada. “There may even be opportunities there that were not covered by CETA that we can do in a different agreement.”

Given the U.K. is the destination for only about three per cent of Canada’s exports, he’s more concerned about the global impact of a hard Brexit harming the Canadian economy than a disruption of free trade between the two countries.

“The bigger concerns for Canada is how this might spread more broadly across the globe. We are already looking at 2019 being a year where global growth is going to ease,” Antunes said. “Let’s not forget, the European Union is an economy of 500 million people, and wealthy consumers.”

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