Political pressure may mount on Canada’s Trudeau

Significance As Canada enters the second half of Trudeau’s government, with a federal election due in October 2019, the Liberal Party’s prospects of a second term in office are fair to good. Even so, there is popular fatigue with Trudeau’s celebrity style, a national debate is simmering over oil pipelines and Canada’s trade outlook is uncertain. Impacts Right-wing provincial successes will bring austerity measures and possible labour protests. Escalating intra-federal sanctions, including oil blockades, are likely. New Canadian trade deals with China, India or a post-Brexit United Kingdom will be hampered by incompetent Liberal diplomacy.

Significance The allegations against Netanyahu involve the acceptance of expensive gifts from wealthy businessmen and an attempt to close a confidential deal on coverage with the publisher of a major newspaper, who until now has been considered his arch-rival. Police are also investigating accusations relating to the role of Netanyahu’s personal lawyer in major procurement contracts between the Israeli navy and a German manufacturer. Impacts Public support for Netanyahu by ministers from his Likud party could be undercut in private. Netanyahu is likely to resist increased right-wing pressure to annex parts of the West Bank, fearing a US response. The accusations have put the premier under extreme political pressure, which might affect his responses to rising tensions with Gaza.


Significance Voting in the race to replace Tom Mulcair as leader of Canada’s social-democratic NDP begins on September 18, with results announced by October 1. The victor of the contest will go on to contest 2019’s federal election against Prime Minister Justin Trudeau and Conservative leader Andrew Scheer. While not a contender for government, the NDP’s standing and performance at the polls will help determine whether Trudeau’s Liberals are elected to a second term or the Conservatives return to power. Impacts Oil-friendly NDP Alberta Premier Rachel Notley will probably be ousted in 2019 by a new right-wing fusion party. The NDP-Green coalition in British Columbia will pressure the new federal leader for more militant stances on climate and energy policy. Trudeau will probably increase his majority in 2019 should NDP support remain tepid despite a new leader.


Significance Even if it succeeds, this will have a greater disruptive impact on the trade in services than goods, because the EU’s single market enables greater cross-border services trade than is typical of other free trade agreements (FTAs). This is likely to cut the volume of EU-UK services trade, in which the United Kingdom currently enjoys a substantial surplus. Impacts The United Kingdom’s departure from the EU will diminish its appeal for multinationals over the next few years, at least. The new UK immigration system could result in staff shortages in low-skilled services sectors. The imperative of tackling COVID-19 will likely delay the conclusion of new trade deals with non-EU countries.


Headline UNITED KINGDOM: Asia-Pacific trade deals are easy wins


Significance This follows the June 23 'Brexit' referendum, in which 52% of those voting called for the government to organise the United Kingdom's exit from the EU. The vote and subsequent leadership transition pose a foreign policy watershed. Impacts South-east Asian states will seek trade deals with the post-Brexit United Kingdom. The diplomatic importance of UK defence and intelligence aid to South-east Asia will grow. France may become more important for the EU to project its influence in South-east Asia.


Significance The consensus among most economists is that whatever the eventual deal, the United Kingdom will be worse off in the long run as a result of leaving the EU. However, the economic impacts will be far from uniform across the country. Impacts The Labour Party is in a better position than the Conservatives to benefit from the increased salience of distributional issues. The automotive, chemicals and pharmaceuticals sectors and the local economies they support are disproportionately exposed. Opposition to trade deals could rise as workers may fear that a flood of cheap imports could threaten their jobs. There is a close association between health and wealth, so poorer areas falling further behind could mean worse health outcomes.


Subject The impact of Brexit on the civil service. Significance With the formal second reading of the EU Withdrawal Bill in parliament today, UK MPs will start to debate the legislation rescinding the United Kingdom's membership of the EU. London's reluctance to clarify its negotiating position during the Brexit talks with Brussels has led to accusations that the United Kingdom is unprepared for such a complex process, not only politically but administratively, too. Impacts A lack of experienced trade negotiators will hamper the United Kingdom’s ability to conclude trade deals after it has left the EU. Stricter immigration rules for EU nationals would increase the workload of the civil service further. The United Kingdom’s perceived unpreparedness could lower EU trust and confidence.


Subject Level playing field after Brexit. Significance Unless the United Kingdom remains a member of the single market, it will no longer automatically be subject to EU rules after Brexit. This has raised concerns in the EU that the United Kingdom could gain a competitive advantage by moving towards a ‘low tax, low regulation’ economic model, which could undermine the competitiveness of the EU and trigger a regulatory race to the bottom. Impacts Lower UK environmental standards could impose direct costs on EU consumers, for example through cross-border air pollution. London may be tempted to accept lower food standards in securing more favourable trade deals with non-EU countries. A no-deal Brexit would put the UK government under greater pressure to adopt a tougher stand vis-a-vis the EU and deregulate.


Significance Prime Minister Boris Johnson’s government signalled that London will pursue a proactive, liberal trade policy globally. However, the capacity to pursue such a policy could be reduced by domestic political pressure. Impacts The United Kingdom’s new post-Brexit immigration regime should attract workers from non-EU countries, in particular from India. Negotiating several trade deals in tandem will stretch UK trade policy resources and ability to compromise with the other side. Rising protectionism and geopolitical rivalry will undermine UK efforts to influence the regulatory landscape abroad.


Subject Outlook for UK-EU trade deals. Significance Following the 'Brexit' referendum, a statement from EU Trade Commissioner Cecilia Malmstrom that the United Kingdom must negotiate its EU exit before concluding a trade deal alters assessments of future trading conditions across the English Channel. Even if the United Kingdom were to retain access to the single market or negotiate a free trade area with the EU, UK-EU trade is likely to be governed solely by WTO rules for many years. Impacts Given the UK government's lack of trade negotiators, the private sector could shape the country's negotiating positions. For UK exporters with domestic suppliers, the impact of tariffs on EU shipments will be mitigated by the pound's depreciation. However, the beneficial impact of the latter is reduced for UK exporters that source from abroad.


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