Brexit? CETA? How shifts in trade policy could impact your business Melanie Paradis July 12, 2016 Columns, Featured, In Position It is rather intimidating to open a blog for leaders in the newest technologies with a history lesson from over 200 years ago. But, given the current geopolitical state of affairs, here it goes. In 1806, the British launched a naval blockade of the French and French-allied coasts because they perceived Napoleon’s quest for a unified Europe as a direct threat to Britain. Lacking the military resources to defeat the Royal Navy, Napoleon responded with economic warfare by implementing the Continental System of trade within Europe to isolate and exclude Britain. In response, Britain introduced a series of its own trade restrictions, including many to impede the Americans from trading with France. This compounded the many other grievances the Americans already had with the British Crown. And there was no lovely Royal Couple like Will and Kate to charm the Americans. ‘Mad’ King George III was blind, mostly deaf, and likely suffering from mental illness and later dementia. In 1811, his utterly extravagant son, Prince George IV, took over as Regent and the following year the Prime Minister of England was assassinated on the steps of Parliament. It was a total mess. Stay with me here. The Americans, struggling to keep their trading economy going, lost patience with Britain and their indulgent Regent, and declared the War of 1812. Meanwhile in the East, Russia had been secretly violating Napoleon’s embargos by quietly trading with Britain. This enraged Napoleon, who decided to invade Russia to compel Tsar Alexander I to cease his illegal trade. It didn’t end well for Napoleon. For the next three years, Europe and North America were in total political and economic ruin, but you’ll remember the next part. Most of this was resolved with the 1815 Treaty of Paris that followed Napoleon’s second abdication and his exile to St. Helena (I can just hear Donald Trump now: “That island is for losers.”) The purpose of the treaty was to establish a permanent and meaningful balance of power in Europe. It stood for almost 100 years until the First World War. Tough economic sanctions followed the end of WWI, which led in no small part to triggering the Second World War. After WWII, European integration and trade was seen as the antidote to war. And so it has been for more than 70 years. Today, international trade policy is fundamentally changing by the millisecond. Brexit and the threat of more exits from the European Union are sparking fear in the hearts and pockets of investors. They remember their history lessons. In North America, anti-free trade rhetoric from the Trump camp is raising eyebrows. Despite all of this upheaval, the Trudeau government remains committed to the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). CETA will provide Canadian businesses with access to more than 500 million people in 28 countries with a combined GDP of $18 trillion. All right, make that 27 countries, 440 million people and a GDP of $15 trillion once you exclude the United Kingdom. Nonetheless, it’s a market larger than the United States. Even without the U.K., this will be a significant build upon Canada’s existing trade relations by further reducing barriers and locking in long-term access to this key market. It is worth noting, however, that even Team Brexit have sent signals that they want into the CETA deal regardless of their status with the EU. Trade with Canada is in demand. And it should be. More than 60 per cent of our GDP is directly related to trade and nearly half of every dollar of Canadian manufacturing output is earned outside the country (International Trade Canada). The technology industry will benefit from greater access to the market, and from the ability of business travellers to enter Canada or the European Union without a work permit for short periods. Overall, the CETA will make it easier and less costly for Canadian small and medium enterprises to do business in Europe. There are two schools of thought emerging, or perhaps diverging: Trudeau sits squarely on the side of trade as the great unifier and peacekeeper of our time, while Trump and the rapidly disappearing Brexit team call for major disruptions to what they see as the status quo. They say the model of international trade that has kept most of the Western world in peace for over 70 years is antiquated and no longer serves the needs of Britons and Americans. They seek to tighten their borders, stem the flow of manufacturing jobs offshore, and look inward for economic solutions. To their credit, the Brits seem to have awoken to a hangover of regret. A decade-long exit plan may prevail, ideally with opportunities to pull a U-turn along the way. As Britain sorts out the direction its new prime minister will take as it withdraws from the European Union, and as the United States prepares for an election this fall, the stakes for international trade have never been higher. At least, not since the Napoleonic Wars. These waters are not uncharted, but their tides remain wildly unpredictable. Our best advice is to keep innovating and keep investing, but don’t take your finger off the pulse of trade in Europe and the United States. Geographic diversification comes with risks and rewards in this climate. The next few months may well determine if we will stay stronger together, or crumble apart. Photos: Donald Trump by Gage Skidmore is licensed under CC BY-SA 2.o. Boris Johnson by Surrey County Council News is licensed under CC BY-ND 2.o. In Position is a monthly column focusing on communications, public relations and government relations for tech companies. It is produced for Communitech News by the Earnscliffe Strategy Group in Toronto.