The United Kingdom and Canada have been in negotiations for a new trade agreement since the UK left the European Union in January 2020. The two countries had hoped to finalise a deal by the end of 2023, but the talks have been abruptly suspended by the UK government, citing “irreconcilable differences” over some key issues.
- The UK suspended trade talks with Canada due to a lack of progress, particularly around access to agricultural markets.
- The talks, which began in March 2022, were reportedly suspended amid unhappiness on both sides.
- Canadian farmers have complained about being effectively shut out of the British beef market due to regulations banning the use of hormones.
- The UK government reserves the right to pause negotiations with any country if progress is not being made.
- Before Britain left the EU at the end of 2020, Canada rolled over existing trade arrangements to ensure free trade could continue.
- According to official British data, total bilateral trade in goods and services was £25.9bn in the year ending 30 June 2023, when Canada was Britain’s 18th largest trading partner.
- According to Canadian data, bilateral trade with Britain in 2022 accounted for just 2.7% of its total.
- Total goods trade between the two countries was worth £19.2bn in 2020, according to the UK government, with UK imports from Canada worth £7.3bn and UK exports to Canada worth £11.8bn.
What are the main points of contention?
According to sources close to the negotiations, the UK and Canada disagree on several matters, such as:
- The level of market access for agricultural products, especially dairy and meat. The UK wants to maintain its high standards of animal welfare and food safety, while Canada seeks to increase its exports of these products to the UK market.
- The rules of origin for manufactured goods, which determine how much of a product must be made in either country to qualify for preferential tariffs. The UK wants to have more flexibility to source inputs from other countries, such as the US and China, while Canada wants to ensure that the trade deal benefits its domestic industries.
- The dispute settlement mechanism, which provides a way to resolve any trade disputes that may arise between the two parties. The UK wants to have an independent arbitration panel, while Canada prefers to use the existing World Trade Organization (WTO) system.
Why did the UK suspend the talks?
The UK government has not given an official explanation for its decision, but some analysts suggest that it may be related to:
- The domestic political situation in the UK, which is facing increasing pressure from Brexit supporters to strike trade deals with other countries as soon as possible. The UK may have decided that the negotiations with Canada were taking too long and were unlikely to yield a satisfactory outcome.
- The strategic interests of the UK, which may have shifted in light of the rising tensions between China and the West. The UK may have wanted to align itself more closely with the US and its allies in the Indo-Pacific region, rather than with Canada, which has a more nuanced approach to China.
- The economic impact of the pandemic, which has hit both countries hard and reduced their trade volumes. The UK may have concluded that a trade deal with Canada was not a priority at this time and that it could rely on the existing WTO rules for its trade relations.
What are the implications of the suspension?
The suspension of the trade talks has caused disappointment and frustration on both sides of the Atlantic. It has also raised questions about:
- The future of the bilateral relationship between the UK and Canada, which has been traditionally strong and friendly. The suspension may damage the trust and goodwill that have been built over decades of cooperation on various issues, such as security, climate change, and human rights.
- The prospects of a broader trade agreement between the UK and the Commonwealth, which is a group of 54 countries that share historical ties with Britain. Canada is one of the largest and most influential members of the Commonwealth, and its participation in a trade deal with the UK would have been a significant boost for the group’s economic integration.
- The role of the UK in the global trade system, which is facing multiple challenges from protectionism, nationalism, and geopolitical rivalry. The suspension may undermine the UK’s credibility as a champion of free trade and multilateralism, and weaken its influence in shaping the rules and norms of international trade.
How can the talks be resumed?
There is no clear timeline or process for resuming the trade talks between the UK and Canada. However, some possible steps that could help are:
- Re-engaging in dialogue at the highest level, involving political leaders and senior officials from both sides. This could help to clarify the objectives and expectations of each party, and identify areas of common ground and compromise.
- Seeking input from stakeholders, such as businesses, consumers, civil society groups, and parliamentarians from both countries. This could help to generate public support and political will for a trade deal, and address any concerns or objections that may arise.
- Leveraging existing platforms, such as the G7, NATO, or COP26, where both countries are members or participants. This could help to foster cooperation on other issues of mutual interest or concern, and create a positive atmosphere for resuming the trade talks.
In conclusion, the suspension of the trade talks between the UK and Canada is a setback for both countries’ economic recovery and global leadership. However, it is not necessarily a permanent breakdown. With renewed commitment and creativity, both sides can overcome their differences and reach a mutually beneficial trade agreement that reflects their shared values and interests.