Canada, Britain strike new trade, beating Brexit, incorporating expiring EU pact

Canada and Britain have struck a new trade deal, beating the Dec. 31 Brexit deadline that would have triggered new tariffs on a range of Canadian exports.

The interim deal will replace Canada’s current agreement with Britain under the European Union that currently covers trade between the two countries, until a new formal pact can be negotiated in the coming year.

Prime Minister Justin Trudeau and his British counterpart, Boris Johnson, announced the deal during a live video news conference on Saturday morning.

“This is a good moment,” Trudeau said, dubbing the deal the Canada-UK Trade Continuity Agreement. He said the new pact sent a strong message about the importance of global trade.

“This continued sign of our collaboration, co-operation, and deep, deep friendship and partnership is really important not just for people in our two countries, but people around the world as well,” the prime minister added.

Johnson said free trade would help both countries “bounce back” to rebuild their economies after the COVID-19 pandemic.

“But I also think that Canada and the UK share a perspective about building back greener,” he said.

“And using that, this is a moment in which to tackle climate change, but also to create hundreds of thousands of jobs in green technologies.”

Britain’s decision to leave the EU after its Brexit referendum means that the Comprehensive Economic and Trade Agreement, or CETA, will no longer apply to the country at the end of the year.

The new deal preserves CETA’s key provision until a more comprehensive agreement can be reached later: the elimination of tariffs on 98% of Canadian exports to Britain, which is Canada’s fifth largest trading partner with $29 billion in two-way merchandise trade in 2019.

International Trade Minister Mary Ng said legislation would be introduced in Parliament soon so the interim deal could be ratified. Ng noted that Canada did not give Britain any additional market access to British cheese, preserving the status quo of the country’s supply management system.

Canada’s dairy industry has complained loudly in the past about the additional foreign access to the Canadian market under previous trade deals, including CETA and the new Canada-United States-Mexico Agreement.

Ng and her British counterpart, Liz Truss, committed to negotiating a new and more comprehensive agreement in the coming year. She said the new deal would explore co-operation around women’s economic empowerment, the environment and digital trade.

But few details were known about the current interim agreement. Breaking with past practice during trade negotiations, there were no pre-announcement briefings for journalists and no text was released.

Canada’s business community offered a mixed reaction shortly after the deal was announced, welcoming the economic certainty the interim deal offered while asking for more specifics on the arrangement.

“We call on the Canadian and British government to publish details of the agreement so that businesses can understand all the practical details,” said Mark Agnew, the international policy director for the Canadian Chamber of Commerce.

“We also call on the government and parliamentarians to work together in ensuring a prompt passage of the necessary implementing legislation to provide certainty for Canadian businesses at the earliest possible opportunity.”

Dan Darling, president of the Canadian Agri-Food Trade Alliance, described the “transitional agreement as a welcome stop-gap measure but said it is not enough.”

He called on the government to fix the market-access issues that Canadian producers have faced under the existing agreement with the EU.

“For other agri-food exporters, a transitional arrangement simply reinforces a situation that remains unacceptable under CETA due to the persistence of trade obstacles that continue to hinder Canadian exports,” he said.

“That is why we are urging both parties to return to the negotiating table as soon as possible in order to reach a comprehensive and more ambitious pact that removes tariffs and non-tariff barriers, provides liberal rules of origin and creates a level playing field that will enable increased trade and deliver commercially viable two-way growth for agri-food.”

Britain formally left the EU at the end of January, but the two parties have operated under an 11-month transition period, which for Canada has meant CETA continued to apply to its trade relations with Britain.

Canadian and British negotiators have been meeting since the summer to strike what has been called a provisional bilateral deal that incorporates many aspects of CETA and would avoid triggering the imposition of new British tariffs on Canadian exports such as seafood, beef and autos on Jan. 1.