UK secures vital rollover trade deal with Canada and agrees to start negotiating more advanced deal next year

24 Nov 2020

Business

The UK and Canada have locked in their existing trading relationship, worth £20 billion, and agreed to begin negotiating a new more ambitious trade deal as early as next year.

On a video call, Prime Minister Boris Johnson and Canadian Prime Minister Justin Trudeau, joined by International Trade Secretary Liz Truss and her Canadian counterpart, Minister of Small Business, Export Promotion and International Trade Mary Ng agreed an ‘agreement in principle’ to roll over current EU-Canada trading arrangements and begin negotiations on a new, bespoke UK-Canada trade deal in 2021.

The agreement to rollover provisions of the Comprehensive Economic and Trade Agreement (CETA)  gives certainty for UK businesses exporting goods and services to Canada worth £11.4 billion. It will support the British automotive manufacturing and food and drink industries which between them provide jobs for more than half a million people across the UK.

Overall, an estimated £42 million tariff burden on UK exports has been saved. The benefits locked in under the agreement reached today include:

  • Future zero tariffs on UK car exports to Canada, which were worth £757 million last year, supporting factories and jobs in our communities. Without this agreement, Canada’s standard tariffs on cars of 6.1% would apply.
  • Tariff-free trade on 98% of goods that can be exported to Canada including beef, fish and seafood and soft drinks.
  • UK producers will continue to benefit from zero tariffs on many agricultural and seafood exports including chocolate, confectionary, fruit and vegetables, bread, pastries and fish. Last year the UK exported £344m worth of agri-food goods to Canada.
  • Without the continuity agreement, Canadian food products such as maple syrup, biscuits and salmon could have been more expensive for British consumers as they would face taxes of up to 8% when entering the UK under the UK Global Tariff.

The deal provides the foundation for both countries to negotiate a new trade deal, that will improve on the existing EU-Canada agreement. It will be tailored for the British economy with the potential to go further in new areas like digital trade, women’s economic empowerment and the environment.

The announcement means that it in under two years, the UK government has agreed trade deals with 53 countries accounting for £164bn of UK bilateral trade. It also takes us one step closer to accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which Canada is a member. CPTPP is a key part of our trade negotiations programme, helping businesses secure more opportunities in 11 key Pacific markets.

International Trade Secretary Liz Truss said: “Today’s agreement underpins £20 billion worth of trade and locks in certainty for the thousands of jobs. We look forward to striking a new more ambitious deal  next year with the aim of creating more opportunities for businesses and improving the lives of people across the country.

“The UK is bonded by history, culture and transatlantic trade with our friends and allies in Canada, and we want to continue to build partnerships around the world that support our shared values of freedom and democracy, and today marks another step towards membership of a group of like-minded nations- the Trans-Pacific Partnership.”

The agreement also guarantees tariff-free access to the Canadian market for British wine and spirits and ensures that the UK and Canada can continue to work towards recognising each other’s qualifications in areas including accountancy, architecture and law.

All nations and regions will benefit from preferential access to Canadian markets. For example, together the West Midlands and North West regions exported over £1.2 billion worth of goods to Canada last year, while Scotland and Northern Ireland collectively exported £1 billion.

BCC Director General Adam Marshall said: “Securing continued access to one of our top trading partners, will be warmly welcomed by our business communities.  

“Firms will be keen to see the UK and Canada continue to work toward an even deeper trading relationship, building on this agreement.  They also urgently need continuity agreements with other key markets, including Turkey and Singapore, to avoid a damaging cliff edge for both importers and exporters, as well as those involved in wider supply chains.  

“However, the single most critical trade agreement our business communities need is one with the European Union. Firms expect the two sides to agree a deal. We urge government to redouble their efforts to secure this as soon as possible to give businesses the clarity they need.” 

The UK-Canada Trade Continuity Agreement will be subject to final legal checks before it is formally signed.