UK and Canada agree deal to keep trading under EU terms

Published 11 December 2020

International trade
Canada - Canadian flag on price tag_18678

The UK and Canada have agreed a deal to continue trading under the same terms as the current EU agreement after the Brexit transition period ends.

It will roll over the existing EU-Canada Comprehensive Economic and Trade Agreement (CETA) which has been provisionally in force since September 2017. Since then EU farmers and by merit of EU membership UK farmers, have been able to benefit from the trade preferences it grants.

The government said it paved the way for negotiations to begin next year on a new comprehensive deal with Canada.

But what does it mean for UK agriculture?

  • 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 exports including fruit and vegetables, bread, and pastries. Last year the UK exported £344m worth of agri-food goods, which includes £172m worth of beverages and spirits, to Canada.

NFU EU exit and international trade adviser Tori Morgan said:

“If a UK-Canada agreement was not in place at the end of the transition period on 1 Jan 2021 these trade preferences would have fallen away for UK businesses. Last year the UK exported £344m worth of agri-food goods to Canada, so this agreement between the UK and Canada is an important step to ensuring continuity in our existing trading relationships before the end of the transition period.

“We are concerned that this agreement doesn’t replicate the cheese quota, although there are mechanisms in place that should mean UK cheese doesn’t lose out. It remains to be seen if this works in practise. The UK and Canada have agreed to start negotiating a new deal next year, a UK priority in these negotiations should be to secure greater access for our cheese producers.

“As this agreement now proceeds for ratification on both sides, we hope the necessary processes can be expedited or if not, bridging mechanisms found to ensure exports of UK food and drink do not face a gap in being able to access the Canadian market.”

The UK-Canada agreement does not replicate the cheese quotas which are granted to the EU in CETA. However, for the next three years the UK will be able to access a share of an existing Canadian WTO quota, which is currently reserved for the EU and worth 14,271t per annum. This means that from 2024 unless anything else is agreed, the UK will only be able to access the Canadian market through the section of the WTO quota which is open to the rest of the world (i.e. we would have to compete for a share of 6,140t. quota volume).

  • The UK exported c. 1,800t of cheese to Canada last year (HMRC stats) and we would be concerned if anything restricted this trade next year
  • Although low volume cheese exports to Canada are usually high value speciality cheese, so the Canadian market represents an important and valuable outlet for UK dairy
  • Securing market access for UK exports of cheese to Canada should be a priority for UK negotiators as they look to start negotiating a bespoke deal with Canada next year
  • Last year the UK exported c.1,800t of cheese to Canada worth £14.1m, meaning by value the Canadian market accounts for 2% of UK cheese exports.

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