Canada and Britain Sign Interim Trade Deal Amid Post-Brexit Uncertainty

Strategic Insights -

Canadian Prime Minister Justin Trudeau and British Prime Minister Boris Johnson announced a bilateral trade deal on January 1, 2021, marking a critical moment in the transition period following Britain's exit from the European Union (EU). The agreement aims to ease trade tensions and provide continued access to each other's markets, particularly in the agricultural and service sectors. Canada and Britain have agreed to start negotiations on a more detailed trade pact next year, focusing on areas such as digital trade, environmental issues, and women's economic empowerment.

Key Takeaways:

  • The interim trade deal will roll over the provisions of the Canada-EU Comprehensive Economic and Trade Agreement (CETA), excluding Britain on January 1, 2021. Canadian exporters will maintain preferential access to the UK market, with tariffs eliminated on 98% of Canadian products.
  • The agreement aims to create a competitive edge for Canadian exporters and businesses, with British officials indicating that financial services and agriculture will be major focal points in future negotiations.
  • Britain's dairy industry, worth around £11 billion ($19 billion) in annual sales, is expected to be a significant area of contention in negotiations, with Canadian dairy producers facing pressure from existing trade agreements including CETA, CPTPP, and USMCA.
  • The UK's exit from the EU has created uncertainty for Canadian exporters, with agricultural producers facing increased competition from EU countries and potential job losses in rural communities.
  • The interim deal has been welcomed by business groups in both countries, with the Confederation of British Industry and the Canadian Chamber of Commerce calling for more details on the agreement's practical implications.
  • However, some critics have expressed concerns about the temporary nature of the deal, with Conservative trade critic Tracy Gray accusing the government of presenting an "11th-hour trade deal" that would require further negotiation.

Statistics:

  • Trade between Canada and Britain totalled $29 billion in 2019, with Britain accounting for 5% of Canada's total trade.
  • The UK's service sector makes up nearly 80% of its economy, with financial services employing around 1 million people.
  • CETA alone is expected to more than double EU cheese imports to 31,972 tonnes, or around 7.5% of the Canadian cheese market.
  • Canadian dairy producers have lost at least $450 million in annual revenue due to existing trade agreements.

Sources:

  • Globe and Mail report, January 2021
  • "Globe and Mail, 31 December 2020, 'Canada and U.K. reach interim trade deal'"
  • Canadian Government release, Global Affairs Canada, "Canada and the United Kingdom Reach a Bilateral Trade Agreement"
  • Confederation of British Industry, "Canada and UK agree interim trade deal"