What’s the Big Deal? UK and Canada Explained

Canadian flag flying

The UK and Canada have struck an interim agreement to continue trading under the same EU’s Comprehensive and Trade Agreement (CETA) trade deal after Brexit.

UK Prime Minister Boris Johnson and his Canadian counterpart, Justin Trudeau sealed the deal on Saturday, November 21, with a promise to negotiate a more comprehensive agreement next year.

As the UK edges towards the end of the transition period to leave the European Union this December, it has intensified efforts to secure trade deals with many countries. This latest agreement with Canada added to the dozens of bilateral agreements the UK has sealed in its bid to maintain economic viability after the transition.

Since 2017, the CETA trade deal has been in effect between the EU and Canada. This rollover agreement means the same terms will continue to apply to the UK and Canada.

Furthermore, this agreement “locks in certainty for UK businesses trading goods and services with Canada worth £20 billion,” a statement by the British government confirmed.

This rollover agreement means the same terms will continue to apply to the UK and Canada

Every year, British businesses export goods and services worth £11.4 billion to Canada. The continued CETA bilateral deal will benefit the British automobile manufacturers and food and drink industries, which between them provide more than half a million jobs across the UK.

The rollover agreement has generated reactions from many UK businesses who had, on various occasions, raised concerns about their survival post-Brexit.

British Chambers of Commerce director-general Adam Marshall said the trade deal will be “warmly welcomed” but at the same time, warned that similar continuity deals were urgently needed with other key markets, including Singapore and Turkey, to avoid “a damaging cliff edge for both importers and exporters.”

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Business leaders have warned for years that the UK is ill-prepared for Brexit and the end of the transition period on the 31st December [Image: Unsplash]

Marshall also reiterated his call for the UK to strike a deal with the EU, saying that is the “single most critical trade agreement our business communities need.”

Before now, many business leaders have warned that the UK economy is ill-prepared for a no-deal Brexit, which would see UK lose its current trade agreements with the EU, and would have to trade under the World Trade Organization (WTO) rules.

The EU has been Britain’s biggest single trading partner, accounting for 43% and 51% of all UK imports and exports respectively in 2019.

Some of the leverages it enjoys under the EU deal include zero tariffs on goods traded between the two, and minimal border checks.

According to the British government, the UK-Canada continuity agreement will undergo final legal checks before it is officially signed. In Canada’s case also, regulations for the agreement must be approved by parliament before it can take effect, CBC News reported.

So far, negotiators from the UK have secured trade deals with 53 countries under two years, accounting for £164bn of UK bilateral trade. The countries and trading blocs include South Korea, Switzerland, Ukraine, Israel, Jordan, and Morocco.

Marshall also reiterated his call for the UK to strike a deal with the EU, saying that is the “single most critical trade agreement our business communities need.”

Maintaining these deals cost the UK billions of taxpayers’ pounds. This begs the question if the deals are worth celebrating, given that Britain currently enjoys them under its EU agreements. It is worth noting, however, that none of these deals is as beneficial as the EU trade deal. For instance, exports to Canada currently make up just over 2% of total UK exports and 2.6% of imports. Whereas, for Canada, its exports to the UK are far more significant in terms of their total.

According to a government source, the latest Canada deal will take the UK “one step close to accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Canada is a prominent member of the CPTPP, a free trade agreement, which is a key part of the UK’s negotiations programme to help businesses derive more benefits from the 11 key Pacific markets.

The UK is keen on fast-tracking plans to join the CPTPP as the clock quickly runs down on its ability to secure deals with other trading partners, especially the EU, its biggest trading bloc. Heading the WTO way by January will have a significant impact on the economy.

If it leaves with no-deal, the UK will start paying tariffs on exported goods to the EU, a situation that could see its automobiles taxed at 10% and agricultural products 35%. Some analysts believe that the transition would leave the British economy 6.5% lower than would have been the case if the current agreements with the EU had been maintained.

Header image [Dogukan Sahin, Unsplash]