The United Kingdom has announced it is pausing negotiations on a new free trade agreement with Canada due to lack of progress on key agricultural issues. This unexpected development raises uncertainty around the future trade relationship between the two countries.
Background of the UK-Canada Trade Talks
The UK and Canada began negotiating a new bilateral trade deal in March 2022 after the UK left the EU. The aim was to roll over key aspects of the Canada-EU trade agreement, known as CETA, and improve access in areas like digital trade and professional services.
The talks were progressing steadily, with both sides indicating good will and optimism about concluding an agreement. However, negotiations hit difficulties in recent months over agriculture, specifically British demands for more access for imported cheeses and concerns in Canada about hormone-treated beef.
Previous State of UK-Canada Trade
- Prior to Brexit, Canadian exports to the UK totaled $19 billion annually under CETA
- Key exports included vehicles, precious metals, machinery, oil, and seafood
- Post-Brexit bilateral trade has declined slightly without a UK-specific deal
- A new UK-Canada trade agreement aims to increase market access beyond CETA
UK Announcement to Pause Talks Over Agricultural Disagreements
On January 25th, 2024, UK International Trade Secretary Kemi Badenoch announced the government would be pausing negotiations with Canada for the foreseeable future.
In her statement, Badenoch cited a lack of willingness from Canada to compromise on issues related to British cheese imports and hormone-treated beef exports.
“There has not been the progress we need to see from Canada toward an agreement that would work for both countries,” she said.
The trade secretary indicated that continuing talks at this stage would not be worthwhile due to Canada’s unwillingness to find common ground. She did not rule out resuming discussions in the future if the situation changes.
Differing Perspectives on Key Agricultural Issues
The two sticking points that led to the pause in trade talks were market access terms for cheeses and beef hormones.
British Cheese Exports
The UK was seeking to significantly expand market access for British cheese exports to Canada beyond what was agreed in CETA. This included lower tariffs and quotas for products like Cheddar, Stilton, and West Country cheddar.
Canada has substantial domestic dairy production and was reluctant to allow substantially higher imports of value-added products like quality cheeses. They offered only a slight increase in market access which Britain viewed as inadequate.
Canadian Beef Imports
Another contentious issue was related to potential Canadian beef exports to the UK market. Canada requested an exemption that would allow imports of beef produced using hormone growth promotants, a common practice in Canadian cattle production.
The UK has banned beef raised with hormones since the 1980s due to health concerns. The British government refused to allow imports of hormone-treated meat, leading to an impasse.
Reactions to the Surprise Suspension of Talks
The unexpected decision by the UK to put trade negotiations on hold pending progress on agriculture caught many observers by surprise. Overall reactions reflected a mix of measured concerns about the economic impacts along with hopes that the pause would be temporary.
Canadian government officials expressed regret and noted these types of “difficult moments” are not uncommon in complex trade talks. British industry groups highlighted worries about losing beneficial access to the Canadian market.
At the same time, others indicated the strength of the bilateral relationship would allow the countries to work through these differences in due course. Some experts said dealing with politically-sensitive agriculture issues up front could clear the path for an eventual agreement.
Potential Impacts and Outlook Going Forward
With UK-Canada trade talks now suspended amid agriculture disagreements, uncertainties swirl around what it means for businesses and consumers in both countries.
Market Access and Trade Volumes
Unless the outstanding issues of British cheese and Canadian beef get resolved, existing trade flows risk major disruption. UK cheese exports to Canada could face significant tariffs without a bilateral agreement to replace CETA provisions.
At the same time, the pause raises questions around import arrangements for major Canadian exports like vehicles, precious metals, oil, and seafood. These goods may confront higher trade barriers entering the UK market.
Overall trade volumes between the countries could decline as a result, hurting exporters on both sides.
Resuming Productive Talks
There is still optimism that the pause in free trade negotiations will prove temporary once agriculture concerns get adequately addressed.
- Canadian officials indicated they remain “committed to the process”
- Those close to the talks do not believe it has broken down irreparably
- With political will, compromise solutions can likely be found
Many experts expect the UK and Canada to return to the table in 2025 or 2026 to resume FTA discussions after a “cooling off” period. This could pave the way for a mutually-beneficial bilateral trade pact.
Conclusion
The UK’s unexpected decision to halt FTA talks with Canada over British cheese and Canadian beef access throws previous progress into doubt. This presents fresh uncertainties and potential economic risks.
However, given the strong diplomatic ties and shared interests between the two countries, many are hopeful the agriculture disagreements leading to the suspension can still be overcome. This would allow eventually expanding the $19 billion trading relationship.
All sides are indicating that with sufficient flexibility and compromise on sensitive issues, productive UK-Canada trade negotiations could resume again shortly. But for now, the path forward remains unclear.
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