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Blow for UK trade strategy as Canada suspends FTA upgrade talks

Talks aimed at renegotiating the interim trade deal between the United Kingdom and Canada have been suspended indefinitely, amidst acrimonious exchanges over access for Canadian beef to the British market.

The two governments confirmed the suspension of talks late on Thursday (25 January), bringing to an end almost two years of negotiations and eight round of negotiations.

The move represents a blow for the UK’s strategy of pursuing upgrades to FTAs which had been rolled over from the equivalent EU agreements at the point of Brexit.

Similar renegotiations are currently under way with Mexico, Switzerland, Türkiye, Israel and South Korea.

Canada is a close UK ally and Commonwealth partner – but the talks have foundered over questions of agricultural market access.

London remains unwilling either to relax its ban on importing hormone-treated beef, or to offer enhanced quotas for hormone-free beef. The issue is an important one for Canada, which is a major beef exporter and which routinely administers growth-promoting hormones to its cattle.

Facing ‘CETA-minus’ terms of trade

The abandonment of the talks means that the UK will continue to trade with Canada under essentially the same terms as it had previously under the EU-Canada CETA agreement – albeit with key differences.

In a sign of mounting problems, the UK conceded last month that it had been unable to persuade the Canadians to further extend a three-year post-Brexit deal allowing the UK a share of the EU quota for cheese imports into the country.

Another deadline which now seems almost certain to be missed relates to an interim agreement on rules of origin.

Since Brexit the UK has been allowed to count EU raw materials as ‘qualifying’ products for preferential exports to Canada – but this concession will lapse on 31 March this year.

Instead of an upgraded trade arrangement, the UK thus now faces the prospect of worse terms of trade with Canada than it had previously as an EU member.

Row set to overshadow UK’s CPTPP accession

There is now a risk that the UK-Canada trade spat could spill over to affect the UK’s accession to the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, of which Canada is a founder member.

Ottawa has yet to initiate parliamentary proceedings to ratify the UK’s accession, and Canadian farm lobbyists are pressuring their government not to do so.

This reflects Canadian dissatisfaction with the market access deal offered to it by the UK as part of the CPTPP accession deal.

“Our job is to make sure we protect our farmers and we are going to do that,” said Canada’s agriculture minister Lawrence MacAulay.

Canada would not have the power to veto UK accession to CPTPP, as the deal will take effect once at least six current members of the bloc confirm ratification. But the possible absence of an instrument of ratification from Ottawa would be a significant diplomatic blow for the UK.

London to ‘focus on other trade deals’

A British government source accused the Canadians of lacking perspective on bilateral trade issues.

“Canada seem to have lost sight of the bigger picture – the British and Canadian businesses who do £26bn worth of trade a year and the people they employ,” the source told Borderlex.

“If Canada comes back to the table with a serious offer and desire to make progress, we’re all ears, but in the meantime we’re going to focus on other trade deals that deliver for UK businesses.”

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