Britain is expected to launch post-Brexit trade talks with Canada imminently, with the goal of reaching an agreement this year.
It ends a period of soured relations after the Department for International Trade (DIT) published a temporary regime that would have cut tariffs on nearly all UK imports, shielding British consumers from a no-deal Brexit but making a UK-Canada deal futile.
This prompted Canada to retreat from talks early last year, despite an agreement having been reportedly close to completion.
A deal is now back on the table after Britain revised its global tariff strategy in May, publishing the rates that will apply to trading partners’ exports when the transition period concludes at the end of the year.
Last week Trade Secretary Liz Truss’ Canadian counterpart Mary Ng tweeted after a meeting between the pair that both sides were keen to reach “an ambitious agreement that will be crucial to Canadians’ economic recovery” from the Covid-19 crisis.
Sources said the deal would be intended to go little further than rolling over the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, with a view to being renegotiated in the future.
A DIT spokesperson said: We’re engaging constructively with the Canadian government on transition of the CETA at the end of the transition period.”
This would be less far-reaching than the strategy for talks with Japan, which have been framed as a bridge to the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of which both Japan and Canada are members.
While it would be in Canada’s interest to reach a deal with Britain to avoid tariffs on its seafood products – that would be reapplied if CETA were not rolled over – for the UK, the main prize would be continuity for businesses, trade experts said.
Despite Canada’s broadly liberal stance on trade, cheese is likely to be a contentious issue, as in the UK-Japan talks, given the lobbying clout of dairy farmers in the Canadian province of Alberta.
Canada only allows 20,000 tonnes of cheese to enter its territory tariff-free each year, three-quarters of which is earmarked for the EU. Under CETA, the EU only managed to adjust its share slightly, negotiating new tariff exemptions on 5,333 tonnes of cheese exports to Canada in 2019, a quota which increases annually but only to 16,000 tonnes.
Stilton producers outside these quotas were slapped with levies of 5.33 Canadian dollars (£3.07) per kilogram – highly prohibitive given the low margins in dairy production. European producers have already expressed concerns about how the quotas are being administered, accusing Canadian authorities of allocating shares primarily to firms unable to use them or that do not compete with Canadian producers.
Given the significance of cheese exports for EU members such as France and the Netherlands, Dmitry Grozoubinski, a former Australian World Trade Organisation negotiator and founder of the ExplainTrade website, said there was “every chance poor Minister Truss is heading for yet another negotiating shouting match over cheese”.
The UK is concurrently negotiating trade deals with the US, Japan, New Zealand, and Australia.