UK-Canada trade deal to be beefed up, with the added plus of a push to the Indo-Pacific market
Brexit opportunity comes from improving on the rollover deal signed in 2020
The UK and Canada are beginning new trade negotiations this month designed to improve on the rollover trade agreement signed just before the UK formally left the EU on 31 December 2020.
Canada has a well-developed economy with high standards. Equally important it is a like-minded partner with a common set of values to the UK. The UK and Canada have a close intelligence and security relationship. Both countries are members of NATO, the G7, the G20, the “Five Eyes” intelligence group and the Commonwealth.
These are facts you should know about UK-Canada trade
- The December 2020 rollover trade deal with Canada avoided £42m of tariffs British exporters would have faced if it had not been agreed
- In 2020 the UK was Canada’s third-largest trading partner
2. In 2020 UK exports to Canada were worth £11.9bn while imports from Canada were valued at £7.3bn
3. UK services exports to Canada accounted for 48% of total UK exports to Canada in 2020
4. These ranged from R&D to professional management and consultancy services
5. Canada is a key member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which the UK wants to join
6. Canada is the World’s 9th largest economy
The strategic benefits of a global, Brexit Britain
In addition to enhancing the UK’s bilateral FTA with Canada, the UK’s accession to the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) of which Canada is a member, can support the UK’s long-term strategy to strengthen its relationship with the Indo-Pacific region.
The Indo-Pacific is home to half the world’s population. It makes up 40% of global GDP, comprises some of the fastest-growing economies, and leads and adopts digital and technological innovation and standards. Sitting at the forefront of new global trade arrangements, the region is currently considered the world’s growth engine.
The Indo-Pacific is important to the UK for economic opportunities, our security and our values. In 2020 the region accounted for 18.8% of UK global trade and 9.3% of inward foreign direct investment (FDI).
A new and enhanced trade deal with Canada could further strengthen the UK’s ability to gain early entry into this lucrative market.
Trade Secretary the Rt Hon Anne-Marie Trevelyan MP said:
“Despite the slowdown to global trade in 2020 due to the coronavirus pandemic, goods exports to Canada still increased by £478 million and Canada remained one of our top 20 trading partners (ranked 16th), with total trade in goods and services worth £19.2 billion.
“UK exports enjoy an estimated £58 million less in duties under the UK-CAN TCA, relative to trading without one. An upgraded agreement can provide the opportunity to support further trade liberalisation and benefit businesses, including the 10,300 small and medium-sized enterprises (SMEs) already exporting to Canada.”
- Anne-Marie Trevelyan MP, House of Commons, 24 Mar 2022
Indications of where trade might be improved
While both Canada and the UK are relatively open to services trade compared to the OECD average, Canada is more restrictive than the UK in more than half of the service categories. In the 2020 OECD survey, the UK was the 6th most open, whereas Canada was only the 23rd — out of 48.
Under the UK-Canada rollover agreement, the UK is more open than Canada to bilateral services trade in all but three service sectors. Canada is most restrictive in the courier, broadcasting and telecommunication sectors, and is least restrictive in computer services. The UK is most restrictive in broadcasting, motion pictures, distribution and banking services. It is most liberal in architecture and computer services trade.
Canada deal offers mid to long-term economic gains
Firstly, had the United Kingdom still been a member of the EU, no trade talks with Canada would have been possible. EU member countries are specifically forbidden from agreeing on trade deals — only the lumbering EU Commission can do this. The deals the Commission made did not suit the UK economy and came at a tortoise-like pace, often taking a decade or more.
The opportunities available to the UK in striking a new deal with Canada are more likely to come from the UK becoming a closer trading partner, as Canada’s is a growing economy. Its GDP is anticipated to increase between 2019 and 2035 by almost 30% in real terms. This would be faster than advanced economies more widely, which are expected to only grow by around 25% over the same timeframe.
Likewise, in the same period the Canadian import market is projected to increase by 45% in real terms. UK exporters will certainly want a piece of this. The difference will be in what opportunities can be negotiated to allow more financial and professional services to blossom — where the UK’s export strength lies.
The weakness of EU trade deals is that they focus on manufactured goods that benefit primarily Germany and France. The rollover trade deal between the UK and Canada obviously followed this model. They rarely offered any benefits in services. It is the opportunity to reorientate these existing deals into something more suited to the UK’s strengths that offers real opportunity.
What’s in it for Canada?
On the other side of the coin Canada is said to be interested in gaining access for its hormone-fed beef. This may be a negotiating feint simply to gain greater quota access for non-hormone-fed beef. Even if it’s not, the key must be that whatever is allowed to be imported must allow the British farmers to adopt the same quality standards too.
The winner in all of this could then be the British consumer who could obtain better quality beef from both British and Canadian farmers, at lower prices. Trade deals should not just be about increasing British exports but also about driving down consumer prices at home. This aspect of trade negotiations is too often forgotten
Sources: UK Dept for International Trade | Hansard
