Tax & Trade Blog
Brexit: New Interim Canada-Britain Trade Deal
Following the United Kingdom’s (“UK”) exit from the European Union earlier this year, Canada had agreed to allow its current free-trade agreement with the EU continue to apply to the UK. That agreement is called the Comprehensive Economic and Trade Agreement (“CETA”), and Canada’s agreement to continue providing similar benefits to the UK was set to expire at the end of 2020.
Canada and the UK have now agreed on a new interim trade deal, titled the Canada-United Kingdom Trade Continuity Agreement (“TCA”).
While the new deal still requires ratification by both parties (formal legislative approvals, on both sides), the TCA is expected to be a significant deal for Canada, as the UK is Canada’s fifth-largest trading partner, with two-way merchandise trade between the countries totalling $29 billion in 2019. The UK was also Canada’s largest merchandise export market in Europe in 2019, and Canada’s the third largest market worldwide!
While the full text of the TCA has yet to be released, the Government of Canada has indicated that the agreement largely replicates the terms of CETA, including items with respect to:
- the elimination of tariffs on 98% of Canadian products exported to the United Kingdom; and
- provisions on labour, the environment, regulatory cooperation, and dispute settlement.
This will result in stability and continuity for most business and exporters currently benefiting from CETA.
However, there will be some notable differences between the TCA and CETA – including a lack of any new market access for cheese or other supply-managed products.
The TCA is also still an interim deal that will be in place as Canada and the UK continue to negotiate a more comprehensive and permanent free trade agreement. Once that occurs, it is expected that a more comprehensive Canada-UK free trade agreement will address issues beyond what is contained in the TCA, including in the areas of digital trade and financial services. Certain existing provisions will also likely need to be renegotiated, including sanitary regulations, procurement rules and investment regulations. Those negotiations are expected to start in 2021, after consultation with businesses and stakeholders.
Given the lack of specifics on the TCA at this time, businesses with trade exposure to the UK market should keep a close eye on the ratification and implementation process so that they are aware of any changes that may affect their operations.
Diarizing a new look at the TCA for January 2021 is probably also a good idea!
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