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The UK and Canada's Post-Brexit "Continuity Trade Deal"


The UK and Canadas Post-Brexit _Continuity Trade Deal_ (1)With Brexit talks going down to the wire, and the very real possibility of a no-deal Brexit around the corner, there was one piece of good news for exporters in UK and Canada recently after the announcement of a UK-Canada continuity trade deal.

The EU-Canada Comprehensive Economic and Trade Agreement (CETA)

The UK's trading relationship with Canada is currently covered by the EU-Canada Comprehensive Economic and Trade Agreement (CETA) under which 98% of goods traded between the EU (including the UK) and Canada are free from trade taxes, known as tariffs.

CETA also reduces many non-tariff barriers, such as customs procedures and regulatory requirements, while also allowing EU companies with much-improved access to bid on Canadian public procurement contracts at all levels of government.

However, with the Brexit transition period set to expire on December 31, 2020, the UK will no longer be covered by the CETA from 1 January 2021.

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The Continuity Trade Deal


In summary, the post-Brexit continuity trade deal will allow the UK and Canada to trade under the same terms provided by the CETA on a bilateral basis. This interim agreement was announced on November 21, 2020, and it will take effect on 1 January 2021.

Benefits of the Continuity Deal


The agreement of the post-Brexit continuity deal is significant because the UK was Canada's fifth-largest trading partner in 2019, after the United States, China, Mexico, and Japan, with two-way merchandise trade totalling CAD29 billion that year (the equivalent of about GBP17 billion, or EUR18.7 billion).

Likewise, UK businesses export substantial amounts of merchandise to Canada. These exports are worth around GBP11 billion per year with Canada a particularly large market for UK-made cars. Without the continuity deal, UK car exporters would face Canada's standard tariff on cars of 6.1%.

A New Deal on the Horizon?

The continuity trade deal should be considered a temporary transitional arrangement, as the two Governments have also agreed to begin negotiations on a more ambitious bespoke trade pact in 2021. This does provide for a certain level of uncertainty for businesses trading between Canada and the UK, as it is unclear how long these talks will last and what their outcome will be. However, this development also suggests that both governments are committed to potentially improving the existing beneficial trading rules provided by the CETA.

What's more, the UK says that this transitional agreement with Canada takes the UK one step closer to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a regional agreement between 11 Pacific Rim countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

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