Canada, U.K. start free trade talks; dairy, beef, pork and grain to be sticking points

Open this photo in gallery:

Canada and Britain are set to begin negotiations on a free-trade agreement as the British government seeks a post-Brexit trading deal, with the sticking points likely to be farm products.

International Trade Minister Mary Ng and her counterpart, U.K. Secretary of State for International Trade Anne-Marie Trevelyan, announced in Ottawa Thursday that the first round of negotiations on a permanent trade deal would begin on March 28. They said the timeline for negotiations is two years.

Britain ranks as Canada’s second- or third-largest export market depending on whether you factor in just merchandise trade or include trade in services, said Mark Agnew, the Canadian Chamber of Commerce’s senior vice-president of policy and government relations.

The toughest areas to negotiate, like many foreign trade deals, will be the politically sensitive agriculture sector as farmers in both countries try to protect their domestic markets. “It’s agriculture, agriculture, agriculture,” Mr. Agnew said.

Two-way trade between Canada and Britain is currently governed by a temporary trade deal enacted after Britain left the European Union at the end of January, 2020. This interim Trade Continuity Agreement carried forward the benefits of the Canada-European Union Comprehensive Economic and Trade Agreement.

For Canadian farmers, much will depend on whether British producers will be granted additional tariff-free access to this country’s heavily protected dairy markets, largely sheltered from global trade, and what kind of unfettered access Canadian beef, pork and grain producers will get to British consumers.

The costliest decision for Canada may be how much compensation it will have to pay Canadian dairy farmers to accept additional tariff-free cheese imports from Britain. The federal government committed to billions of dollars in compensation for dairy trade concessions made in past trade deals including the Trans-Pacific Partnership pact and the Canada-EU trade agreement.

Prime Minister Justin Trudeau’s government has vowed not to grant Britain any further access than what it had under the EU trade deal to Canada’s heavily protected dairy, eggs or poultry markets – part of this country’s sheltered supply-management system. “The government will ... fully defend Canada’s supply management system for dairy, poultry and eggs, including by not conceding any additional market access for supply-managed goods,” the Trudeau government said in a recent statement to Parliament on negotiating objectives.

Mr. Agnew said that, notwithstanding the red line that Ottawa drew in its trade talk objectives, the British will “come asking” for more cheese access. Indeed, in 2021, British Prime Minister Boris Johnson told CBC TV that he was hoping for greater access. “I think what is really needed now is more affordable, high-quality British cheese in Canada and I hope that we can do a deal to allow that.”

The Dairy Farmers of Canada said they expect Canada to stick to its pledge.

“Last month, Minister Ng tabled Canada’s negotiating objectives for the Canada-U.K. free trade agreement and made it clear there will be no more import access to supply managed commodities,” Pierre Lampron, president of the Dairy Farmers, said in a statement. He said his group confirmed Wednesday “that the issue of access to the Canadian dairy market was not on the agenda of these trade talks. We continue to monitor them closely.”

International trade lawyer Mark Warner said financial services negotiations will also be challenging given Britain’s powerhouse banking sector.

He questions how much “bandwidth,” or capacity, the Department of Global Affairs has to conduct trade talks given that Ottawa has launched so many different trade negotiations and exploratory talks and is still embroiled in several trade disputes with the United States.

In 2020, bilateral trade in services between Canada and Britain amounted to nearly $12.9-billion. The U.K. is also a key source of foreign direct investment (FDI) and of science and technology partnerships. In 2020, the value of FDI in Canada from Britain was valued at $69.6-billion and Canadian direct investment in that country was valued at $116.8-billion.

The minority Liberal government says negotiations with Britain are unaffected by the Liberal-NDP co-operation agreement in Canada’s House of Commons where NDP Leader Jagmeet Singh has agreed to prop up the minority Liberal government for three years. “There are no implications for the trade talks,” said Alice Hansen, press secretary for Ms. Ng.

With reports from Reuters

For subscribers: Get exclusive political news and analysis by signing up for the Politics Briefing.