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The UK has halted trade talks with Canada in a row over hormone-treated beef that will leave UK farmers and industry with reduced access to Canadian markets.
The stand-off, which will affect cheese and carmakers, follows two years of negotiations to extend preferential trading arrangements with Canada that were “rolled over” when the UK left the EU in January 2021.
The breakdown in negotiations is the first time the UK has suspended talks with a trade partner since Brexit. Canada had sought concessions on the export of hormone-treated beef, which is blocked by UK legislation.
William Bain, the head of trade policy at the British Chambers of Commerce, said the suspension was “unwelcome news” for UK business that sent a bad signal on the merits of free trade.
“For our dairy exporters and parts of our manufacturing industry the loss of key trade preferences puts them in a worse position than before 2020. Government must help these sectors through difficult times and open up new markets for our goods and services,” he added.
The UK’s main trade agreement with Canada will remain in place but British cheesemakers will not see any renewal of a preferential access deal that expired at the start of the year.
The section of the deal that allowed UK carmakers to export vehicles to Canada under the same preferential rules as EU carmakers is set to expire in April.
The UK government said: “Trade negotiations are complex, but sometimes it is right to pause if progress is not being made. We remain open to restarting talks with Canada in the future to build a stronger trading relationship.”
Kemi Badenoch, UK trade secretary, told MPs earlier this week that Canada was “very restrictive” on dairy and this had created a “challenging discussion”.
Trade between the UK and Canada was worth £25.9bn in the 12 months to the end of June 2023, according to government data. The decision to halt talks leaves tariffs of 245 per cent on British cheese — Canada accounts for 2.4 per cent of global exports, which was worth just under £19mn in 2022.
The expiry of the deal on cars will also have a limited impact. Canada is a small market with the UK export just over 9,000 cars to the country last year, the bulk of which were from Jaguar Land Rover, according to independent data and trade group AutoAnalysis.
Mike Hawes, boss of the Society of Motor Manufacturers and Traders, said the decision was “especially disappointing and sends a signal that the UK’s world-class automotive products are not welcome in Canada”, and urged both sides to get back around the negotiating table.
Canada raised about £3.2mn from tariffs on UK car exports last year, a figure that could rise to between £28mn and £46mn if the nation opts to impose typical charges on non-compliant goods or at World Trade Organization levels.
A spokesperson for Canada’s trade minister, Mary Ng, told the BBC that the UK’s “decision to continue to maintain market access barriers for our agriculture industry and unwillingness to reach a mutual agreement has only stalled negotiations”.
The National Farmers Union of England and Wales welcomed the pause in talks. “Canada was demanding too much and offering too little,” said Minette Batters, NFU president.
Former UK trade department official Allie Renison, now at consultancy SEC Newgate, said the decision to suspend the talks was a signal that the UK was prepared to stand its ground on trade issues.
“It would seem the UK is not averse to playing hardball itself — a tactic long embraced by the Canadians in trade talks. The move has consequences, particularly for cheese exporters, but it sends a reassuring signal to the UK farming constituency ahead of an election,” she added.