Canada contradicts Kemi Badenoch claims on ‘ongoing’ trade talks

Kemi Badenoch, business and trade secretary, was on Tuesday locked in a new political row, this time over her contested claim that she was engaged in trade talks with Canada, negotiations Ottawa insists do not exist.

Badenoch told MPs “explicitly” on January 29 that talks with Canada were “ongoing” to avoid a March 31 tariff cliff-edge for UK carmakers, even though she had earlier unilaterally paused wider trade talks with the Ottawa government.

But the Canadian high commissioner to the UK, Ralph Goodale, has written to the House of Commons business select committee to insist Badenoch’s claimed talks, which also cover cheesemakers, have not happened.

The business secretary is separately engaged in a bitter row with Henry Staunton, whom she sacked as Post Office chair last month, accusing him of making “wild, baseless allegations” over the Horizon IT scandal.

Liam Byrne, chair of the business committee, demanded that Badenoch correct the record on the trade talks.

“It is essential the secretary of state now explains why the Canadians’ account of the talks is so utterly at variance with what she told the House of Commons,” the Labour MP told the Financial Times.

The dispute started on January 25 when Badenoch halted free-trade talks with Ottawa in a row over Canadian hormone-treated beef, a move that left UK carmakers potentially facing tariffs costing tens of millions of pounds. Cheesemakers also face heavy Canadian tariffs.

Badenoch tried to reassure MPs four days later that she was continuing to hold talks with Ottawa, notably over the right of British carmarkers to use EU parts in their exports to Canada

The UK and Canada have a trade agreement that was rolled over when the UK left the EU. The deal included preferential terms on rules of origin for certain products that are due to expire at the end of March.

British-origin cars must be 50 per cent UK-made in order to qualify for export to Canada without paying tariffs, a proportion that rises to 55 per cent in September. Until the end of March, UK carmakers can include parts from their EU supply chains to meet this threshold. Preferential terms for UK cheesemakers expired at the end of last year.

“This is a good opportunity for me to state explicitly that the talks have not broken down,” Badenoch told MPs on January 29. “We are having multiple discussions with Canada on cheese, in which we have not come to an agreement.”

She added: “We have an ongoing rules-of-origin discussion, and we have an FTA discussion, which I have paused.”

But Goodale wrote to Byrne’s committee on February 16 to challenge that account. His letter, seen by the FT, said that Canada was “disappointed with the unilateral pause in these negotiations”.

He added: “As far as I’m aware, since the UK announced its pause on January 25, there have been neither negotiations nor technical discussions with respect to any of the outstanding issues — including British access to Canada’s Tariff Rate Quotas for cheese and the approaching expiry of cumulation provisions respecting Rules of Origin.”

The UK-Canada disagreement focuses on a relatively small area of trade: while eight out of 10 UK-made cars are exported, Canada accounts for only 1.3 per cent of exports, which are dominated by Jaguar Land Rover.

Currently Canada charges a 0.7 per cent tariff on cars, something that left UK exporters paying around £3.2mn last year after selling 9,000 vehicles in the market, according to calculations from Ian Henry of AutoAnalysis. 

Without a deal, Canada is proposing to charge 6.1 per cent on vehicles, which would see the bill rise to £28mn, still a small sum for the market. This would climb as high as £46mn if Canada instead imposed WTO tariffs of 10 per cent, Henry added.

Badenoch, the bookmakers’ favourite to be next Tory leader, is coming under increasing scrutiny — and Labour criticism — as some at Westminster start to look beyond Rishi Sunak’s leadership of the Conservative party.

She is known as a combative fighter for what she regards as the truth, as evidenced by her row with Staunton after he claimed he was told by government officials to stall on compensation payments to postmasters. She called the allegation “a disgrace”.  

Last December she repeatedly accused Labour MP Kate Osborne of “lying” during a women and equalities committee hearing, which prompted the Tory committee chair to warn Badenoch against using “unparliamentary language”. 

Osborne had alleged that Badenoch had “compared children and young people coming out as trans to the spread of a disease”. The business secretary, who also holds the equalities brief, had previously likened the surge in referrals to NHS gender identity services to “almost an epidemic”. 

Badenoch told Osborne: “That is a lie, that is a lie and I think you should withdraw that statement. That is a lie, you are lying, you are lying, you are lying.”

Earlier in 2023 she locked horns with the Commons Speaker Sir Lindsay Hoyle, who admonished her for announcing a government policy decision via a newspaper rather than in parliament, as convention dictates.

The tone of her apology at the despatch box, in which she said “I’m very sorry that the sequencing that we chose was not to your satisfaction,” drew sharp intakes of breath from opposition MPs.

“That is totally not acceptable. Who do you think you’re speaking to, secretary of state?” Hoyle shot back.

Her admirers view her style as refreshing, while critics deem it needlessly combative. Sometimes her approach has raised hackles in her own party, including among fellow Brexiters.

The Department for Business and Trade did not immediately comment.

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