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By Gully Foyle – 2 minutes read

AS MANY OF YOU will have already seen, the news broke overnight that the UK has decided to suspend negotiations on an upgraded FTA with Canada. Unfortunately, many of the news stories this morning on the topic have made numerous errors regarding what has actually happened, and what the potential consequences are.

To be absolutely crystal clear – the UK and Canada signed a continuity agreement in 2020, that came into force on 1 April 2021.

That is not changing. The UK will continue to have an FTA with Canada.

There were some aspects of the deal that were time-limited, and with the suspending of negotiations on an upgraded deal, it is unlikely that those will be resolved in the short term. The rest of the deal, however, continues.

Those aspects, in a nutshell, are:

•  Cheese quotas: As has already received a lot of press, the UK’s access to the EU’s cheese tariff rate quota (the amount of goods that can be sold on a lower tariff before a higher tariff kicks in) came to an end in 2023.

•  EU component cumulation: Rules of origin in trade deals say how much of a given product needs to have been made in a country, for it to qualify as being from that country, and so eligible for lower tariffs. For example maybe 80% of a toaster needs to be made in the UK to be considered a UK toaster. The continuity agreement included a three-year time limit on EU components being able to be considered as UK components (so if 10% of said toaster was parts made in the EU, those parts would be considered UK parts). The deal came into force in April 2021, so that three-year time limit ends in April 2024.

•  Suspension of ISDS clauses: Not many people are aware of this, but the Investor-State Dispute Settlement (ISDS) clauses that people complain about when talking about CPTPP, are present in multiple EU trade deals as well, including CETA. The continuity agreement suspended these for a period of three-years, but if no agreement was made by October 2023 to extend the suspension – which I believe hasn’t happened – then the clauses come into effect again.

Worth also noting that in July 2023 the UK signed an agreement to accede to the CPTPP – an 11-nation trade bloc which includes Canada, and has many areas of improvement on the terms of the deal copied from the EU. Canada also signed that agreement, so it is expected that they will ratify it later this year too.

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Gully Foyle is a passionate researcher and commentator on post-Brexit trade between the UK and the rest of the world. You can find out more on his X (formerly Twitter) profile at https://twitter.com/TerraorBust 

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