While the rollover transaction agreement is ongoing, it contained two important sunset clauses.
First it was on cheese. Under the terms of the deal, the UK's access to the quota system will expire at the end of 2023.
Currently, British cheese falls under the non-EU supply quota, but it is only a fraction of the size and has already been used up by imports from other countries.
The second sunset clause concerned Canada's rules of origin regime. This technical regulation covers the tax treatment of components manufactured in other countries that are used in finished products manufactured in other countries.
For example, electric cars in France are equipped with batteries made in China.
When this provision expires in April, it will become much more expensive to export British cars to Canada.
Canada and the United Kingdom began negotiations in March 2022 on a deeper trade agreement to address these two issues.
On the surface, both seem surmountable. But British negotiators are struggling to overcome Canada's powerful dairy lobby.
“Canada's dairy lobby is one of the most successful lobbying organizations in the world,” says Michael Martins, partner at Overton Advisory.
“They're so ingrained in Canadian politics that most prime ministers can't help but picture themselves drinking milk and eating cheese while campaigning.”
There are more than 9,000 dairy farms across Canada, and the processing industry is worth more than C$17.4 billion (£10.2 billion) to the economy. Holstein Canada, a nonprofit organization that promotes Holstein cattle, says farms are located across the country, but about 80% are in Quebec and Ontario.
These two provinces send the most members to Canada's House of Commons. “They have huge political significance,” Martins said.
“Quebec is one of Canada's most important provinces, and Prime Minister Trudeau's constituency is also located there.”
In October 2022, Prime Minister Justin Trudeau was photographed affectionately stroking the nose of a calf during a visit to a family farm in Ontario, a photo opportunity to appeal to this important constituency. It seems so.
