The UK-Canada trade rift: What it means for cheese, beef and cars

Britain and Canada are pointing fingers at each other after disputes over beef and cheese led to the collapse of trade talks.

Negotiations have been going on for nearly two years to scrap a new deal that would replace the one the two countries signed when Britain was still a member of the European Union.

This could mean tougher trading terms for the UK with a partner that accounts for 1.4% of total trade in the 12 months to June 2023.

According to the UK government, trade in goods between the two countries was worth £19.2bn in 2020, with UK imports from Canada worth £7.3bn and UK exports to Canada worth £11.8bn.

The impact of the breakdown in negotiations could be felt by consumers and farmers in both countries. Automobiles, another major sector, will also be affected.

We list the potential impact on all three areas.

British farmers will see the breakdown in negotiations as a major victory. The National Farmers Union (NFU), the group representing British farmers, is pressuring the government to protect its members.

British beef farmers already face competition from beef farmers in New Zealand and Australia, which benefit from a free trade agreement with the UK that removes tariffs.

Minette Batters, president of the England and Wales Nation Farmers Union, said it would have been difficult to pull Canada out of the trade deal, “but it's the right decision.”

The Canadian government had asked Britain to ease its ban on hormone-treated beef, which producers say effectively shuts them out of the British market.

The Canadian Cattlemen's Association said Britain “has shown no signs of being ready to fully embrace Canada's food safety system, which is widely recognized as one of the best in the world.”

This is not the first time beef has become an obstacle in trade relations between the two countries. Canada's agriculture industry had previously complained to the government that under the interim post-Brexit deal with Britain, Canadian meat was at a “significant disadvantage” and effectively locked out of the market.

Last year, a federation of Canadian agricultural organizations protested the UK's accession to the Trans-Pacific Partnership trade agreement Comprehensive and Progressive Agreement, citing concerns about reciprocal access. They demanded that Britain accept Canada's food safety regime or pay compensation for the losses.

According to the Food and Drink Federation (FDF), UK cheese exports to Canada were worth £18.7 million (2.4% of total cheese exports) in 2022.

That means Canada imports just over 2 million kilograms of cheese from the United Kingdom (the fifth largest supplier), according to international trade data.

British company Combe Castle International is the UK's largest cheese exporter to Canada, with around a third of exported cheese going to the country.

Ben Hutchins, the company's head of sales and marketing, told the BBC the company was “pretty devastated” by the suspension of negotiations, adding that the company had been exporting to Canada since 1980. .

He said the cancellation of negotiations “doesn't look rosy” for cheese exports.

Hutchins said a third of the business is still tied up in Canada after 40 years, and finding new markets quickly won't be easy.

Industry group Dairy UK said the cancellation of negotiations was “disappointing, but there was little indication that Canada was genuinely interested in improving access to the Canadian cheese market.”

Since the start of the year, British cheese exporters have been hit with a 245% tariff on British cheese bound for Canada, impacting prices.

A spokesperson for Dairy UK said: “This has put UK dairy exporters at a disadvantage and disrupted trade.”

“However, exports to Canada are a relatively small part of UK production, and while some UK dairy companies will face significant commercial challenges, we believe they are not insurmountable. We understand,” the group added.

Meanwhile, Canadian cheese exports, including cheddar cheese, are primarily to other countries. The UK is not in the top 10 markets.

The Canadian Cheese Council, which represents small and medium-sized cheese importers and their suppliers, said its members have spent decades building relationships with British cheesemakers.

The December expiry of a time-limited deal that allows Britain to continue selling cheese without high tariffs has already caused “significant” disruption to the industry, with “cheese importers and small cheese shops across Canada It will be paralyzing,” the newspaper said.

Coupled with the suspension of trade negotiations, the efforts that have been put into building bilateral relations are “in jeopardy”, Council President Joe Dal Ferro told the BBC.

“We feel abandoned by both governments,” he said.

According to the Department of Commerce and Industry, the UK's biggest export to Canada is cars.

In the 12 months to the end of the second quarter of 2023, exports amounted to £745.8m.

A time-limited deal allowed Britain to continue selling cars without high import duties, but this has been called into question.

Mike Hawes, from industry group the Society of Motor Manufacturers and Traders (SMMT), said British exports to Canada are much smaller than exports to the EU, but Canada remains an “important market”.

“The cancellation of trade negotiations is particularly disappointing given the close relationship between our two countries and sends a signal that Britain's world-class automotive products are not welcome in Canada,” he said.

He said the reintroduction of tariffs on British cars “is not in anyone's interest, especially not Canadian consumers,” adding, “We urge all parties to return to the negotiating table. I ask,” he added.

The BBC understands there are no significant imports of Canadian-built cars into the UK.

The Canadian auto industry's reaction to the news was muted.