Canada, U.K. strike transitional post-Brexit trade deal

Canada, U.K. strike transitional post-Brexit trade deal

Canada and the United Kingdom have reached an interim post-Brexit trade agreement, Prime Minister Justin Trudeau and British Prime Minister Boris Johnson announced Saturday.

"Now we get to continue to work on a bespoke agreement, a comprehensive agreement, over the coming years that will really maximize our trade opportunities and boost things for everyone," Trudeau said. 

"Free trade is an important part of the way that we're going to bounce back from COVID, but I also think that Canada and the U.K. share a perspective about building back greener," said Johnson, who also took a moment to congratulate Trudeau for taking steps to get Canada to net-zero carbon emissions by 2050.

The Canada-United Kingdom Trade Continuity Agreement extends the elimination of tariffs on 98 per cent of goods exported between the two countries and sets the stage for negotiations toward a permanent and more ambitious deal in the new year. The deal could include "the potential to go further in areas like digital trade, the environment and women's economic empowerment," a release from the British government said.

The announcement came as world leaders virtually convened for the G20 summit. 

Brexit complicated negotiating new agreement

Following the U.K.'s exit from the European Union last winter, the two countries agreed to let the Comprehensive Economic and Trade Agreement (CETA) — the bilateral trade deal in effect between Canada and the EU since 2017 — continue to apply to Canada–U.K. trade until the end of 2020.

Negotiating a new comprehensive bilateral trade agreement between the two that could be fully ratified and in place before Jan. 1 was difficult because the British did not have jurisdiction over their own trade affairs until their exit from the EU was complete.

Instead, the two sides agreed to "roll over" the CETA in a short-term transitional agreement, replicating most of the existing language and renegotiating only what was required to make it fit U.K.-only trade.

Trudeau talks with Johnson as they take part in a working session with G7 leaders in Biarritz, France, on Aug. 25, 2019. (Sean Kilpatrick/The Canadian Press)

"We knew that having an interim agreement would be crucial to ensure that businesses, exporters, our workers on both sides of the Atlantic have the continuity and the predictability that they need," International Trade Minister Mary Ng said Saturday.

Now that negotiations have concluded, the deal must be approved by both governments. In Canada's case, legislation to change regulations and laws (including its custom tariff) to comply with the new agreement must be approved by Parliament before the deal can take effect.

The timeline for passing such a bill is now very tight, but both countries have said they don't want to disadvantage or disrupt businesses who've benefited from CETA and depend on this two-way trade.

There's no end date or sunset clause for the transitional agreement, but both sides intend to begin negotiations toward a permanent agreement to replace it sometime next year.