Canada, U.K. begin trade talks as both seek to lessen dependence on bigger neighbours

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Canada and the United Kingdom launched formal negotiations on a free-trade agreement, and pledged a relatively swift conclusion, as both countries accelerate efforts to reduce their economic dependence on larger neighbours.

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Trade Minister Mary Ng and her British counterpart, Anne-Marie Trevelyan, won’t be starting from scratch. In 2020, their two countries worked out an intermediate arrangement to avoid disruption during Britain’s exit from the European Union — and, in the process, the Canada-EU Comprehensive and Economic Trade Agreement.

“Our government has made it a priority to focus on a progressive trade agenda that is inclusive and sustainable; an agenda that advances high standards for the environment and for labour; and one that helps our businesses thrive into the future by benefitting from digital trade,” Ng said at a press conference on March 24.

Trade diversification is a priority for Canadian Prime Minister Justin Trudeau and his British counterpart, Boris Johnson, who boasts of leading a “global Britain” now that his country is unshackled from the EU. The U.K. is seeking to join Canada in the Japan-led Trans-Pacific Partnership, and recently started negotiations with India.

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Ng is also on a roll. In addition to the U.K., she has commenced formal trade talks with Indonesia and the Association of Southeast Asian Nations, a 10-member economic bloc, in the past year. And earlier this month, she “relaunched” negotiations with India that observers said had lost all momentum.

The slew of recently announced trade talks suggests the Trudeau government is doubling down on its trade diversification strategy. However, it’s not just gummed up supply chains that’s pushing Ng and her team to find alternative trade channels for Canada, said Adam Taylor, who advised former prime minister Stephen Harper on trade policy.

Relations have soured with China, Canada’s second largest trading partner, since the arrests and releases of Huawei Technologies Co. Ltd. executive Meng Wanzhou and Canadians Michael Kovrig and Michael Spavor. At the same time, trade with the U.S. has become uncertain. Renegotiating the North American Free Trade Agreement under Donald Trump put strain on the relationship. President Joe Biden’s administration has done little to alter Trump’s approach to trade, a worry for Canada, as the U.S. is its largest trading partner, with close to 70 per cent of two-way trade crossing the border.

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“There’s a lot of risk there, so trade diversification is something we need to take seriously,” said Taylor, who now works as a trade consultant. “Minister Ng, to be fair, she’s got a bit of wind in her sails now.”

Ng and Trevelyan said they will strive to conclude negotiations within two years. That shouldn’t be too difficult, since talks between two long-time trading partners represents “low-hanging fruit,” said Carlo Dade, director of trade and investment at Canada West Foundation, a think-tank.

“This is kind of expected, so you’re not getting bonus points for doing that’s expected,” said Dade.

There will be sensitivities and irritants, especially surrounding dairy, Dade said. U.K. cheese exporters want more access to the Canadian market, which the federal government and lobbyists voraciously protect. Still, it will be an easy deal for these two trading partners, he said.

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