Britain announced on Wednesday that post-Brexit the trade deal with Canada that let its car manufacturers avoid steep tariffs there is expected to run out next week, representing the latest decline in trade relations between the two long-standing allies.
In January, Britain and Canada halted discussions on a new free trade agreement due to a disagreement on Rules of Origin (ROO) arrangements, which are due to expire at the end of March. There were also mutual concerns about limited access to each other's agricultural markets.
Britain stated on Wednesday that Canada chose not to extend the Rules of Origin arrangements that were put in place after it departed from the European Union. These terms were serving as a temporary solution while the two sides aimed to reach a comprehensive trade agreement.
According to the terms, both parties agreed that British goods using inputs from the EU or processed in the bloc should be considered as made in the UK and therefore be eligible for lower tariffs in Canada. If the agreement ends, carmakers that do not meet the new ROO requirements could face a 6.1% tariff in Canada.
A spokesperson for Britain’s Department for Business and Trade expressed, “Canada’s decision not to continue these Rules of Origin will raise trade costs and negatively impact businesses in both countries.”
The UK government is willing to collaborate with Canada to find a solution that benefits both countries, but it is not willing to regress on the current terms.
Canada’s trade ministry did not immediately respond to a request for comment.
The value of British car exports to Canada reached nearly 700 million pounds ($883.68 million) in 2023.
At the end of 2023, Britain extended similar ROO arrangements with South Korea and Mexico.
Britain and Canada, both part of the Commonwealth and the G7, have strong historical ties, but the negotiation of new trading terms has highlighted their conflicting interests.
British concerns about Canadian hormone-treated beef and disputes over cheese quotas affected discussions on a new free trade agreement.
A source from the UK government mentioned that they had been attempting to reach an agreement with Canada on ROO for several months, but Ottawa had shown no willingness to agree to an extension.
