UK-Canada Agree to Maintain EU Trade Policies
With the ongoing health crises in the United Kingdom and Canada affecting key business sectors, both nations needed to act quickly to preserve their former European Union trade agreement.
Last weekend, Boris Johnson and Justin Trudeau made an “agreement in principle” over a video call regarding trade. This pledge helps each nation avoid steep tariffs that would have went into effect on January 1st, 2021.
Seven years ago, the EU and Canada agreed to the Comprehensive Economic and Trade Agreement. After the UK left the EU, their trade relationship with Canada was left somewhat undefined.
While the current agreement is only a vocal pledge to maintain these terms, the countries plan on working on a new agreement after December 31st, 2020.
Why this matters to small and medium sized businesses
Trade between the UK and Canada is fundamental for both countries, and the uncertainty regarding trade status, tariffs, and other taxes makes it hard for business owners to plan for their future.
Liz Truss, the UK Secretary of State for International Trade, said this agreement has saved thousands of jobs. While there is still some work to be done, the recent agreement sets the foundation for nearly $35 billion worth of trade. Furthermore, not coming to an agreement could have triggered roughly $73 million in tariffs for businesses.
Both countries rely on imports from the other, with the UK exporting everything from vehicles to daily food and drinks. Similarly, the UK is Canada’s third-largest export market. Suffice to say that many businesses rely on imported goods and might not have been aware of this looming threat to their livelihoods.
Retailers, restaurants, manufacturers, and other businesses could have seen a sharp increase in prices for key inventory items had the agreement expired. If your business falls under these categories, you might have needed to reduce staff, increase prices, or close down altogether if importing became too expensive.
We’re not out of the dark yet
The UK still has 14 other European Union agreements to address by January 1, 2020. These remaining deals are with significant trade partners like Mexico and Turkey. If no agreements are preserved, the trade relationship will default to World Trade Organization terms. A shift back to these terms could cause large effects on the economy since the remaining agreements cover around $105 billion of trade with Britain.
Small businesses that rely on imported goods should pay attention carefully to ensure their supply is not affected.