There was much media reporting in December on the final stages of the UK-EU trade negotiations. It is a complex issue at the best of times but particularly when people are pre-occupied with celebrating Christmas! I thus thought it might be useful to write and explain what happened and what it means for UK-Canada trade.
It was announced on 24 December that the UK and EU reached an agreement on our future trading relationship just ahead of the end of transition period on 31st December 2020. This was the result of significant and concerted efforts on both sides to establish a foundation for the new relationship between the UK and the EU, based on free trade and close cooperation between sovereign entities. Enacting provisions for the UK EU agreement were passed into UK law at a specially convened Parliamentary session on 30 December 2020.
While the UK’s trading relationship with the EU changed from 1st January 2021, the EU will continue to be an important trading partner for the UK. Canadian companies in the UK with cross-border operations in the EU will benefit from tariff free access to the European customs union. The UK-EU deal provides for zero tariffs and zero quotas, and it provides for streamlined customs arrangements, including recognising our respective trusted trader schemes, to support the smooth flow of goods at the border and reduces administrative costs for traders.
The agreement ensures that service suppliers and investors based in the UK will continue to be able to access the EU’s markets and will not be subject to discriminatory barriers to trade. The agreement will support professional mobility by ensuring UK service suppliers travelling to the EU for short term trips do not face undue barriers, such as work permits. UK-based businesses will also benefit from commitments on visa facilitation for professionals engaged in cross-border trade with the EU.
Alongside of the trade agreement we have agreed a Joint Declaration on regulatory cooperation in the area of financial services. This sets out the Parties commitment to structured regulatory cooperation on financial services, with the aim of establishing a durable and stable relationship including a Memorandum of Understanding on regulatory cooperation by March 2021.
In parallel to our efforts to negotiate a trade agreement with the EU, we worked closely with the Canadian Government to provide continuity for UK-Canada business by rolling over the current EU-Canada CETA trade arrangement into a bilateral agreement from 1 January 2021. Whilst agreement in principle to such a UK-Canada deal was reached on 21 November 2020, unfortunately Parliamentary approval was not achieved before the end of the 2020 session. Thus a Memorandum of Understanding (MOU) has been signed enabling temporary measures for UK-Canada trade from 1 Jan 2021 until the new Trade Continuity Agreement (TCA) comes into force or is provisionally applied in 2021. The TCA also provides the foundation for us to negotiate a more advanced, tailor-made bilateral UK-Canada FTA which can go further than the EU-Canada deal.
The UK Government has the ambitious goal of securing trade agreements with countries that cover 80 per cent of UK trade within three years. Agreement of a trade deal with Canada also takes the UK one step closer to accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) covering 11 Pacific markets, which is a key part of the UK’s expanded trade negotiations programme. In under two years, the UK government has agreed trade agreements with 61 countries. Total UK trade with these countries was worth £199 billion in 2019 and, besides Canada, includes other key trading partners such as South Korea, Japan, and South Africa. We have also completed five rounds of negotiation with the United States with talks over a UK-US Free Trade Agreement.
We believe that the fundamentals that underpin the UK business environment will go from strength to strength in 2021. The UK is already well-known for our talented and diverse workforce, backed by some of the world’s best universities, our commitment to the rule of law, backed by a predictable legal system, and our competitive tax environment, backed by low, stable and predictable corporation tax rates. We are committed to building back better with a clear strategy to invest in making the UK a global leader in green technologies – an important step towards reaching the UK’s net zero by 2050. This will be made possible by the Government’s ten point plan for a green industrial revolution, announced by the Prime Minister on 18th November 2020.
The UK Government will continue to work closely with businesses to provide information that will help them manage the new trading arrangements. There is a UK government transition hub for businesses providing the latest updates.
I should also add an update on travel to the UK. COVID-19 rates in the UK are extremely challenging at the moment driven by the more contagious variant, which unfortunately is present in quite a few other countries along with other new variants. The UK has an accelerated vaccine programme aiming to inoculate the most vulnerable population groups by March. Pre-flight COVID testing (carried out within 3 days of travel) is already required for travel into Canada and will be introduced for travel into the UK with effect from Friday 15 January. Further information can be found on the UK COVID travel advice website.