(Reuters) - Britain and Canada's post-Brexit trade relationship may encounter further hurdles as transitional tariff arrangements are set to expire at the end of March. This development highlights ongoing tensions between the two nations.
In January, Britain and Canada suspended negotiations on a comprehensive free trade agreement due to disagreements over Rules of Origin (ROO) and dissatisfaction with agricultural market access. Rules of Origin (ROO) are regulations used to determine the economic nationality of a product, which in turn dictates eligibility for preferential tariff rates. These rules, which were initially designed to bridge the gap during negotiations, are at the heart of the current trade tension.
On Wednesday, Britain confirmed that Canada has opted not to extend the existing Rules of Origin. This decision could result in UK auto manufacturers facing a 6.1% tariff when exporting to Canada if they don't comply with the revised ROO requirements.
"Canada's move not to continue these Rules of Origin will lead to higher trade costs, potentially harming industries on both sides," a spokesperson for the UK Department for Business and Trade stated. "The UK government is open to finding a mutually beneficial solution with Canada, but we will not compromise on the existing terms."
The value of British auto exports to Canada in 2023 was nearly 700 million pounds ($883.68 million).
Late last year, Britain managed to extend similar ROO arrangements with South Korea and Mexico.
While the UK and Canada share a history of close ties through the Commonwealth and G7 membership, the establishment of new trade agreements has exposed their differing interests. Disputes over Canadian hormone-treated beef and cheese quotas have further complicated the negotiations.
A UK government source revealed that efforts to reach a ROO agreement with Canada have been ongoing for months, but Canada has shown an unwillingness to extend the transitional terms.
