Talks over the FTA have been taking place between the UK and Canada for 18 months. On the surface, there’s a lot in common between UK and Canadian cultures. However, in practice, Canada is well-known for its seasoned and hard-nosed approach to trade discussions. It’s also smarting from what it claims was a poor deal from the recent conclusion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
One of the toughest issues is proving to be the tariff rate quotas for UK cheese exports. After the Brexit transition period ended, Canada agreed to extend the allocated export volumes the UK had enjoyed when it was part of the EU to the end of this year. Producers hoped the two countries could reach a favourable permanent outcome before that point. However, here we are at the start of November with no solution in sight.
Delaying the Canada cheese letters
Key exporters, specialist Canadian retailers, the Provision Trade Federation (PTF), and Dairy UK have called for a two-year extension to the ‘cheese letters’ which are set to expire at the end of this year. This side letter would ensure that UK cheese producers can continue to export, thus maintaining continuity of orders into 2025, pending a permanent agreement.
PTF has written to UK secretary of state for international trade Kemi Badenoch, as well as her counterpart in Canada, pressing that case. However, Canada’s chief negotiator has rejected that option in writing to his UK counterpart.
As it stands, trade with UK cheese producers will default to the non-EU reserve of Canada’s quotas from 1st January next year. That means they will shift to being small fish in a vast ocean of competing exporters, many of whom will be closer to the destination market and can offer cheaper consignments.
UK cheese exports take a hit
UK cheese exporters to Canada are already taking a hit on post-Christmas orders, because they won’t be able to guarantee the amounts they previously could. Losses will mount as the days go by and volumes will fall off a cliff come the new year. Some suppliers have built up sizeable exports over many years, so for them millions of pounds in sales are under threat. These are well-respected branded producers.
The orders can’t simply be diverted to other markets. It takes years of hard graft to build up the retail base for such products. Canada’s specialist retailers will lose out too, as their customers have built up a real taste for high quality UK speciality cheeses and, again, they can’t easily source alternative supplies from other countries. That’s why Canada’s International Cheese Council of Canada has thrown its weight behind UK producers on this issue.
This is not just about losing existing sales either. According to AHDB, UK cheese exports grew strongly in 2022 – by 15% year-on-year in volume to almost 180m tonnes, and by 39% in value to £785m. A bad outcome from the Canada FTA would stifle the industry’s future potential too.
Ordinarily one obvious route to take would be to offer concessions to sweeten a deal. However, UK dairy has little wiggle room, with UK red meat producers understandably demanding a strong outcome from the FTA after feeling short-changed by the UK’s FTAs with Australia and New Zealand.
The PTF and industry continue to press Government for the best outcome for UK cheese exporters. We believe a solution can still be found by negotiators, even though the prognosis right now doesn’t look good.