Canada and the United Kingdom (“UK”) will be formally commencing the negotiation on a comprehensive bilateral free trade agreement in April, 2022. In the lead up to this negotiation, Canadian businesses are being asked to identify their priorities and concerns. This bulletin discusses the current Canada-UK free trade legal regime regulating trade, procurement and investment and the April negotiations. Canadian businesses now have a unique and important opportunity to identify their priorities and concerns to improve their access to the UK market.
The Interim Canada-UK Trade Agreement
Following the UK’s exit from the European Union on January 31, 2020, Canada and the UK entered into the Canada-United Kingdom Trade Continuity Agreement (the “Canada-UK TCA”). The Canada-UK TCA came into force on April 1, 2021 and preserved the preferential market access of Canadian and UK businesses under the Canada-European Union Comprehensive Economic and Trade Agreement (the “CETA”). One important result of this agreement is the establishment by September 21, 2022 of an individual electronic single point of access for procurement notices covered under the Canada-UK TCA. This system will enable Canadian and UK businesses to retrieve information about all bid opportunities currently covered under the agreement. For information on other aspects of the Canada-UK TCA, see our previous bulletins titled A Work in Progress: Updates regarding the Canada-United Kingdom Trade Continuity Agreement, Saved by the Bell: The Canada-United Kingdom Trade Continuity Agreement and 2021: New Year, New Trade Agreements and New Procurement Thresholds.
In the Canada-UK TCA, Canada and the UK agreed to commence negotiations on a new bilateral free trade agreement by April 1, 2022 and to conclude such negotiations by April 1, 2024. The Government of Canada planned to hold a consultation process before engaging in negotiations in order to identify the areas of focus for Canada in the prospective bilateral negotiations.
Initial Consultation Process
From March 12 to April 27, 2021, Global Affairs Canada ran a public consultation process to solicit the views of stakeholders in order to “identify what is most important to Canadians in the negotiations and determine how Canada should best proceed.” An invitation to provide written submissions was published in the Canadian Gazette, with Global Affairs Canada receiving 118 written submissions, including from business and industry associations, provinces and territories, academics, and Indigenous, labour, and civil society organizations. Areas of interest from stakeholders included goods and services market access, investment, regulatory cooperation, the environment and inclusive trade provisions for small and medium-sized enterprises, gender and Indigenous peoples.
Government procurement was another area of discussion in the consultation. In particular, the aerospace sector identified challenges in accessing the UK and broader European government procurement markets, with opportunities for some products being effectively blocked for Canadian manufacturers. Certain Canadian provinces and territories also indicated that current levels of liberalization for UK procurement were satisfactory and that the exceptions in CETA with respect to government procurement should be maintained.
Further targeted consultations through virtual meetings and roundtable discussions were held with stakeholders in the agricultural, natural resources and clean technology sectors, as well as with certain provinces, territories, Indigenous groups and advisors specialized in trade and gender issues. Global Affairs Canada accepted additional submissions after the formal closure of the consultation period, to be shared with Canadian trade negotiators.
A further targeted consultation has been initiated by the Services Trade Policy Division of Global Affairs Canada, in which it is seeking additional input from Canadian stakeholders on issues related to cross-border trade in services and changes to UK regulatory regimes and measures.
The Canada-UK TCA applies to cross-border trade in services the same obligations previously imposed by the CETA – namely national treatment and most-favoured nation provisions. These obligations ensure that Canadian service suppliers are on equal footing with UK service suppliers and most-favoured third nations when accessing the UK services market. Furthermore, the Canada-UK TCA applies to cross-border services using a negative list, pursuant to which all services are covered unless explicitly stated otherwise. Excluded sectors include most services related to the aerospace industry, to audio-visual services for the European Union, and to cultural industries for Canada.
With respect to cross-border trade in services, the Services Trade Policy Division of Global Affairs Canada includes the provision of services through the internet, a physical presence, temporary travel, and services to customers from the UK who travel to Canada. As such, the consultation invitation solicits input regarding:
- General barriers facing Canadian companies in providing services in the UK. Examples include regulations that discriminate against foreign service suppliers, requirements for specific types of legal entities such as joint ventures, requirements for a commercial presence, and lack of transparency or restrictions in obtaining licenses.
- Barriers related to labour mobility of highly skilled business persons. Examples include limitations on entry due to labour market testing, limitations on the number of foreign workers, lack of transparency on the requirements for work permits, excessive delays in processing times, and high fees for applications.
- Barriers related to operation of e-commerce with UK customers. Examples include limitations on cross-border movement of data or information, localization requirements for servers or computing facilities, unreliable payment systems, customs/border procedures, logistics and infrastructure, concerns related to personal privacy and the security of online transactions.
Global Affairs Canada is seeking input on these issues using questionnaires but also invites participants to provide commentary more generally. With respect to changes to UK regulations that could impact Canadian suppliers, the consultation process does not provide specific examples, however, contacted stakeholders are invited to provide general feedback on such issues.
With formal trade negotiations due to commence in the coming months, companies will want to have a clear understanding of the barriers they currently, or may potentially, face in providing services to customers in the UK. This understanding will help identify possibilities, points of leverage and grounds for deeper commitment in relation to a future Canada-UK bilateral trade agreement.
Fasken will continue to monitor significant developments with respect to a bilateral free trade agreement with the UK and provide updates where necessary.