Negotiations on a post-Brexit trade deal with Canada have stalled dramatically — all because of a row over cheese.
The government on Thursday called off trade talks with Canada, and Downing Street said the government «will only negotiate deals that benefit the British people.»
Key obstacles understandable. it exports British cheese and imports Canadian beef into the UK.
Justin Trudeau has vowed to protect Canada's dairy industry, which has an extremely powerful political lobby, and British officials have been reluctant to relax rules on hormone-treated beef.
“It was intended. It had to be done quite quickly because it was just an update to an existing deal,” says William Bain, head of trade policy at the British Chambers of Commerce.
“But in the end it took two years to achieve nothing.”
As a result of the breakdown of negotiations, British industry faced a huge hike in tariffs on exports to Canada. And this is a blow to the country's cheesemakers, who will now have to pay a tariff of 245.5% of the value of the product.
“We have been trading for 44 years, and Canada was one of the first markets that we traded,” says Helen Dallimore, international sales manager at cheese exporter Coombe Castle.
“This is a Commonwealth country, there are huge numbers of emigrants, and British cheese is in huge demand.”
The Wiltshire-based company ships about a third of its products to Canada, including its signature maple cheddar. But Dallimore says: «We won't be able to pay the 245 per cent entry fee.»
The UK exports about 2 million kilograms of cheese to Canada each year, the equivalent of 4 million 500-gram blocks of cheddar.
< p> After the UK left the European Union (EU), an extension agreement was signed with Canada, allowing most trade to continue as normal.
Until December, cheese exports were subject to Canada's import quota from the EU, which was generous enough to cover the entire year's trade without any tariffs.
The extended trade agreement continues, but it includes two important termination clauses.
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The first was on cheese. Under the terms of the agreement, UK access to the quota system expired at the end of 2023.
British cheese is now subject to a quota for sources outside the EU, a fraction of the size already used in imports from other countries.
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The second sunset clause concerned Canada's rules of origin system. The technical rules cover the tax treatment of components produced in other countries that are used in finished products produced in other countries.
For example, a Chinese-made battery is installed in a French electric car.
When this clause expires in April, it will become much more expensive to export British cars to Canada.
Canada and the UK began negotiations on a deeper trade agreement to address these two issues in March 2022.
At first glance, both problems seem surmountable. However, British negotiators struggled to overcome Canada's powerful dairy lobby.
“The Canadian Dairy Lobby is one of the most successful lobbying organizations in the world,” says Michael Martins, partner at Overton Advisory.
“They are so deeply ingrained in Canadian politics that most prime ministers have to imagine themselves drinking a glass of milk or eating a piece of cheese while on the campaign trail.”
There are more than 9,000 dairy farms in Canada, and the processing industry contributes more than C$17.4 billion (£10.2 billion) to the economy. Although there are farms throughout the country, about 80% of them are in Quebec and Ontario, according to Holstein Canada, a non-profit organization that promotes the Holstein cattle breed.
These two provinces send the largest number of MPs to Canada . House of Commons. “They have a lot of political clout,” Martins says.
«Quebec is one of Canada's most important provinces and is where Trudeau's constituency is located.»
In October 2022, Trudeau was photographed affectionately stroking the nose of a calf while visiting a family farm in Ontario, apparently , has become a photo opportunity, attracting this key audience.
Canada's dairy lobby is so politically influential that the country's leaders often champion its interests
D' Arcee McFadden, senior vice-president of McMillan Vantage, a Canadian public relations company, says: “This is much more than just a quarrel with the UK. We are talking about milk and dairy products. We have a small number of dairy farmers in Canada and they are protected by the government. Frankly, all political parties.
“Their defense is expensive, and therefore they have a disproportionately large voice.”
In October, the Canadian government agreed to pay dairy farmers C$330 million over 10 years in compensation for lost business after Trudeau agreed to concessions that allowed Canada to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Canada-West Agreement. USA and Mexico (CUSMA).
Many Canadian farmers are still concerned about the consequences of these deals. The group Dairy Farmers of Canada called on the Ottawa government to be «vigilant» last year after the UK joined the CPTPP.
Mr Trudeau is preparing for a general election in 2025 and already faces an uphill battle . He has been criticized for the cost of living crisis and housing problems in Canada.
Martins says: “He has to be more careful when it comes to some of the international negotiations just because of how dangerous the domestic situation is. «.
Now the UK has to pick up the pieces. As well as problems for cheese producers, a blow is looming for British car makers. Trade body Make UK said the failure of trade talks was «deeply concerning».
The failure of the talks means the UK will also miss opportunities to secure better terms for digital trade, which accounts for four-fifths of UK services exports to Canada
There was also scope to improve customs processes, which could increase foreign direct investment between the two countries.
John Kampfner, former chief executive of Chatham's UK in the World Initiative House says: “Friendship has no meaning in this regard.”
“Canada negotiated very hard in its own interests, and Britain always found it difficult to achieve anything. approaching what the EU received from Canada. It's not a British thing, it's a matter of power relations.”
Back in Wiltshire, Coombe Castle is exploring alternatives. But Dallimore says: «It's very sad to see us cut off.»
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