The UK paused talks to strike a free-trade deal with Canada, with each side accusing the other of obstructing progress.

The two countries have been negotiating for almost two years on replacing an interim deal put in place following Britain’s departure from the European Union (EU). The breakdown in talks effectively leaves the UK at risk of being in a worse position than it was as a member of the bloc when it comes to Canada trade.

A major sticking point was on agriculture. The UK was pushing to extend a temporary arrangement - which expired on Dec 31 - allowing exports of British cheese to Canada under low tariffs, similar to those enjoyed by EU members. Canada, for its part, had hoped to secure UK access for its beef and pork.

But those do not currently meet British regulatory standards, and Prime Minister Rishi Sunak’s administration has come under intense pressure from UK farmers not to allow, in particular, hormone-treated beef into the country.

“We had to take a strong line on this,” Minette Batters, president of the National Farmers’ Union of England and Wales, told the BBC. “It would lead to a two-tier food market in this country. There is no need to compromise on it.”

Explaining the decision to stall talks, a UK government spokesperson said late on Thursday Britain will only negotiate trade deals that “deliver” for its people. 

“We remain open to restoring talks with Canada in the future to build a stronger trading relationship that benefits businesses and consumers on both sides of the Atlantic,” the spokesperson said in a post published by Susannah Goshko, British High Commissioner to Canada, on X, formerly Twitter.

The UK is Canada’s third-largest, single-country trading partner at over C$46 billion a year, according to the Canadian government. The UK ranks Canada as its 18th-largest trading partner.

Still, it’s a setback for the UK, which also wanted Canada to extend country-of-origin rules that allowed it to export products containing parts from the EU. The expiration of the rules at the end of March could drive up the prices of British goods - such as vehicles - in Canada, unless the UK changes its supply chains.

The timelines for these measures were clear to both parties and were intended to ensure that the negotiations were prioritised, a Canadian government official familiar with the matter said. The UK didn’t meet them, the person said.

The UK’s decision to maintain market-access barriers for Canada’s agriculture industry and unwillingness to reach a mutual agreement stalled negotiations, said Shanti Cosentino, a spokesperson for Trade Minister Mary Ng.

She said Ng had been in touch with her UK counterpart, Trade Secretary Kemi Badenoch.

“I’m disappointed that they have paused these negotiations,” Ng told reporters. “I’m very confident that we will be able to get back to the table, and I would encourage my colleagues in the United Kingdom, let’s get back to the table.”

Agriculture Minister Lawrence MacAulay defended Canada’s dairy-import quotas, which have long been a source of tension with trading partners. The country has controlled dairy supplies for decades, limiting domestic production and applying heavy tariffs to imports, in an effort to stabilise incomes for local farmers.

“When it comes down to signing the trade deal, we will sign a trade deal that’s good for Canadian farmers,” MacAulay said. “The supply-management sector is protected in this country, and will be.”

  - Bloomberg