Orbit Brokers

Brexit and Canadian Trade

Brexit refers to the withdrawal of the United Kingdom from the European Union (EU). It is a play on words, combining Britain and Exit. This means that after leaving the trading bloc, the United Kingdom will no longer benefit from membership in the EU. Once that happens, duty rates on British goods imported to Canada will increase.

Why are they leaving?

On June 23rd of 2016, the United Kingdom held a referendum known as the United Kingdom European Membership Referendum. 51.9% of voters chose to leave the EU. The results weren’t legally binding, however the government in power at the time had promised to pursue the outcome, regardless of the results. This was the first time in history that a referendum had gone against the preference of the reigning government. As such, the government triggered the withdrawal process in March of 2017 and entered into a negotiation period that lasted 2 years. No agreement was reached on an exit deal, and extensions was given until October 31, 2019. That deadline has now passed and again an extension has been granted, this time until January 31, 2020.

What happens when they leave?

If and when a deal is reached and the UK leaves the EU, this means they will no longer be a party of CETA. As a result, goods manufactured in the UK and coming to Canada from the UK will no longer benefit from the trade agreement. CETA allows 98% of European goods to be imported without tariffs. As Canadian Customs Brokers, it is important for us to monitor trade agreements as they help determine the rates of duty paid on imported shipments. Should Britain leave CETA, duties and taxes on most British goods will increase. Canadian importers will no longer be allowed to claim the EU tariff. British goods will go back to being classified under the Most Favoured Nation rate of duty, which applies to all countries that do not have a trade agreement in place. This will inevitably raise the prices Canadian consumers will pay for British goods.

What could happen next?

If Brexit occurs, Canadian authorities have pledged to negotiate a new trade deal with the UK. This would be a smaller deal than CETA, however after the US and China, the UK is Canada’s largest trade partner. A trade deal is vital, however these deals tend to take years to negotiate, so there is nothing imminent. There is the potential framework already in place from the existing CETA agreement, but the details would have to be negotiated and agreed upon before any deal can be reached. Until the UK officially leaves the EU, imports from Britain still fall under the scope of CETA and can be imported at a reduced rate of duty. Negotiations are ongoing and hopes are a deal will be reached soon. If you have any questions in regards to Brexit, or imports in general, please feel free to Contact Us. For a free quote, please click here.

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