UK car exports to Canada could be threatened by fraught negotiations between Canada and the UK on a bilateral Free Trade Agreement (FTA) to replace a so-called temporary EU ‘rollover’ arrangement that will expire on April 1.

Negotiations between representatives of the two governments are reported to have broken down over disagreements related to agricultural products, but a lack of agreement would threaten the imposition of tariffs on a range of traded exports – including motor vehicles. While exports of vehicles from Canada to the UK are small, vehicles are by far the biggest industrial sector by value in the UK’s exports to Canada.   

Reports also highlight a clause in the UK-Canada trade continuity deal related to Rules of Origin, which is set to expire on April 1. After that date, Reuters reported, EU parts for goods manufactured in Britain such as cars will no longer count as ‘domestic’ for the purposes of trade with Canada, potentially resulting in additional export duties or tariffs unless the clause is extended.

Figures from the SMMT suggest that around 1.3% of the UK’s car exports – around 9,300 cars – were shipped to Canada in 2023. According to GlobalData, Tata-owned Jaguar Land Rover (JLR) sales in Canada in 2023 are estimated at around 8,300 units.

Mike Hawes, SMMT Chief Executive, said: “Canada is an important market for UK car exports and, given the close ties between our two countries, the suspension of trade talks is especially disappointing and sends a signal that the UK’s world-class automotive products are not welcome in Canada.

“If UK car exports can’t use EU parts and components to avoid additional duties it creates a risk that tariffs, potentially charged on top of luxury goods taxes, could be reintroduced. This would benefit no one, not least Canadian consumers, and we urge all parties to get back around the negotiating table.”

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By GlobalData