As Britain prepares to end its transition out of the European Union on Dec 31, it has negotiated multiple rollover bilateral deals to maintain trade, with many simply replacing the terms the bloc had already agreed.
The stopgap agreement allows trade between the two countries to continue under the same terms as Canada's existing treaty with the European Union while negotiators begin work on a new bilateral deal between the United Kingdom and Canada, Prime Minister Boris Johnson said in a statement.
Labour urged the government to secure continuity arrangements with other key trading partners before the end of the year.
The PM and Canadian PM Justin Trudeau made the "agreement in principle" in a video call, the Department for International Trade said.
The agreement could provide a major boost to U.K. Prime Minister Boris Johnson in his efforts to plot a new course for Britain as a global trading nation outside the EU.
Johnson said that work would begin from early next year to negotiate "a new, bespoke trade deal with Canada that will go even further in meeting the needs of our economy". Before it is formally signed, the UK-Canada Trade Continuity Agreement will be subject to final legal checks. The U.K.is Canada's third-largest export market after the USA and China.
Britain ships goods ranging from electric cars to sparkling wine to Canada, and imports products such as salmon and maple syrup from the Commonwealth country that also recognizes Queen Elizabeth II as head of state.
In less than two years it has agreed trade deals with 53 countries, accounting for 164 billion pounds of British bilateral trade.
The deal with Canada locks in existing trading rules that cover 20 billion pounds ($27 billion) of trade between the two countries, or about 1.5% of the U.K.'s total trade in goods and services a year ago.
An EU-UK trade and security agreement is close to being finalised but the risk remains of an accidental no-deal Brexit in six weeks, with gaps on the contentious issues "slowly shrinking", EU ambassadors have been told. That's because it's in an 11-month transition - created to give both sides some time to negotiate a new trade deal.