Friday, 8 June 2018

What Sort of Trade Deal (if any) could the UK negotiate with the USA?

The Prime Minister with President Trump at the White House
Author Shealah Craighead
Licence Copyright waived by the US government
Source Wikipedia

Jane Lambert

The argument for quitting the single market and customs union is that it will enable the British government to negotiate trade deals with countries outside the EU. On the face of it it is an attractive proposition as the economies of many of the countries in Asia and the Americas are growing more rapidly than those of our European neighbours.

Despite the rapid growth of China and India the largest of those countries remains the USA. With a GDP of US$19.4 trillion its economy is even larger than that of the EU and is currently growing more rapidly. It shares our language, common law and political traditions. We have been close allies since 1941 despite upsets like Suez and Grenada. It ought to be easy to negotiate a trade deal with the USA. Especially as the current incumbent of the White House has declared himself in favour of one.

At least that is what one might think but how far (if at all) is it a realistic expectation?   Not very, according to On the Rebound:Prospects for a US-UK Free Trade Agreement, a report by Ed Balls and Peter Sands of the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School.  Together with a team of research students from Harvard and King's College, London the authors interviewed senior British and American civil servants, experts, academics and business leaders and made the following findings:

  1. "The UK needs a deal, but it is unclear how committed the US is",
  2. "There is a clear power imbalance between the US and UK." Such imbalance lies not just in the relative economic disparity of the two countries but in the lack of experience of British officials in conducting trade negotiations.
  3. "The UK must strike a deal with the EU before it can negotiate an FTA with the US."
  4. The UK will have little to gain and will have to concede more on tariff reductions than the EU offered in the Transatlantic Trade and Investment Partnership negotiations."
  5. "The US demands on non-tariff and regulatory issues will be politically contentious and difficult for the UK to meet."
  6. "Negotiating non-tariff and regulatory issues will force the UK to choose between regulatory alignment with the US or EU."
  7.  "The US cannot, or will not, concede on many British non-tariff and regulatory objectives."
The researchers concluded that "a US-UK FTA is only going to happen if the UK makes concessions that are unlikely to be politically acceptable and in any case, promises relatively limited upside for UK business."

If Ed Balls and Peter Sands are right, there is no reason to suppose that negotiating a trade deal with the USA will be any easier than the negotiations over the withdrawal agreement and future partnership with the remaining EU countries.  Even if terms can be agreed they are unlikely to be as favourable as those we enjoy with other EU states.  Distance and freight costs will prevent manufacturers in the UK taking full advantage of the economies of scale that we enjoy right now. In other words even if an FTA with thre USA can be agreed it may not be worth the effort and concessions.

Should anyone wish to discuss this article or Brexit generally, call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form.  

No comments:

Post a Comment

The Withdrawal Agreement: An Exchange of Letters

Jane Lambert By a letter dated 14 Jan 2019 , the Prime Minister asked the Presidents of the European Council and the Commis...