Brexit Briefing March 2021

James Gilray The Plumb-pudding in danger; - or - State Epicures taking un Petit Souper

 

Jane Lambert

The rational argument over Brexit is summarized in this Gilray cartoon from 2 centuries ago. Is it better to be part of a large bloc with enormous bargaining power that has to take account of the interests of all its members some of which are irreconcilable or a medium-size entity with much less bargaining power but more agile in that it has only to take care of its own interests?

Up to now the disadvantages of leaving the EU have been more apparent than the advantages.  Inshore fishermen from certain waters have been unable to export their catch. Exporters of processed foods have been required to pay for health checks even on small consignments.  Hauliers from Ireland have found it more convenient to take a long sea crossing to the Continent than drive overland from Hollyhead to Dover.  British exports to the EU are said to have tailed off dramatically.  That is because The Trade and Cooperation Agreement has prevented tariffs but not non-tariff barriers that apply to all non-member states.

Now that might be a cost worth paying if the United Kingdom were to make up for more than it has lost in the fast-growing, emerging markets of Asia, Latin America and Africa.  That is, after all, the reason for the UK's application to join the Comprehensive and Progressive Trans-Pacific Partnership (see Brexit Briefing for January 2021 6 Feb 2021).  Now it has to be remembered that not all countries in the CPTPP are tiger economies.  Australia, Japan and New Zealand, for example. are mature services based economies not all that different from the member states of the European Union except in so far as they are much further away.

Far from negotiating a bilateral trade agreement with the UK in which former president Donald Trump expressed an interest, the government of the world's largest economy is contemplating the imposition of tariffs on a range of British experts unless the UK resolves its differences with the USA over digital services taxation.  Relations with the world's second-largest economy could hardly be frostier as a result of Brtish representations over the treatment of Uighurs in  Xinjiang and opposition activists in Hong Kong.

There has been one success that suggests that an agile national government can achieve more than a supranational bloc. That has been the procurement and deployment of COVID 19 vaccines.  The speed and efficiency with which the UK has vaccinated over 50% of its population with a first dose and a very large number with a second despite has made the Commission and EU member states appear flat-footed.  The government's performance has been trumpeted as a success of Brexit especially as some controls in the UK are easing just as many continental countries are re-entering lockdown.

Of course, procurement of supplies of vaccine over a very short period is not the same as negotiating trade agreements that are expected to stay in place for decades but it is an example of how agility and good organization can sometimes achieve better results than massive bargaining power.

Anyone wishing to discuss this article or any matter arising from it may call me on +44 (0)20 7404 5252 or send me a message through my contact page.

The United Kingdom Internal Market Bill

 

Author Henry Holbein

Jane Lambert

The publication of the UK Internal Market white paper on 16 July 2020 and the subsequent consultation that ended on 9 Sept 2020 must be one of the least publicized announcements of government policy ever.  Although I have received a lot of emails from the government about brexit ranging from customs arrangements to information for British citizens who wish to continue to live in different EU member states I can't trace any notification about this one.   I can find nothing about the white paper in the press in the days following its publication.  The white paper's publication seems to have escaped other bloggers' attention including Professor Grey whose Brexit Blog rarely misses a truck.

According to the explanatory notes on the United Kingdom Internal Market Bill, the purpose of the legislation is to implement the proposals set out in the white paper.  Those proposals are said to be driven by "three overarching policy objectives:

a. to continue to secure economic opportunities across the United Kingdom; 

b. to continue to increase competitiveness and enable citizens across the UK to be in an environment that is the best place in the world to do business; and 

c. to continue to provide for the general welfare, prosperity, and economic security of all UK citizens."

The bill has already received considerable attention because of the language of clause 45 (1) that certain provisions will have effect "notwithstanding any relevant international or domestic law with which they may be incompatible or inconsistent ."   As the Northern Ireland Secretary admitted, that provision will breach a treaty, namely the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community which Her Majesty's government signed and Parliament ratified just a few months ago.  That clause has led to resignations from the government and the senior civil service, threats of legal action from the Commission and warnings from the Speaker of the House of Representatives and other senior US politicians of both parties.

The title of the bill is curious because the United Kingdom is and always has been a unitary state albeit with devolved administrations in Belfast, Cardiff and Edinburgh.   It is important to stress than devolution is not the same as federalism which is the pooling of sovereignty by sovereign states.    Devolution is the delegation of central government functions which theoretically (and in the case of Northern Ireland) has actually been recalled.   The expression "internal market" was originally interchangeable with the term "single market" which was the process by which the EU member states entrusted the regulation of the EU economy to the Commission.   It is as odd for a nation state to describe its domestic economy as an "internal market" as it was for Thomas Cronwell to declare the southern part of an offshore island as "an empire" in The Ecclesiastical Appeals Act 1532.  Perhaps rather more absurd for the policy of 1532 statute was to assert that the King of England was equal to the Pope and Holy Roman Emperor.  Possibly equivalent to British negotiators' insistence in the new partnership talks that the 66 million inhabitants of the UK and the 450 million inhabitants of the remaining EU member states are sovereign equals. 

The bill consists of 54 clauses divided into 7 parts and 2 schedules.   Part 1 (clauses 1 to 14) and Schedule 1 is concerned with "UK Market Access Goods", Part 2 (clauses 15 to 21) with "UK Market Services", Part 3 (clauses 22 to 28) and Schedule 2 with Professional Qualifications and Regulation, Part 4 (clauses 29 to 39) with Independent Advice and Monitoring of the UK Internal Market, Part 5 (clauses 40 to 45) with Northern Ireland, Part 6 (clauses 46 to 47) with Financial Assistance and Part 7 (clauses 48 to 54) with Final Provisions.   My first impression on reading through this bill was that there was nothing in it that did not already fall within the scope of existing legislation except perhaps Part 5 in so far as this bill purports to resile from the UK's treaty obligations.  As I am about to lose my right to represent clients in the Court of Justice of the European Union, the Boards of Appeal of the EU Intellectual Property Office and the Unified Patent Court as well as my rights under the Legal Services Directive, I wondered whether Part 3 would entitle me to practise in Edinburgh or Belfasr but it is clear from Schedule 2 that it would not.

Anyone wishing to discuss this article or the bill in general may call me on 020 7404 5252 or send me a message through my contact form.

British Intellectual Asset Owners' Rights after Brexit: IP Provisions of Bilateral Investment Treaties and Free Trade Agreements

Rt Hon Elizabeth Truss MP

Author  Chris McAndrew - Licence CC BY 3.0

Jane Lambert

Tomorrow I shall deliver a talk entitled  Bilateral Investment Treaties & Exporters' Rights Post-Brexit to the IP Law Summer School. I first gave that talk on 17 Aug 2017 a few months after Mrs Theresa May had served notice under art 50 (2) of the Treaty on European Union of the UK's intention to leave the EU and negotiations on the terms of its withdrawal were at a very early stage, I delivered an updated version of that talk on 15 August 2019 after the government had lost its majority.   At that time, there was uncertainty as to whether the UK would leave the EU with or without a withdrawal agreement or even whether the UK would leave the EU at all. 

It has become necessary for me to update my talk again because there has now been a general election at which the government secured a sufficient majority in the House of Commons to withdraw from the EU on the terms of the Agreement on the withdrawal of the United Kingdom of Great Britain and Nothern Ireland from the EuropeanUnion and the European AtomicEnergy Community ("the withdrawal agreement").  In accordance with art 50 of the Treaty, the government has also agreed to a Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom  ("the political declaration").   This country left the EU at 23:00 on 31 Jan 2020 and is now in a period of transition that is due to last until 31 Dec 2020 during which EU law continues to apply to the UK. The purpose of the transition period is to enable officials from the UK and EU to negotiate terms for a new relationship after the expiry of that period. In addition to its negotiations with the EU, the government is in negotiations with the governments of a number of other countries, notably Australia, Japan, New Zealand and the USA, for new free trade agreements.   It has also announced its intention to apply to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (see the Department for International Trade's update of 17 June 2020).

British businesses have benefited from this country's membership of the European Union in the following respects.  First, the substantive laws on copyrights, databases, designs, rights in performances, trade marks, trade secrets and supplementary protection certificates have been harmonized thereby facilitating their legal protection.  Secondly, it has become possible to protect brands, designs and plant varieties across the EU with EU trade marks and Community designs and plant varieties. Thirdly, the rights of EU intellectual asset holders including those from the UK have been extebded beyond Europe in the free trade and other agreements that the EU has made with third countries.  These benefits will come to an end on 31 Dev 2020   The purpose of tomorrow's talk is to consider the new environment for British business so far as it relates to intellectual property.

Some of the present arrangements will not change.   The UK will continue to be bound by the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS") as it will remain a party to the Marrakesh Agreement Establishing the World Trade Organization.  Similarly, it will remain a member of the World Intellectual Property Organization ("the WIPO") and party to the Paris, Berne, Rome and other international intellectual property conventions to which it has already subscribed including the European Patent Convention and the Patent Cooperation Treaty.  Several countries that have negotiated free trade agreements with the EU have agreed to continue to trade with the UK on a similar basis.

As for the remaining member states of the EU, the withdrawal agreement contains a number of provisions that relate to intellectual property.   The political declaration binds the UK and EU as follows:

"42. The Parties should provide for the protection and enforcement of intellectual property rights to stimulate innovation, creativity and economic activity, going beyond the standards of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights and the World Intellectual Property Organisation conventions where relevant.
43. This should preserve the Parties' current high levels of protection, inter alia, of certain rights under copyright law, such as the sui generis right on databases and the artists' resale right. Noting the protection afforded to existing geographical indications in the Withdrawal Agreement, the Parties should seek to put in place arrangements to provide appropriate protection for their geographical indications.
 44. The Parties should maintain the freedom to establish their own regimes for the exhaustion of intellectual property rights.
45. The Parties should establish a mechanism for cooperation and exchange of information on intellectual property issues of mutual interest, such as respective approaches and processes regarding trademarks, designs and patents."

Both the EU's draft agreement of 18 March 2020 and the British government's counter-proposals for a comprehensive free trade agreement of 19 May 2020 contain extensive provisions on intellectual property.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership contains provisions against expropriation of investments and dispute resolution provisions that are similar to those found in the bilateral investment treaties that the British government has negotiated with a number of countries.  Such provisions entitle individual investors to seek compensation from a national government for the expropriation of their investment which could possibly include the revocation of patents or the loss of an opportunity to market products by reference to a trade mark because of a public health concern. Any free trade agreement that is likely to be negotiated with Australia, Japan, New Zealand and the USA can be expected to contain similar provisions.

Anybody wishing to discuss this article or any of its issues should contact me on +44 (0)20n 7404 5252 during office hours or send me a message through my contact form.

Michel Barnier's Statement at the End of the Fourth Round of Negotiations

Michel Barnier
By Foto-AG Gymnasium Melle,
CC BY-SA 3.0,

Jane Lambert

As I said in my May Brexit Briefing, a fourth round of talks between British and Commission negotiators was scheduled for the 2 to 5 June 2020.  They have now taken place and a statement has been made on their progress by Michel Barnier (see Statement by Michel Barnier following Round 4 of negotiations for a new partnership between the European Union and the United Kingdom 5 June 2020).

On its face, it does not make very encouraging reading.  Monsieur Barnier said that there were four big sticking points, namely:

• "Fisheries, and free and fair competition, the so-called ‘level playing field' – two essential elements of the new economic partnership we want to build;

• Guarantees protecting people's fundamental rights and freedoms needed to underpin a close police and judicial cooperation in criminal matters;

• And finally, the governance of our future relationship."

On none of those issues, according to Monsieur Barnier, has there been any significant progress.  He complains that the British wish to renegotiate the Political Declaration setting out the framework for the future relationship between the European Union and the theUnited Kingdom which the Prime Minister signed and expressed concerns as to the implementation of the Northern Ireland Protocol to the Withdrawal Agreement.

There has been no parallel statement from the British side.  As I said in my comments on the British counterproposals and Brexit Briefing a lot more work has been done on the British side than might be expected for mere window dressing. Nevertheless, Andrew Bailey, the Governor of the Bank of England has warned business leaders to prepare for the present transition or implementation period to expire without an agreement (see Ryan Weeks Bank of England governor tells banks to brace for no-deal Brexit – report 3 June 2020 Financial News).

I have added Monsieur Barnier's speech and my comments to my EU negotiations page. I am also monitoring the UK's negotiations for free trade agreements with the USA and Japan.  Despite the deteriorating relationship with China over Huawei, Hong Kong and responsibility for the pandemic I am minded to monitor China's Belt, Road Initiative ("BRI").  The BRI is a massive infrastructure project over the next 30 years for which British businesses and their professional advisors are well placed to win contracts.  I am under no illusions as to the nature of the present Chinese leadership but while countries' interests remain constant governments and policies can and do change.

Anyone wishing to discuss this article or any of its topics should call my clerk Stephen Somerville on 07986 948267 or send me a message through my contact page.

Brexit Briefing April 2020

Author NIAID Licence CC BY 2.0

Jane Lambert

The world has changed since 23 June 2016 and indeed much of that change has occurred since 12 Dec 2019. The United States and the United Kingdom have suffered more deaths from CORVID-19 than any other country and a severe contraction of economic activity. The virus has affected other large countries but not to the same extent.  The other significant event that occurred in April was the announcement that China had overtaken the USA in the number of applications for patents through the Patent Cooperation Treaty for the first time ever (see WIPO PR/2020/848 7 April 2020).  In terms of domestic applications, China is considerably further ahead.  That country filed 1.5 million applications compared to the USA's 597,000 {see World Intellectual Property Indicators 2019 -Patents WIPO 2019).

Despite those changes, British officials are quietly pursuing negotiations that are likely to result in trade barriers with the UK's nearest and largest market from 31 Dec 2020 and an American administration in an election year that is struggling to control the pandemic and the resulting economic downturn.  Such policy would, of course, be justified by the 2016 referendum result and the 2019 general election though it is probably the case that the government won with remainder votes who were more afraid of Corbyn than they were of brexit.

The new relationship negotiations resumed in April as I noted on 18 April 2020 in Barnier and Frost talk at last and two rounds have actually taken place. In a press statement by Michel Barnier following the second round of future relationship negotiations with the UK on 24 April 2020, the EU chief negotiator warned of

"two very real deadlines that we are faced with and which have been set by law:

• 30 June 2020: Will we decide or not, before that date, and by joint decision with the British, to extend the transition period, according to the possibility that is foreseen in the Withdrawal Agreement?

• And, 31 December 2020 – the date of the ‘economic Brexit', following the ‘political Brexit' that took place at the beginning of this year: On this date, which will bring important and definite changes in many areas, will the United Kingdom leave the Single Market and Customs Union with or without an agreement with the EU?"

By a circular dated 29 April 2020, the Commission announced that it had reviewed and updated the plans that it had made for a British departure from the EU without a withdrawal agreement and has set them out in a number of sector readiness notices that can be found on its Getting ready for the end of the transition period page.

In his statement, Monsieur Barnier came close to accusing British officials of negotiating in bad faith. In the Political Declaration that accompanied the withdrawal agreement, both sides made commitments for the future framework that British negotiators refused to discuss except in the most general terms.  There is concern that the British government is failing to implement the provisions of the withdrawal agreement that would enable the border between Northern Ireland and the Republic of Ireland to remain open.  In order to monitor such implementation, the Commission has sought permission to open a representative office in Belfast which was refused by the Paymaster General on 27 April 2020 (see the letter from the Rt Hon Penny Mordaunt MP to Helga Schmid and Michel Barnier).  Further, the only British response to the draft treaty that the Commission proposed to the UK on 18 March 2020 has been a number of text proposals which Monsieur Barnier has been asked not to share with the member states or the European Parliament.

Negotiations began with the US Trade Representative on a trade agreement with the USA on 5 May 2020 after a two-month break with platitudinous statements on both sides (see Joint Statement of UK International Trade Secretary Liz Truss and USTR Robert Lighthizer  5 May 2020 Department for International Trade and Statement of USTR Robert Lighthizer on the Launch of U.S.-UK Trade Negotiations 5 May 2020 Office of the US Trade Representative).   It is worth remembering that any deal with the USA will have to be approved by the US Senate which will have concerns if a largely US brokered peace deal in Northern Ireland breaks down as a result of the failure to honour the commitments on Northern Ireland in the withdrawal agreement.

I shall be updating the EU new partnership negotiations page and the US trade agreement negotiations page.  Ideally, there should be a page on British involvement with the one belt one road initiative and the UK's relationship with China which is already providing much of the investment and technology for the UK's next generation of nuclear power stations, high-speed rail and 5G mobile communications but at the moment that relationship seems to be going nowhere.  Anyone wishing to discuss this article or any of the issues raised in it should call 020 3819 8725while lockdown continues or message me through my contact form.

EU's Draft Agreement on a New Partnership with the UK

The White Cliffs of Dover seen from Cap Griz Nez

Author Rolf Süssbrich Licence CC BY-SAv 3.0 Source Wikipedia English Channel 

Jane Lambert

Possibly because both sides' chief negotiators have tested positive for COVID-19 (Charlie Cooper UK chief Brexit negotiator self-isolates after showing COVID-19 symptoms 20 March 2020, Politico), the negotiations on the UK's new partnership with the EU has been put on hold since the beginning of this month (see Daniel Boffey UK-EU talks on post-Brexit relations 'in deep freeze'  26 March 2020 The Guardian).

That does not mean that there have been no developments. One of the most important was the delivery on 18 March 2020 of a comprehensive draft agreement to the British government from the European Commission (see Draft text of the Agreement on the New Partnership with the United Kingdom).  According to the Commission's website. that negotiating document was transmitted to the United Kingdom on 18 March 2020, following consultation with the European Parliament and Council. It was presented to the Council Working Party on the United Kingdom on Friday 13 March 2020.

Now anyone who has ever been involved in a negotiation will know that the party that produces the draft text first - whether it is a Tomlin order for the settlement of litigation or a turnkey contract for a new computer system - generally has the upper hand. That is more or less what happened in the withdrawal agreement negotiations.  The European Commission's draft agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community of 27 Feb 2018 was not substantially different from the Agreement on the withdrawal of the United Kingdom of Great Britain and Nothern Ireland from the European Union and the European Atomic Energy Community that the Prime Minister signed, and Parliament ratified with the European Union (Withdrawal Agreement) Act 2020, at the end of January.

The British negotiators ought to know that and they have promised their own draft agreement but nothing has materialized so far.  The Guardian reports that "UK officials said the legal text covering the outstanding areas would be produced at a time of the British government’s choosing, and attempts to find a new method of 'continuous dialogue' were being made" but, so far, nothing has been forthcoming.  Unless an agreement is reached by the end of the year this country loses preferential access to its nearest, largest and richest market under the terms of the withdrawal agreement and the statute.

Now that may suit some politicians' agenda.  The Guardian reports that Mr David Davis has said that the economies of the remaining EU member states will be so ravaged by the coronavirus menace that it will not matter much if the UK loses preferential access to that market because there will be so little trade to lose.  That may be true in the short term but it is one of the reasons that Fitch gave for downrating the UK's credit rating and keeping it on negative watch.  At a time when the UK will need every scrap of business and every penny of investment that it can get, erecting barriers to any trading partner does not seem a good idea.  Moreover, it is not likely that any other country will fill the trade gap. Certainly not the USA which has reported more confirmed cases than any other country and over 3 million unemployed, and probably not China if the British government insists on picking a quite unnecessary quarrel with that country (see Kate Procter Michael Gove appears to blame China over lack of UK coronavirus testing  29 March 2020 The Guardian).

In the hope that wiser counsels may prevail, it is worth looking at the draft partnership agreement. It is 436 pages long divided into 6 parts with some 36 annexes. Part 1 deals with definitions and interpretation and other common provisions, Part 2 with economy and trade, Part 3 with security, Part 4 with the UK's participation in the EU's programmes, Part 5 with institutional and horizontal provisions and Part 6 with final provisions. Readers are most likely to be interested in Part 2.  As it stretches over 202 pages divided into 17 titles it is by far the longest part of the draft agreement.  The titles cover transparency, good regulatory practices and regulatory cooperation, level playing field and sustainability which includes competition, state aid, social protection and climate change, trade in goods, services and investment, digital trade including data protection, capital movements, intellectual property, public procurement, mobility of natural persons, transport, energy and raw materials, civil nuclear and small and medium enterprises.  I have not had time to read every single provision but from the little I have seen which is IP, competition and data protection the draft is in line with the political declaration which the UK government has accepted.

Of course, there would be no point in negotiating terms for a future partnership if either side fails to implement the withdrawal agreement.  Art 164 (1) of that agreement established a Joint Committee comprising representatives of the EU and UK which shall be responsible for the implementation and application of the agreement.  Following telephone discussions between the Vice-President of the Commission and Chancellor of the Duchy of Lancaster. a meeting is scheduled for tomorrow.  Top of the agenda will be citizens' rights and the Northern Irish protocol.

Anyone wishing to discuss this article should contact me through my contact form.  During the coronavirus emergency, our clerks will be working from home in accordance with government requirements and calls to our landline will be diverted to their mobiles.   Readers are invited to contact me directly. If they want to chat I will call them back by phone or VoIP.

The Department for International Trade's Proposals for a US-UK Free Trade Agreement

Jane Lambert

According to the Department for International Trade, "[a free trade agreement] with the US represents significant opportunities throughout the economy, from agriculture to professional services. Potential benefits include better jobs, higher wages, more choice and lower prices for all parts of the UK." On 2 March 2020 the Department set out its approach to trade negotiations, negotiating objectives, response to a public consultation on a UK-US trade agreement and a preliminary assessment of the long-term impacts of a bilateral trade agreement between the UK and the US in a 184-page document entitled  UK-US Free Trade Agreement.

The document consists of an introduction, 4 chapters and an annexe:

• Chapter 1 - Strategic case 
• Chapter 2 - Outline approach 
• Chapter 3 - Public consultation on trade negotiations with the United States: Government response 
• Chapter 4 – Scoping Assessment 
• Annexe - Public consultation on trade negotiations with the United States: Summary of responses.

Chapter 1 estimates the benefits of a trade deal with the USA would be a long term increase in trade of approximately £15.3 billion which could deliver a £1.8 billion boost to UK workers’ wages, lower prices on key consumer goods imported from the USA and thereby raise living standards.  It considers how each of the nations and regions of the UK and particular sectors of the economy could benefit.  For instance,  it could enable professionals to move more easily and support recognition of professional qualifications in accountancy and law 

Chapter 2 outlines the structure of a free trade agreement with the USA covering:

• trade in goods including customs facilitation, technical barriers to trade and sanitary and phytosanitary standards; 
• good regulatory practice;
• trade in services;
• investment;
• intellectual property;
• competition;
• industrial subsidies;
• publicly owned enterprises;
• government procurement;
• sustainability'
• anti-corruption;
• trade and development;
• trade remedies;
• dispute settlement;
• special provisions for small and medium enterprises;
• women's empowerment;
• exceptions to protect national interests; and
• general provisions,

Each of those topics was the subject of a public consultation in 2018 to which the government received 158,720 responses.  Many of these were in identical form from campaign groups but some contained individual suggestions as well as 6,405 non-campaign responses from individuals, businesses, trade associations, non-government organizations and the public sector.  These together with the government's response are set out in the annexe to the document.  Chapter 3 sets out the government's policy on those topics taking into account the consultation and its previous responses.

Chapter 4 provides a preliminary assessment of the potential long-run impacts of a free trade agreement with the USA.  It opens with a snapshot of the UK's existing trade with the USA.  If there were substantial tariff liberalisation and a 25% reduction in non-tariff measures, GDP would increase by 0.07% or £1.6 billion, exports by 4.3% and imports by 4.1%.  If there were full tariff liberalisation and a 50% reduction in non-tariff measures, GDP would increase by 0.16% or £3.4 billion, exports by 7.7% and imports by 8.6%. The chapter models the impact of such tariff reductions and liberalization on the UK's nations and regions and sectors of the economy.   

No timetable appears to have been published for the start of negotiations with the USA. According to the press release Liz Truss kick-starts UK-US trade talks of 1 March 2020, they are expected to begin this month (that is to say, March 2020). Certainly, there is nothing to compare with the detailed negotiations with the Commission on the UK's new relationship with the EU. Nevertheless, I am monitoring such activity as takes place on my Trade Negotiations with the USA page.

Anyone wishing to discuss this article or any of the issues mentioned may call me on +44 (0)20 7404 5252 or send me a message through my contact page.

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.