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Would Britain really be first in line for a US trade deal?

If Trump wants to ease a trade deficit, his priority would be to continue talks with the European Union

September 9, 2019

11:41 AM

9 September 2019

11:41 AM

The animosity between the Trump administration and Europe has not yet damaged military relations, but the same can’t be said for economic ties. Negotiations for an EU-US free trade agreement, the Transatlantic Trade and Investment Partnership (‘economic NATO,’ as the organization’s former secretary general, Anders Fogh Rasmussen, had called it), have stalled, perhaps permanently. Negotiations are at ‘a stalemate,’ said EU trade commissioner Cecilia Malmström. The Council went a step further, declaring the mandate for the talks to be ‘obsolete and no longer relevant.’

TTIP’s demise, and the frustration it has caused the Americans, might augur well for another possible transatlantic trade deal. A post-Brexit Britain, if it’s outside the customs union, would seem quite an attractive free trade partner for the US. ‘In the Trump administration, Britain’s constantly at the front of the trade queue,’ said national security adviser John Bolton during last month’s visit to 10 Downing Street. But even if a US-EU free trade agreement is dead, don’t expect a US-UK one to fare much better.

Though divergence between Washington and Brussels became painfully apparent in the Trump era, it existed prior. ‘It was difficult already under the former administration,’ Malmström recently told the European Parliament. It ultimately had more to do with different outlooks on trade than of personality clashes, and the details of the disagreement are highly instructive of the problems that UK negotiators would face in talking with the Americans.

Europe feared the regulatory gutting the Americans could wreak on the social market economy. Worries ranged from the Americanization of European labor standards to the infamous Investor-State Dispute Settlement mechanism (which might weaken European state regulatory powers in favor of US multinationals). In the end, though, agriculture was the stumbling block, with America demanding Europe relax its protectionism and restrictive food safety laws (‘a red line,’ said Malmström).

The interlocutors were too evenly-matched. The EU is the second largest economy on earth, not too far behind the United States, and the US and EU are both each other’s single largest trading partner. Neither could quite gain advantage over the other in the talks, hence the stalemate.

Britain would find itself in a different position. Significantly smaller than the soon-to-be EU 27 (it currently accounts for a little over 15 percent of EU GDP), Britain could also, at least initially given a no-deal, be in a tough position as trade reverts to the more restricted WTO rules. With this initial shock, Britain might be overly eager to conclude an agreement.

This would make American negotiators’ lives easier, but the UK government would be in tricky political waters. If Boris Johnson rushes into an agreement after October 31, he may have to make significant concessions on what the EU had stood firm on, which would likely be unpopular at home.

Already, the emerging outline of US-UK trade talks seem to be making many of the Remainers’ points for them. Warnings that only the EU would be able to safeguard British labor and food standards, and potentially the National Health Service, would, in the public eye, be corroborated by a perceived hollowing out of the postwar welfare state immediately after Brexit. It would be politically disastrous for Johnson and the Tories, and for the project of leaving the European Union.

But there are also reasons for Trump to avoid making a deal. Despite the collegiality he and his anti-establishment allies have felt towards Johnson and the Brexiteers, and their shared hatred for the European Union (Bolton also made headlines for his statement that Europe treats its voters like ‘peasants’), an ‘America first’ trade strategy wouldn’t necessarily prioritize a UK deal.

Trump has tended to use negotiations as a means to reduce America’s bilateral trade deficits. But America runs a trade surplus with the UK. If the WTO trade regime increases tariffs on UK exporters, that surplus would only grow. The status quo would, in Trump’s terms, be beneficial to America.

Rather, if Trump wants to ease a trade deficit, his priority would be to continue talks with the European Union. There is evidence that he is trying, with the recently announced deal on EU imports of US beef. The unusual amount of fanfare surrounding the agreement is a sign that the White House remains eager to engage the Europeans, and the threats of an impending trade war, over Airbus, or automobiles, or agriculture, are another means to get Brussels back to the table.

But even if he did strike a deal with Britain, there is very good reason to believe he would not be able to deliver the deal through Congress. While normal treaties need only the approval of the Senate, trade agreements require both houses. Since this might be the only opportunity for the House of Representatives to have a say on Trump’s dealings with regard to Brexit, expect them to take it.

Democrats have an iron grip on the House, one likely to last past the 2020 election. Their speaker, Nancy Pelosi, made it clear that ‘if Brexit undermines the Good Friday accord,’ that is, sees the reimplementation of a hard border, ‘there will be no chance of a US-UK trade agreement passing the Congress.’ Britain leaving the customs union would almost certainly mean some form of Irish border, a catch-22 that would make House approval of a free trade agreement an impossible task.

Ultimately, after October 31, the American administration may still have more pressing trade matters to deal with. Negotiations with China, seeing as they may shape the very system of world trade for years to come, will take precedence. As will efforts to get Congress to ratify the USMCA trade agreement, the Nafta renegotiation that was central to Trump’s 2016 campaign, and vital to America’s economy, since the China trade war has elevated Mexico and Canada to numbers one and two among America’s single-country trading partners.

With Trump needing to reengage Europe as well, Britain may not be at the back of the line, but despite what John Bolton said, they are certainly not at the front.


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