For the United Kingdom, one of the most important trade relationships is with the United States of America. Now that Brexit has been achieved, a bilateral agreement between the transatlantic trading partners is likely to take centre stage.
How substantial is trade between the UK and USA?
In 2019 alone the UK imported $147bn-worth of goods and (predominantly financial) services from the USA. Going back the other way, the US spent $63.2bn on UK goods and $62.3bn on services.
This makes the USA the biggest market for the UK outside of the EU; with Britain the 7th biggest trading partner of the United States. American companies have spent $851bn investing in the UK – making it Britain’s biggest global contributor. UK firms have spent $505bn investing in the US – second only to Japan.
Westminster will therefore be leaning heavily on these modern day financial, as well as centuries-old cultural and historical, ties when discussing the terms and benefits of a new trading relationship.
How far away is a new agreement?
With the official withdrawal from the EU, formal negotiations on a UK-US trade deal can begin. There is no time to draw up a full Free Trading Agreement with the outgoing administration of Donald Trump, so instead focus is on a comprehensive ‘mini deal’.
On that, current US Trade Representative Robert Lighthizer recently confirmed he and UK Trade Secretary Liz Truss are engaged in dialogue and that he believes it “extremely likely” something can be agreed between the two, despite time being in “short supply”.
What still needs addressing?
The UK would like to reverse the tariffs imposed by President Trump in 2018. Although the US’s trade war with China grabbed most headlines, the EU was amongst many other large trading partners caught in the “America First” crosshairs. For the UK, steel was hit with a 25% import duty on grounds of national security, 10% was levied on aluminium, and many luxury goods suffered a similar fate. Scotch Whisky, the brand making up the majority of the UK’s $2bn exports in spirits across the pond, saw 2019 exports shrink by 30%.
So for now the UK are doing all they can to stay on America’s good side. Liz Truss announced the UK would not be joining the EU in $4bn-worth of retaliatory tariffs against the US; part of a 16 year transatlantic dispute over illegal state subsiding of Airbus in Europe and Boeing in the US. The move is a U-turn away from Brussels and a gesture that Britain hopes will signify its intention to do business on a more accommodative platform.
With the priority having been to get a deal across the line with the EU, exactly what the UK government wants longer-term has not been made public. America, however, has not been so coy. In early 2019 The Trump team laid out the objectives it wishes to achieve from any future UK-US partnership. The removal of “multiple tariff and non-tariff” barriers (i.e. a reduction in costs and red tape for US exports) was explicit.
Which areas of trade could the mini deal impact?
A cause of American ire for many years has been the perceived discrimination against American farming practises. The European Commission – whose line the UK has toed – restricts the US agricultural industry in what it can export across the Atlantic, on grounds of standards. Chlorine-washed poultry, genetically modified crops, and hormone-induced beef are all common-place in the US, but banned in Europe.
While the UK government has made recent commitments not to lower standards, at the same time the US believes in any agreement their major meat exporters need “more access to the British agricultural market”.
Equally in the spotlight is the concern US Pharmaceutical firms will lobby hard for the removal of price-caps imposed on NHS suppliers. The obvious objective would be to increase the cost of prescription drugs supplied to the UK and bring prices, and profit margins, in-line with what they charge domestically. The government have rejected these accusations the NHS are to be part of any current or future haggling. But again, it may be a case of ‘watch this space’.
Another thorny issue is whether a FTA would be required to include an Investor-State Dispute Settlement (ISDA); essentially the right for a company from overseas to bring a lawsuit against a government it believes is taking measures to obstruct its operations. US multinationals will always be keen to have as much power as possible in the territories they occupy, and it would make any investment more attractive to them. Former Trade Secretary Liam Fox was supportive of the clause, although the current message is a lot cagier.
What will the Biden presidency mean for the UK-US trade deal?
With Joe Biden set to begin his presidency on 20th January, the UK government will soon be working with and negotiating with a president who has very different priorities, ideologies and Brexit views compared to President Trump.
On day one of the Biden presidency, all focus in the US will be on efforts to counter the debilitating impacts of Covid-19. When time can be given to international alliances and trade deals, it is likely the US will prioritise straightening out relations with the EU and China. In addition, Biden’s Irish ancestry could also mean he is naturally drawn to dialogue with Dublin before London on European matters. In fact, the UK’s new status outside the EU could see Westminster take a backseat for a while when it comes to US foreign policy
While just how far down the agenda a UK-US could slide under the Biden presidency is not yet clear, however worrying noises coming out of Washington suggest a trade deal will not be looked at until 2022.
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