UK - US trade talks: An ocean to cross06/08/2020
Earlier this week, the UK’s International Trade Secretary, Elizabeth Truss, crossed the Atlantic to meet the US Trade Representative (USTR), Robert Lighthizer, for the third round of trade negotiations between the two nations. A trade deal was expected to have been struck by July 2020, has seen slow progress due to the COVID-19 pandemic and differences between the two sides on important issues.
Though the UK would prefer to strike a deal with the US prior to leaving the Brexit transition period with the EU, Truss told a House of Lords Committee last month that she will not “set a deadline” on agreeing a deal with the US. With the looming US election, coupled with an ongoing global pandemic, a UK-US trade deal before the end of the year seems difficult.
In this blog, we unpack the various elements of the negotiations.
Prospective deals galore but none struck
By being a part of the European Union (EU) trading bloc, the UK has not struck a trade deal with any country in the last 40 years. The EU is the UK’s largest trading partner with the US second. According to government figures, UK-US trade was valued at £220.9 billion last year, accounting for 19.8% of all UK exports. Apart from the US, the UK has opened trade talks with several nations – Japan, New Zealand, India – to name a few, but a deal is yet to be struck with any of them. The ongoing COVID-19 pandemic seems to be further hindering the progress of talks. But with no deal yet in sight with the EU and the UK leaving the Brexit transition agreement at the end of the year, as well as the UK’s intent to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), UK negotiators will be working furiously to expedite trade talks and re-establish the UK as a key trading partner in the wider world order.
Everything is on the table – but not the NHS
In the 184-page document describing the UK’s approach to trade negotiations with the US, a number of sectors, including, digital economy, professional services, food and farming, spirits, automotive and manufactured goods are expected to be ‘on the table.’ However, the UK Government has reiterated, despite commentary to the contrary, that the National Health Service (NHS) would not be ‘up for discussion.’ Additionally, following a severe backlash from British farmers based on the fear of chlorine-washed chicken and other food items of perceived lower quality being ‘dumped’ into the UK market, Truss announced a new Trade and Agriculture Commission that would protect the UK’s high-food standards in prospective trade deals. As the US has lower tariffs than the UK in several categories of goods, it will be expecting concessions from Britain on this front. However, with the issue of a digital services tax on tech companies, many of them American, expected to bring almost £500 million annually to the UK Treasury, and the US threatening reciprocal tariffs on British car exports, the sectors that will ultimately benefit from a final UK-US Free Trade Agreement or mini sector deals remains undetermined.
Deal or No Deal
If President Donald Trump (and as a result, Lighthizer), lose in the upcoming November US Presidential elections, and Joe Biden in the seat of power, ‘trade winds’ may change overnight. The Trump administration would still have time until January 2021 before formally leaving office to strike a trade deal with the UK, though this seems unlikely. The US administration could also want to wait and watch to see the final terms of a UK-EU deal before getting back round the negotiating table. Additionally, as the COVID-19 pandemic continues to throw various trade negotiation timelines into disarray, only time, talks and a vaccine, will tell if a UK-US deal can be reached in 2020.
The UK and the US have weathered numerous storms over the years as part of a transatlantic ‘Special Relationship.’ But, before a Free Trade Agreement can be struck, many hard yards need to be crossed – including an ocean.
Yashshri Soman is an Account Manager at Atticus Communications.
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