Now that Britain has left the EU and entered a transition phase where it works to negotiate a final trade deal between both sides, the British Government is beginning to shift attention away from its tricky discussions with Brussels and starting the first phase of negotiating a key UK-US trade deal.
How is US-UK Trade Deal Likely to Play Out?
The timing of discussions between Washington and London is beneficial for both sides as US President Donald Trump may not be in office next January. But even if the UK fails to conclude a deal with the EU, would a trade agreement with the US be any better? And would it be any easier to negotiate?
Regarding the latter point, a UK-US trade pact would be easier to conclude. The one argument Vote Leave made during the 2016 EU Referendum was that Brussels has failed to negotiate trade deals with some of the world’s largest economies like China, the US, Australia, Brazil and India.
Equally, Remainers fear that the UK on its own would not have as much leverage in trade negotiations if it is not part of a bloc the size of the EU.
However, Britain’s EU departure and the Conservatives’ huge majority mean that the British Government would be able to legislate a trade deal fairly swiftly, thereby proving that trade agreements can be concluded quickly outside the EU.
Brussels’ Ongoing Trade War With Washington
Brussels, meanwhile, is still engaging in a trade war with the US and there are few signs that either side is ready to begin negotiating a trade deal.
Both Trump and Senate Republicans are also enthusiastic about a UK-US trade deal, yet the Democrats control the House of Representatives for now. House Speaker Nancy Pelosi stated last year that she will not approve of a trade pact if Brexit jeopardizes the Good Friday Agreement. So it will not be as easy for the US Government to approve of a trade pact.
Although the UK is not part of a bloc that provides it with “leverage” in trade negotiations, as many Remainers argue, this does not mean this country has not already achieved some victories in early discussions. Trump said last year that he does not want the NHS after British politicians repeatedly urged US pharmaceutical companies to keep away from the health service, and it remains a red line in forthcoming negotiations.
UK Environment Secretary George Eustice also dismissed fears that chlorinated chicken will be sold in British supermarkets.
Nonetheless, the US Treasury Secretary Steven Mnuchin said the Trump administration will tax British cars if the UK Government rolls out a digital services tax on American companies.
The Potential for a Win-Win US-UK Trade Agreement
A UK-US trade deal will be positive for both countries in the long-term. They already trade $109 billion of goods every year. The US is our largest export market, accounting for 13 percent of manufactured goods and 24 percent of services.
A trade agreement will enable British shoes and clothes to be exported to America as they are already hampered by tariffs thanks to Trump’s trade war with the EU. For example, the US charges a 10 percent tariff on British shoes.
Although British giants like GlaxoSmithKline are well-established in the US, smaller bio-tech companies will be able to break into the American market as a result of a UK-US trade pact smashing those trade barriers.
US agri-business is also likely to benefit from a trade agreement as British consumers will be able to purchase cheap American food as opposed to expensive French and Spanish goods that are subject to EU tariffs.
This is an exciting moment for two close allies to begin negotiating a trade agreement and while there will be obstacles in the short-term, the benefits of a UK-US trade deal far outweigh them.