The US and UK Are Launching Post-Brexit Trade Negotiations
In the post-Brexit world, a US-UK bilateral free trade agreement has become inevitable. Now, with COVID-19 hitting both economies more than ever, both sides intend to strengthen their respective economies. However, a trade deal might also be a matter of political survival as Prime Minister Boris Johnson and US President Donald Trump have been subjected to heavy criticism over their crisis management during the pandemic.
US-UK Bilateral Trade Deal
The United States and the United Kingdom have initiated talks to conclude a bilateral free trade agreement. Due to the current circumstances — courtesy of the COVID-19 pandemic — the first negotiations over the upcoming two weeks are to be conducted via video conferencing according to an announcement from Robert Lighthizer on behalf of the office of the United States Trade Representative.
The final agreement will strengthen the US economy, Lighthizer said, while British Secretary of State for International Trade Elizabeth Truss stated that both countries would benefit enormously and thus mitigate the economic impact of COVID-19. Both sides described a trade agreement as a “priority” and promised “accelerated negotiations.”
Getting the Job Done Despite the Pandemic
In regular times Boris Johnson would have celebrated the initiation of the talks. Brexiteers amongst his cabinet and arguably himself have long been in favor of implementing a trade agreement with the US. In fact, it was one of their most prominent arguments for leaving the European Union. However, But during a global pandemic, no one feels like celebrating. The United Kingdom has been facing disastrous weeks, economically and at a human level, as it now leads Europe’s total fatalities caused by the virus. Johnson himself has become the subject of intense criticism. Negotiating with President Trump is not adding any popularity points at this stage, either.
Moreover, Johnson is arguably cognizant that the reality could become more different than Truss’s proclaimed “accelerated negotiations.” While the incentive, as well as the political desire to conclude an agreement rather urgently, is undoubtedly present, the conclusion of a comprehensive trade agreement between two developed nations remains a complex undertaking.
The latter is even more applicable if the trade protagonists are not on the same economic level. With an economic output of more than $ 20 trillion, the US is facing the newly exited Great Britain with an economic output of “only” $3 trillion and is, therefore, negotiating from a position of strength. Besides, Great Britain is only a market of around 66 million people, while the United States is home to 330 million individuals.
For the United Kingdom, the economic benefits of an agreement with the USA appear manageable in absolute terms and in relation to the expected damage from leaving the European Union. Number 10 itself estimated at the beginning of March that, depending on the degree of liberalization of bilateral trade, and an increase in prosperity of between 0.07 % and 0.16 % of the country’s GDP is forecast.
The trade volume between the United States and the United Kingdom, including the exchange of services, was around $ 260 billion in 2018. Trade within the entire European Union, including the UK, was $ 1.3 trillion at the same time.
While President Trump not only describes Prime Minister Johnson as a “good friend” but has repeatedly promised the UK a quick trade agreement amid the separation from the EU, Trump is also under the microscope. It seems inconceivable that Trump would abandon his “Art of the Deal” approach and not prioritize America’s interests and thus putting his reelection bid even more in jeopardy. Prime Minister Johnson will hardly be able to make concessions that would make the country worse off than it was in EU times.
Thus, while the United States remains Britain’s premier trading partner after the European Union, the White House’s wishes of opening up the UK agriculture market for the US and allowing access to the National Health Service NHS for US pharmaceutical manufacturers remain inconceivable also.
Nevertheless, Johnson may need the agreement more than Trump does, for the mere reason that Trump is being supported by an impervious and – as far as Trump is concerned – an extremely forgiving base. Johnson, on the other hand, while no election is imminent, needs to find a spark in dark times. How much he is willing to sacrifice for this spark remains to be seen, however, the trade agreement could recuperate his tarnished reputation and tip Britain’s economy back into shape in the long-run.