5 March 2019
Ilona Serwicka is Research Fellow in the economics of Brexit at the UK Trade Policy Observatory.
Last week, the United States published a document that set out their negotiating objectives for a trade agreement with the UK, shortly after the publication of virtually identical documents for negotiating with the EU and with Japan. Those in the UK who expected ‘special treatment’ from the US are in for a disappointment, but not a surprise (as UKTPO researchers pointed out in October 2016). In negotiating with major trading partners after Brexit, the UK is likely to be a price taker because of a power imbalance.
The language of the UK-US document is ‘aggressive’: demanding concessions but offering little in return. The document does not mention any specific advantages to the UK and is reminiscent of ‘America First’ rather than based on trade as a win-win activity. The introduction states that:
‘The United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities for trade and investment with the UK’,
This is basically a reiteration of President Trump’s inaugural address: ‘we will follow two simple rules: buy American, hire American’.
The framework for negotiating the UK-US trade deal is centred around reducing tariff and non-tariff barriers, but only in ways that benefit the US. Early in the document, we read that one of the negotiating objectives of the US is to:
‘Secure comprehensive duty-free market access for U.S. industrial goods and strengthen disciplines to address non-tariff barriers that constrain U.S. exports’.
It is important to note that the US appears keen to lock the UK into its interpretation of the sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) – something that would be inconsistent with the UK in maintaining frictionless trade with the EU, including keeping the open border between the Northern Ireland and the Republic of Ireland. Calls by the US ‘to remove expeditiously unwarranted barriers that block the export of U.S. food and agricultural products’ reminds us of earlier challenges by the US that the EU ban on imports of ‘chlorinated chicken’ or ‘hormone-injected beef’ is WTO-illegal and not based on scientific evidence. Now the US explicitly calls for ‘the adoption of international standards and (…) the obligation to base SPS measures on science’. UKTPO Fellows have previously written that ‘the US has for a long time been highly critical of EU SPS rules, and getting the UK to move away from the EU system would be a very high priority for the US’. And while the EU may have been able to resist US pressure, after Brexit, the UK may find it more difficult given its very weak negotiating position: the UK economy is some seven times smaller than that of the US and is manifestly in a hurry.
On investment, the US objective in negotiation of the UK-US trade deal is to:
‘reduce or eliminate barriers to U.S. investment in all sectors in the UK’’.
Similarly, on government procurement, the US wishes to:
‘increase opportunities for U.S. firms to sell U.S. products and services to the UK’,
while simultaneously restricting access for the UK (for example, through keeping domestic preferential purchasing programs at state and local government levels).
The US document also attempts to regulate the UK’s relationship with third countries! For example, it would constrain the UK’s ability to sign a trade deal with China by creating a mechanism to:
‘take appropriate action if the UK negotiates a free trade agreement with a non-market country’.
To preserve its commercial partnerships with Israel, the US states that one of its objectives is to:
‘discourage actions that directly or indirectly prejudice or otherwise discourage commercial activity solely between the United States and Israel’.
Although the negotiating objectives state that:
‘Our aim in negotiations with the UK is to address both tariff and non-tariff barriers and to achieve fairer and deeper trade’,
the definition of ‘fairer and deeper trade’ that it offers is an entirely American-focused and may not appear that fair or deep from the UK perspective. In the words of my colleague Peter Holmes, the current document is shorthand for ‘do things the American way’.
There may be ‘two faces of Trump’: who claims that protection will restore US prosperity but also suggests that the UK and the US can trade more after Brexit. But with the US opening position so full of one-sided demands, the negotiations are going to be very bloody. David Henig, Director of Trade Policy at the European Centre for International Political Economy (ECIPE), said that it would be ‘a sign of terrible weakness to negotiate on this basis’. But since procrastination is the hallmark of the UK’s current approach to trade, perhaps the silver lining is that it can’t happen yet. Real negotiations will have to wait until we have agreed with the EU and settled our position in the multilateral trading system.
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.
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