LONDON — The U.K. and U.S. will launch trade talks on Tuesday but they carry high risks for British Prime Minister Boris Johnson, who is under heavy pressure not to buckle to U.S. President Donald Trumps demands on food standards and health.
Washington and London are already major trade partners. Britain is Americas fifth export destination and the U.S. is easily the U.K.s biggest single export market.
A deal with the United States was long viewed as a Holy Grail by British politicians who wanted to pull the U.K. out of the European Union and deepen ties with the global Anglosphere.
That made the deal a highly sensitive political football. U.S. President Barack Obama warned in April 2016 (before Britains vote to leave the EU) that London would be at the back of the queue for a trade deal, while the Trump administration changed tack and said Britain would be at the front.
Being at the front of the queue, however, has its own problems because Britain is simultaneously negotiating its future terms of trade with the EU, which it left in February. Brussels will seek to put more onerous terms of trade on the U.K. if Johnson is seen as making a strategic shift to U.S. goods and standards in its economic ecosystem.
There is also the domestic risk to Johnson posed by the massive U.S. agricultural industry and Washingtons threat to Britains hallowed National Health Service, and notably the way drugs are priced.
Here are five key areas to keep an eye on:
1. Is it actually worth it?
The U.S. and U.K. already have close to tariff-free trade for their major exports, so any economic wins from the agreement will be small.
Britains own assessment is that the deals long-term boost to the economy will likely remain below 0.1 percent.
Experts contacted by POLITICO thought the deals benefits would largely be symbolic. “President Trump is known to like a deal for the deals sake, even if there is not much trade actually resulting from it,” said Chad Bown from the Peterson Institute for International Economics.
Bown cautioned that with the COVID-19 crisis taking center stage, “it is hard to see them making much progress on a substantive trade agreement anytime soon.”
Marta Bengoa from the City College New York said the main gains from a deal would likely be focused on trade in digital services and cross-border data flows, which the U.S. and Britain want to liberalize.
Simon Lester from the CATO institute said: “I dont take economic modelling of trade agreements too seriously, but the numbers Ive seen for the economic benefits of a US-UK free trade agreement are pretty low,” he said. “My best guess is that perhaps we get some sort of Phase 1 deal, like we saw with China and Japan, which addresses a handful of issues and leaves the big ones for a later date.”
Britain hopes to win lower tariffs on its agricultural exports to the U.S. — noting that import levies can be as high as 17.6 percent on products like cheddar cheese. But a bigger row is brewing on U.S. imports to the U.K., with Washington pushing to reduce restrictions on chemically-rinsed chicken, genetically modified crops and hormone-treated beef.
Farmers and standards campaigners are concerned that Britain will allow the import of cheap animal products that are produced to lower standards than can legally be made at home — thereby undercutting the British agriculture.
NFU director of EU exit and international trade Nick von Westenholz said he hoped a U.S. deal would “provide one of many opportunities for British farmers to sell more great British food overseas, but British farmers need to know that their businesses wont be undercut by sub-standard food imports, and the British public need assurance that the food they buy has been produced to those same high standards, regardless of where it has come from.”
The Department for International Trade insists any deal with the U.S. will “not compromise on our high environmental protection, animal welfare and food standards.” But it has not ruled out allowing imports of genetically modified food.
3. Financial Services
Britain is hoping for a comprehensive chapter on services, and is looking to its powerful financial sector.
But Sam Lowe, a senior research fellow at the Centre for European Reform, noted that Britain would struggle to get anything significant from the U.S. on financial services, as Washington does not historically address financial regulation in its trade agreements. However a deal could lead to closer working on financial services regulation in future, he added.
Britain also wants the U.S. to become a market for its digital industries, covering things like blockchain technology, driverless cars and quantum technology.
But Harry Broadman, a former U.S. trade negotiator, said the “bilateral asymmetry” between the two sides might make digital liberalization difficult. The most “immediate irritant,” he argued, is the British plan for a unilateral tax on tech giants, which the U.S. is not happy about.
Elsewhere, the U.K. has said boosting business travel will be a priority, as well as the recognition of professional qualifications.
4. Health care
If you thought food was politically sensitive, wait until the talks get to health care.
After last year insisting that Britains public health service would “absolutely” be “on the table,” U.S. President Donald Trump rowed back saying that he did not consider the National Health Service itself as being “part of trade.”
However, the U.S. Trade Representatives negotiating objectives for a trade deal with the U.K. make it clear that Washington has set its sights on Britains “reimbursement regime,” in anRead More – Source