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22 September 2021

The UK’s difficulties signing a US trade deal pose problems for both major parties

The UK isn’t going to sign a trade deal with the US but it’s also not clear why it should want to.

By Stephen Bush

What are the biggest obstacles to a US-UK trade deal? The first is that the United States has relatively little interest in it, and that is unlikely to change even if Joe Biden is defeated in 2024. The second is that the two countries remain fundamentally at odds on several important areas of policy, most of all agrifood. 

Trade agreements do two things: they reduce tariff barriers (a tariff barrier is essentially what happens when you order the complete series of Sports Night on DVD from the US because it isn’t available in the UK and have to pay extra tax on it just because it comes from the US) and non-tariff barriers (a non-tariff barrier is when you put your shiny new Sports Night DVD in your PlayStation 4 and it doesn’t work because it only works in machines built to be sold in the US, Canada and Mexico). You remove tariff barriers simply by mutually agreeing to lower them. International agreements mean that tariffs are on the whole relatively low by historical standards.

But non-tariff barriers are harder to eliminate, not least because doing so does involve imposing real limits on sovereignty, with political consequences at home. That the prize is comparatively small from a US perspective because of the distance between the two countries means that there remains little prospect of movement on that side. 

What does this say about the so-called special relationship between the US and the UK? Not a whole lot, frankly. The line Labour likes to sell, and what Keir Starmer told me in my recent interview, is that Boris Johnson’s flirtations with breaking international law and his lack of grip on detail have weakened the UK’s hand in global affairs. I don’t think this one works: the French government killed the leader of the Islamic State in the Greater Sahara in mid-September and has been a vital participant in the US’s global military efforts against jihadism. No one doubts, whatever they may think of Emmanuel Macron, that France is an enthusiastic participant in the “rules-based global order”. Yet France was cut out of the Australia-UK-US security and submarine deal. 

What about the UK’s mooted “Plan B” of joining the US–Mexico–Canada Agreement (USMCA), the trade pact that covers those areas? Well, the biggest problem is that USMCA doesn’t have an accession chapter: unlike the European Economic Area (EEA) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), there is no clear rulebook on how countries outside USMCA might go about joining it. As Mexico and Canada have already signed trade deals with the UK, and because the United States has little interest in one, the UK would have to make significant concessions to join. 

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The good news is that the benefits of trade agreements are comparatively minor when the country in question is so far away: while the increased friction that the UK’s particular form of Brexit has created has created new barriers to trade with the nations of the EEA, the country will still trade more with the EU than the US, regardless of whether the UK joins USMCA. 

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In any case, the benefit of the UK’s current form of Brexit isn’t in increasing trade: if you wanted a “trade-maximising Brexit”, you would leave the customs union but stay within the single market, which would allow you to have the benefits of a deep trade deal with your nearest neighbour and to sign up to the likes of CPTPP as well. (Signing those extra deals on top would, however, have the effect of further thickening the regulatory border in the Irish Sea.) 

But if you have, as the UK does, a “sovereignty-maximising” Brexit, you are better off focusing on how you can use the powers you have reclaimed here at home: on insourcing production and manufacturing, on using the government’s procurement power differently, and so on. If you wanted a free-trade Brexit, you really should have stayed in the EEA, or tried to sign up to something that kept you as close to the single market as possible while ending free movement, such as Theresa May’s backstop. 

What all this really exposes is that the UK’s foreign and trade policy, particularly where the US is concerned, has never really adjusted to the significant change in how the US conducts itself, particularly with regards to its older European allies, since Barack Obama entered office.