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15 March 2019

US-UK trade: meet the diplomat behind the deal

As Her Majesty’s Trade Commissioner for North America and Consul General in New York, Antony Phillipson leads the team that is preparing the way for Britain’s most important post-Brexit relationship.

By Will Dunn

“The UK and the US,” Donald Trump announced to the press on 15 February, are “agreeing to go forward and preserve our trade agreement… we expect that the UK will be very, very substantially increased as it relates to trade with the United States.”

A week later, many of the same reporters looked on in shock as Trump petulantly insisted that the Memorandum of Understanding that had just been agreed by his Trade Representative, Robert Lighthizer, and the Chinese delegation, didn’t “mean anything”. The Chinese Vice-Premier, Liu He, laughed openly and was heard to say “okay” as Lighthizer struggled to persuade the President that an MOU – the treaty or trade agreement that often precedes a formally ratified settlement – between the world’s two largest economies was worth announcing.

This is the challenge that faces British diplomats and trade negotiators in the US. Britain must renegotiate its trade relationships after it leaves the EU, and America is the UK’s biggest single-nation trading partner. However, they cannot start actually negotiating for this deal until the withdrawal agreement has been passed – or Britain leaves with no deal. In either case, Britain will need to complete a deal vital to its economy as quickly as possible, and it will need to make this deal with an administration many view as the most protectionist, aggressive and temperamental in living memory.

Antony Phillipson refuses to be daunted. “One thing I would point out,” he says, “is that it’s not exactly as if we’re starting from scratch. We’re the biggest investors in each other’s countries already. Each day, a million Brits go to work for American-owned companies in the UK, and a million Americans go to work for British-owned companies in the US. This is a highly integrated relationship.”

In person, Phillipson certainly appears unflappable. Tall, bespectacled, speaking quickly but quietly, he is the archetypal British diplomat – he is in fact so diplomatic that he refrains from describing himself as a diplomat, in case the Foreign Office would be offended – and he is faultlessly on-message about the opportunities and the imperatives for a Britain that is newly isolated (or newly global, depending on how you voted). Phillipson began his career at what was then the DTI, working in private office for four trade secretaries (Ian Lang, Margaret Beckett, Peter Mandelson and Stephen Byers) before moving to Washington to work in trade policy in the US. He has worked as Tony Blair’s private secretary for foreign affairs, the head of the Foreign Office’s Iran department, and the High Commissioner of Singapore. His autobiography would make interesting reading, although he would probably be too diplomatic to write it.

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In 2017, Phillipson was one of the nine new trade commissioners appointed by the Trade Secretary, Liam Fox, to create opportunities for British businesses around the world. “In the US,” he explains, this job involves “a very strong focus on preparing for an FTA [free trade agreement].”

Five times since its launch in 2017, the UK-US Trade and Investment Working Group has brought together large delegations from both countries – “100-plus officials, across Whitehall departments and across the US system” – to discuss global challenges that will affect both nations, the immediate opportunities and practical issues for companies large and small doing business in the US, and trading agreements between the two countries.

 Like many Brexit issues, this is not as simple as some Leavers had hoped. “There’s often this thing that the US only trades with the EU on WTO terms – so what would be the problem if we just trade on them? But the fact is that there’s this web of agreements that govern EU-US economic interaction,” Phillipson explains, pointing to the agreements on aviation, civil nuclear energy and wines and spirits that have already been rolled over. Last month, Liam Fox told the Commons that 43 of 109 existing EU trade measures would be maintained by the UK.

To grow trade in a way that will “deepen and strengthen” valuable sectors of the economy, however, will require an FTA. Phillipson says the work for producing an FTA begins by looking at “what type of thing has featured in previous US FTAs”. While Trump described NAFTA, the agreement between the US, Canada and Mexico signed by Bill Clinton in 1993, as a “disaster” that cost the US “millions of jobs”, the US-Mexico-Canada Agreement (USMCA) with which it has now been replaced “is the new template for US trade agreements in today’s world”, according to Phillipson. “And I think that’s actually quite helpful,” he says, “because it gives us a framing point.”

The government has to be careful to avoid actually negotiating for an FTA with the US, or anyone else, until Britain is either in the implementation period created by a withdrawal agreement, or out of the EU with no deal. But there is work that both governments can do in advance. The UK has already run a public consultation on “what people would want to see in an FTA, and what people would not want to see in an FTA”, and “at some point, on our side, [there] will be a public statement that sets out what our negotiating objectives are”. Meanwhile, the US government has also begun the process to get approval from Congress for its own negotiating objectives.

“At that point,” Phillipson says, “people will be able to look at two documents – their objectives and our objectives. And that will then go to a broad question: are there things they want from us that may be difficult?” Inevitably, thanks to extensive coverage in the British press, this will involve the question of whether British people want to eat American chicken.

“It’s been a constant,” Phillipson says of the chlorine-washed chicken debate, “not just in this context, but in the previous EU-US TTIP talks.” Farming in the US is not regulated in the same way as it is in the EU, and some practices – such as washing chicken carcasses with chemical solutions to remove bacteria, or the use of growth hormones in beef farming – that are widely used in the US are banned in the EU for safety and animal welfare reasons. Phillipson points out that Britain will need to find consider its position with regard to both the US and the EU. “Chicken and beef are examples of where there is a difference in regulatory approach, at the minute, between the EU and the US, and in time the decision will need to be made between the UK and the US, which will be a function of the decision we choose to make about our alignment with the EU. So it’s a three-way dynamic.”

Phillipson acknowledges that this will make things more complicated, but he says it won’t come down to choosing one trade bloc or the other. “There will be areas where we will choose to align with the EU, because sovereign choice is in our economic interest. That does not mean there will be nothing we can do with the rest of the world, including
the US.”

Nor is it solely for governments to decide what their citizens buy. For example, the first trade deal struck by the Trump administration was with South Korea. Under the new “KORUS” deal, US car manufacturers can now export up to 50,000 cars (which do not meet Korean safety standards) every year. But Koreans actually buy fewer than 20,000 American cars a year, and this is not because of tariffs, but because Koreans – like Europeans – overwhelmingly prefer the smaller, more efficient cars made in their local market. Phillipson agrees that “the case for trade liberalisation is that it gives more choice to consumers, in terms of variety of products and what they want to pay for it. It is the same for business.” There is, he points out, “plenty of American produce that we import now,” which is not affected by the UK’s current membership of the EU and its laws on animal welfare and consumer safety. “The dynamic in the negotiation will be – where are the priorities on the US side for future market access, and how does that fit with UK sovereign choice?”

The other aspect of a US trade deal that may inflame the British public is what it might mean for the NHS. The relationship between US companies and Britain’s health service was a major factor in public opposition to the Transatlantic Trade and Investment Partnership (TTIP) in 2015. Phillipson says his team were “puzzled” by this reaction because “we had always made clear throughout those negotiations that the NHS was off the table”.

He does, however, admit that this is probably a goal for the US. “Do we think that the Americans are going to want to look for increased opportunities to invest in, or to open up, UK public services? Yes, I think they will.” The key, he says, is to go into negotiations with a clear-eyed sense of what both countries want.

Phillipson is preparing to make those negotiations during an implementation period, which all but the most fervent Brexiteers hope will be the mechanism for Britain’s exit from the EU. But he has increasingly been forced to consider the alternative. “At the beginning of this year, as the risk of no deal went up following the rejection of the Withdrawal Agreement, we thought – okay, we must now prioritise in the immediate term the rollover of agreements and no-deal contingency planning. That’s not because we wanted no deal”, he qualifies, “but we have to be prudent.” This has included, he admits, the need for staff who were “focused on the FTA” to be “moved over to no-deal planning.”

Phillipson says it’s simplistic to say that a no-deal Brexit would force the UK into a weak negotiating position – “we would still need to be able to do a deal that enjoyed parliamentary support”, he points out – but he also says it’s not what America wants, either. A key Brexit objective for the US is “minimising the disruption to their existing massive investment in the UK”.

The other factor that may become pertinent to a US trade deal is the Irish border. “There is a big Irish-American caucus in Congress,” Phillipson explains, “and recently they wrote to the Prime Minister and the Taoiseach, saying, can we just point out that we really care about the Good Friday Agreement and the investment that the US has made in delivering 20 years of peace – so watch this, please. They don’t like the idea of no deal, because of what that potentially means for the border.”

Despite the current uncertainty, Phillipson maintains that he and his team are “very confident and very positive about the prospect of an FTA.” As a trade negotiator and (Foreign Office nomenclature permitting) a diplomat, he is naturally predisposed to seeing both sides, to keeping things on the table. In the era of political table-flipping, these are important skills to have.

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