The UK’s different approaches to US and EU trade negotiations will not help either cause

On the day that the UK’s future trade talks with the EU got underway, the government published its objectives for parallel talks with the US. There are some striking differences between the two mandates, in both form and content.

It is not unusual for a country to adopt different approaches in different trade negotiations. But the extent to which these vary suggest a lack of coherence between the Department for International Trade (DIT) – which has kept the lead on trade negotiations outside the EU – and the UK’s Brexit team in No.10, which has led on the EU mandate.

The US mandate is less than a third as long and rather less detailed. Curiously, the assurances it asks for from the US are those that the UK is unwilling to grant the EU. And it attempts to sell the US deal using numbers derived from a model previously rejected by the government as “overly pessimistic” when it produced figures on a potential EU deal.

These differences muddy the water, and make the government’s already tough task of completing both negotiations together by the end of 2020 even tougher.

The government wants the US to give assurances it was unwilling to grant the EU

The government’s objectives for talks with the EU send a clear message: on level playing field issues, such as the environment and labour standards, the UK will brook no interference with its sovereignty. The jurisdiction of the European Court of Justice is rejected entirely. Nor does the government want its proposed dispute settlement mechanism to apply to these areas.

In contrast, the government asks the US for “appropriate mechanisms for the implementation, monitoring and dispute resolution of environmental and labour provisions” in any deal. This inconsistency is likely to see David Frost, the UK’s chief Brexit negotiator, face some awkward questions in Brussels.

The government’s US mandate underplays several tricky issues

The government’s objectives for US talks are far less detailed than for the EU negotiations. In the case of subsidies, for example, the government has drawn up plans for the UK and EU to undertake specific obligations relating to notification and consultation, each detailed in full in the mandate. For the US, it states that the two countries should simply “explore the scope for industrial subsidies provisions”.

Similar ambiguity appears in the section on investment. Investor–state dispute settlement (ISDS) – a mechanism allowing investors to challenge foreign government actions they believe impair the value of their investments – was one of the most difficult topics in EU–US trade negotiations in the mid-2010s. But the government’s mandate for its own US talks simply “notes the range of perspectives” on ISDS and suggests that “if it is deemed… appropriate… it must reflect modern practice”.

The language suggests that the government has not yet decided whether it does deem ISDS “appropriate” or what scope it sees for restraints on each side’s ability to subsidise its businesses. This is concerning. If the government really wants to conclude a US deal at the same time as EU talks complete at the end of the year, then it should bring its mandate to the same level of detail. Otherwise it risks being overpowered by US negotiators with a clearer view of what they want.

The government needs to make up its mind on economic modelling

The government’s US mandate contains detailed assessments of the economic impact of a trans-Atlantic trade agreement. It suggests that UK GDP could grow by around 0.07% if the UK and US get rid of most tariffs and 25% of non-tariff barriers (NTBs), or by around 0.16% if they can eliminate all tariffs and half of NTBs.

These figures are not to be sniffed at. For comparison, the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada was forecast to increase EU GDP by 0.03%. But they do not come close to making up the 4.9% of UK GDP that the government’s own analysis, done in November 2018, suggested the UK would lose by moving from full membership of the EU to having a conventional free trade agreement with it.

That analysis has been dismissed by the government, which has said it is seeking “alternative views”. David Frost has also suggested that the 2018 studies exaggerated the impacts of non-tariff barriers and demanded a “fantastic ability to project the micro detail of the economy over a long period”.

While Frost’s view has some support among economists, both the 2018 analysis and the more recent assessment of a UK–US deal were produced using the same economic model, GETRADE. If the government’s considered view is that this is not a sound basis for making policy decisions, then it shouldn’t use the model when it comes up with an answer it happens to like.

The government has set itself a tough task in completing negotiations with both the EU and the US this year. It would surely stand a greater chance of success if it equips its negotiating teams – in DIT and No.10 – with clear and coherent objectives.