03 December 2019

Alex Stojanovic argues that the UK should resist the temptation to make the US the priority in any post-Brexit trade policy.

The UK government seems to have built its post-Brexit trade policy on an obsessive pursuit of an extremely contentious US trade deal. Yet, like Captain Ahab’s pursuit of Moby Dick, it is likely to be an exhausting search for an illusory behemoth – and with huge risks involved.

The UK would be better off focusing on a less ambitious prize, and one that has more chance of actually being agreed.

A US–UK deal would be especially contentious and probably won’t be ratified

Leaked documents on the government’s exploratory talks with the US provide more detail on the US's priorities and how it aims to open up the UK’s market.

The US wants to prize the UK away from the EU’s regulatory approaches – especially on food safety. The US has clear differences with the UK on attitudes to animal welfare, labelling for consumers and production methods – which won’t change overnight because of Brexit. The attempt to remove these barriers is likely to create a public outcry in the UK – in fact there is already a significant campaign underway. In addition, there could be economic costs. If the UK were to open its market to US imports, it could immediately disrupt exports to the much more important EU market – and increase the friction in trade between Great Britain and Northern Ireland. Not surprisingly, the US has flagged this as “the biggest sticking point” to reaching a deal with the UK.

Despite President Donald Trump’s statement to the contrary, the NHS is the other major interest for the US. The US pharmaceutical industry is demanding higher drug prices and more patent protection in the UK, with the leaked documents providing details of how this could be achieved.

These are just two of many potential deal-breakers, and it is precisely the most controversial issues for the UK that have the most influential backers in the US – the powerful US agricultural lobby would oppose any deal that doesn’t involve significant reductions in tariff and non-tariff barriers.

As a result, if the UK doesn’t accommodate the US's demands, it is hard to see how a deal could pass Congress. And if the UK bows to US demands, it is equally hard to see how that deal will be passed in the UK Parliament.

Prioritising the US doesn’t make much strategic sense for the UK’s trade policy

Our previous work argues that prioritising the partner with most leverage over the UK is not the smartest way to approach trade policy.

Leaving the EU would place significant economic and political pressure on the need to pass big trade agreements. Negotiating a deal with the US, either as the UK prepares to leave the EU or immediately after Brexit, would maximise the US’s already outsized negotiating clout.

Whatever concessions are made by the UK to the US would then become a starting point in any talks with other countries. For example, it will be difficult for the UK to exempt the NHS from future deals if it has formed part of any US–UK trade agreement.

And a politically toxic deal with the US could see the post-Brexit vision of ‘Global Britain’ launched against a backdrop of negative headlines. This is unlikely to help efforts to establish the kind of cross-party co-operation needed to strengthen the UK’s negotiating stance in future trade talks.

There are better immediate options available for the UK than a trade deal with US

The UK should instead begin life after Brexit by pursuing more realistic options than the US, and should first seek to negotiate with smaller nations such as New Zealand. There will of course be similar pressures to reach a deal, but the stakes will be lower and the negotiating leverage will be less imbalanced. The Initiative for Free Trade has also made the case for negotiating a UK-specific version of the EU’s deal with Japan, as this would offer benefits to the UK in terms of digital trade and financial services – both priorities of UK trade policy.

In any deal, the UK will have to make difficult trade-offs – most likely on agriculture – but these would be less far-reaching than those likely to be demanded by the US. Talks would also be conducted in a less controversial atmosphere, allowing British politicians and officials to gain crucial experience ahead of any negotiations with the US.

While there is no reason why the UK cannot negotiate successful trade deals, it has not had to negotiate a trade deal on its own for nearly half a century. It will need time to fully develop its trade policy and clarify its aims before it attempts to negotiate with one of the largest trading nations on the planet. 

The US may offer the biggest prizes, and the US will certainly shout loudest, but the UK should resist – and heed the lesson of Captain Ahab’s obsessive quest for a prize he couldn’t capture.