The UK gets its act together on trade and diplomacy

It is very easy to carp at trade deals, as the opposition parties are finding. After complaining about the concession of NICs holidays for Indian intra-company transferees on Tuesday, when the government unveiled its free trade agreement with India, Conservative leader Kemi Badenoch has now accused the government of letting itself get “shafted” in its damage limitation exercise with the US.

But if the India and US trade “deals” are not earth-shattering, they are certainly worth having. The UK gained some valuable concessions on its manufactured exports to India – an important gain when access to the US is being reduced. The UK reportedly always held out against an EU-India deal (which never materialised) over visas, and would have probably preferred not to make the concessions on National Insurance that the Indians received, but the UK’s trade negotiators had to judge whether they could have got a deal over the line without making it easier for Indian workers to come to the UK. The UK could have held out for better access for UK legal and financial services, but then the deal might just not have materialised. So this deal, which like the deals the Conservatives negotiated with Australia and New Zealand does not add much to GDP at first sight, is probably on balance worth having.

The issues in the US deal were different: the need to dampen the impact of the big tariffs the US is levying on cars, steel and aluminium and prevent those leading to immediate job cuts. And the government got the Trump administration to row back on its claim there would be no exemptions from sectoral tariffs (the ones designed to reshore jobs into the US) by getting carve-outs – through rate quotas in the case of cars and through some unclear partnership on steel – and a promise of preferential treatment when the US gets round to imposing sectoral tariffs on pharmaceuticals.

The US did not budge on its revenue-raising baseline tariff, and the UK agreed to reduce some tariffs on what the US commerce secretary described as $ 5bn worth of export “opportunities” including on beef and bioethanol which have upset farmers (again). 

The UK was first to do a deal with the US – reflecting perhaps a degree of mutual desperation: it will only be possible to judge whether this was a “good” deal when we see whether other countries do better “deals” or play hardball and get the US to change course. But the deal reduced the immediate risks British industry faced from Trump’s policy.

Keir Starmer has maintained his freedom of manoeuvre on the EU reset

While the prime minister was at pains to link yesterday’s announcement to the anniversary of VE day, the president was keener to emphasise it as a benefit of Brexit. Ultimately, the US did not demand a price that would have kiboshed the prospects of progress. The UK reduced agricultural tariffs, but insisted on maintaining standards. And the government did not surrender on tech regulation (though the details of the floated partnership are still to come) nor on the Digital Services Tax (yet).

Concessions on agricultural standards could have instantly torpedoed one of Labour’s clear asks for the UK-EU reset – an agreement on sanitary and phytosanitary standards. Ministers had made clear they would hold the line on that – and they did (the EU may though look for assurances that the UK’s border controls are up to ensuring that we don’t let beef treated with growth hormone into our market). Nothing else that the UK has agreed with the US has at this stage direct implications for the EU Summit (even if there may have been some gagging in Brussels at the mutual admiration on display in the Oval office and the JLR canteen).

Proper co-ordination and the right people are paying off

The UK, of course, has another agenda with Trump as well – ensuring he stays committed to NATO and does not pull the rug from under Ukraine – and there too its quiet diplomacy at defusing the Trump-Zelensky tension after February’s meltdown seems to be paying off.

On coming into office, Labour recreated the Economic and Global Issues secretariat, and brought in big hitters – Jonathan Powell as national security adviser, Michael Ellam as second permanent secretary heading EGIS and acting as G7 and EU sherpa and appointing Lord Mandelson to be our ambassador in Washington. This week suggests that is paying off in terms of co-ordination and effectiveness. Now the government needs to ensure that that is not undermined by what still seems to be an underpowered communications operation which failed to anticipate criticisms of the India deal and needs to be on top form for the EU reset.