Britain’s much-ballyhooed trade agreement with the USA has not even progressed past preliminary discussions and it’s already hitting major snags. According to a report in the Daily Telegraph last week, talks are breaking down due to “chronic” staffing shortages on the British side and the obstacles that exist because a deal would involve politically sensitive elements of the economy. So far, so predictable.
Aiming for a quick trade deal with the United States is a tremendous folly. Such an agreement faces so many obstacles that it is probably unachievable anyway but attempting to do this as soon as our EU membership ends is just absurd. We are in no way ready.
The UK is currently in the process of removing itself from a political, economic and legal union it has been part of for 46 years. In case you haven’t noticed it is a mite complicated. As a country we are currently in the early stages of repatriating trade policy and this is no mean feat. The government is building a department from scratch. This means hiring trade officials, expanding the civil service, developing a strategy and integrating it with other government departments. This is far from complete.
Unsurprisingly, US officials have expressed a “gradually rising concern” about the UK’s “ability to conduct such complex negotiations” and in response are sending “less senior” officials to meetings. Whitehall does not have the capacity to manage negotiations with the US and the EU at the same time, it seems. Overstretched and understaffed government departments constantly talking at cross purposes doesn’t make for productive and coherent trade negotiations.
The new Department for International Trade has a vast amount of work to do as it tries to roll over existing trade agreements. On top of that, Britain is about to begin the most important trade negotiations the UK will ever embark upon, with the EU. The idea that it makes any strategic sense at this point to pursue trade negotiations with an economic superpower is risible, especially when shortages of expert trade officials is a “chronic problem”. Lambs to the slaughter.
Despite the delusions of Brexiteer Atlanticists nobody in the US is going “to do us a favour” when it comes to trade. US trade negotiators will be ruthless and single minded in pursuing their goal, which will be to take as much as they can while giving as little away as possible. This will always be the case but if we go in now when we are at our weakest and most desperate, we will be fleeced.
The US is very clear about its aims in negotiations with Britain. In their summary of their objectives, they aim to “eliminate practices that unfairly decrease US market access opportunities or distort agricultural markets to the detriment of the United States”. That means opening our market to beef produced with growth hormones and our old friend chlorinated chicken.
Brexiteers keen on a US FTA often say “but we won’t have to follow the USA’s rules” but that’s exactly their aim. The US intends to bring us under their sphere of economic influence and compel the UK to adopt US standards. This means leaving the EU regulatory system which we currently help to shape (and will likely influence even post-Brexit because of the size of the UK economy) and the EU geographical indication system that protects products such as Scotch, Cumberland sausage and Wensleydale.
They also want to open up the UK healthcare market and have the NHS pay more for US produced pharmaceuticals.
So, once we have got past the practical problem of not having the capacity to negotiate this agreement there is the question of whether it is sensible at this point to walk straight into negotiations with a superpower with an experienced team and clear objectives. Even if we set those concerns aside, we run into two further barriers, one political and one economic.
First, the political. One of the biggest problems facing TTIP – the failed US and EU agreement – was the opposition of the public in member states. TTIP faced some of the biggest objections among the British public and press. When negotiations are being conducted at a national level and with the US, scrutiny will be heightened.
Much of the press will have a field day reporting on US animal welfare and agricultural standards. Expect double page spread exposés in newspaper and episodes of Channel 4 Dispatches or BBC Panorama exposing animal cruelty, poor hygiene and various scary sounding chemicals. Then will come the horror stories about the threats to the NHS. First protest amongst the public grows and then political opposition in the House of Commons brings the whole thing to a halt. Ratifying a comprehensive FTA with the USA will be extremely difficult.
Even if we overcome the political barriers, the economic problem remains. Adopting US standards will lead to restricted access to European markets. Currently our regulations are harmonised with other EU member states. Thus, it can be assumed that goods exported from the UK conform to the relevant standards and therefore do not need to be inspected, assessed and tested.
Any future UK-EU Association Agreement will have an overarching institutional framework designed to monitor compliance and manage divergence. Regulatory divergence will mean restricted access to the Single Market. If we accept imports that do not meet EU standards, we will face increased border checks on our imports.
The main problem with chlorinated chicken is not one of safety or hygiene but the fact that its presence in the UK market means British poultry exports will face an increased inspection rate to prevent chlorinated chicken entering the EU ecosystem.
Notably, US House speaker Nancy Pelosi has warned that the UK adopting US standards would lead to a hard border on the island of Ireland. “If there is any harm to the Good Friday accord,” she said, “no treaty”. So, even if we decide to pay the economic price, we’re back to the political barriers as Congress would not ratify the deal in these circumstances.
All of these problems, and for what? The consensus among trade experts is that the economic gains in terms of boost to GDP are insignificant. It is US farmers and US pharmaceutical companies that stand to gain the most. The UK and the US already have a significant trade partnership and there are many ways this can be enhanced without an FTA. The costs of new barriers to EU trade far outweigh the marginal gains of a trade agreement with the US.
Donald Trump is a fan of Britain and has extended his hand in friendship so we must seek to benefit from good relations. However, Trump is operating an “America First” policy and railing against the liberal global institutional framework that Britain will rely on post-Brexit. This is not someone we want to depend on.
Already Trump’s negotiators have signalled that any trade agreement depends on the UK falling in line with his policy on China and dropping its intended tax on US tech companies. If we jump into his arms in desperation now, we will find the demands keep coming.
We should forget the US trade agreement and concentrate on conserving trade with the EU and rolling over existing agreements. Then we must look to allies where we can forge an understanding an agreement based on mutual benefit, like New Zealand and Australia. Start with the easy wins.
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