The United Kingdom's trade deal with the European Union isn't the only massive project British negotiators must contend with before they quit the bloc at the end of the year. With just months to go ahead of the exit, with or without a deal, Prime Minister Boris Johnson and Trade Secretary Liz Truss are also racing to keep the many trade deals the UK currently maintains as a result of its membership with the EU.
All told, there are about 70 of them covering about 15% of the UK's trade, Bloomberg reported this week. The report notes that while Britain has made considerable progress, so-called “continuity deals” with some of the most important countries in that group including Canada, Japan and Turkey have yet to materialize.
If the UK leaves the EU with no agreement, it will trade with those 27 countries under terms set by the World Trade Organization.
Fresh agreements with the U.S., Australia and New Zealand are also a priority -- one of the main arguments for Brexit was that Britain would be free to pursue better deals unshackled from Europe.
“Deals with the likes of Australia, New Zealand and the U.S. likely will mean very small gains in aggregate--and nowhere near enough to make up for the losses that will come from the added trade frictions with the EU,” said Julia Magntorn Garrett, a fellow at the UK Trade Policy Observatory at the University of Sussex. “In terms of continuity deals, it's not so much about gains to GDP, because we already gained from those agreements — it's about mitigating any losses.”
The government's own analysis shows that leaving the EU will lead to GDP loss of around 5% in the long term even with a free-trade agreement in place. A pact with the U.S. would only add a fraction of that to UK growth.
Asked about the government's figures showing only minimal benefits from the accords, Truss told a panel of lawmakers recently that because the deals haven't been negotiated yet “their upside could in fact be larger than the calculations now suggest.”
However, the downside also could come into play as the economic carnage wrought by the pandemic and the ensuing collapse in global trade could prove problematic.
“In this climate, it's possibly going to be even more difficult,” said Swati Dhingra, a fellow at the Centre for Economic Performance, a research group at the London School of Economics. “People are going to be thinking of job creation in their own countries. There's going to be less of a coming-together around the negotiating table.”
With the UK set to face the worst economic fallout from the pandemic among developed economies, “Johnson could use some wins,” Bloomberg says, “but it won't be easy.” While the EU and U.S. usually limit their trade negotiations to two or three major agreements at a time, Britain is now pursuing almost a dozen at once.
“Even if you were an incredibly experienced negotiator it would be a really tough job,” said James Kane, an associate working on trade policy at the Institute for Government, a think tank in London.
Bloomberg reports some details on how the UK's non-EU negotiations are going so far, and focuses on the U.S., EU talks — with the U.S. already Britain's largest bilateral trading partner and trade between the two worth $270 billion in 2019.
Still, in March, the British government estimated that a comprehensive free-trade agreement with the U.S. would only have modest benefits for the UK economy -- a 0.16% increase in GDP over the next 15 years, and a 0.2% increase in real wages.
A priority for the UK in the negotiations is tariff elimination, Bloomberg says. The U.S. has imposed punitive levies on British goods in recent years, including steel, aluminum and Scotch whisky, many in retaliation to EU subsidies for Airbus SE. Britain is also hoping to open up the U.S. market for services trade, such as in the digital and financial sectors, where the UK is strong.
The two sides have completed two negotiating rounds so far, with the next slated for late July. Truss has said there is no deadline for reaching a deal and that talks are progressing well. The top U.S. negotiator recently downplayed chances of a deal this year.
A key obstacle will be disagreements over agriculture. The U.S. sees greater market access for its food exports as a big prize, whereas the British government is under pressure not to allow standard U.S. products like chlorine-washed chicken and hormone-treated beef into the country.
So, we will see. The administration's “get tough” tariff policy is still prominent for the administration's election hopes, and the UK Green Party's “anti-industrial” food policies likely will be very difficult to dislodge. As a result, it is difficult to see much opportunity for bridging wide gaps in important U.S.-UK policies. However, these talks involve high stakes and should be watched closely as they proceed, Washington Insider believes.
Welcome
