US – UK Trade Deal ‘Unlikely’

From Inside Trade, November 15th  

 Sent in by Ben Davis of the United Steelworkers

The draft Brexit deal unveiled by the UK government last week could stop a future U.S.-United Kingdom free trade deal before meaningful talks have even begun, two British Conservative members of Parliament, along with a British trade analyst, argued on Thursday.

“I think it’s probably impossible,” MP David Davis, the former British Brexit secretary who resigned in protest of the direction of talks in July, said at a Heritage Foundation event.

The Withdrawl Deal could keep the UK in a customs union with the European Union for an indeterminate period of time, he added, which means the country would not be able to enact its own regulatory regime and pursue its own trade deals, including one with the U.S.

Brexit supporters have long touted free trade agreements – particularly one with the U.S. – as prizes for leaving the EU. Davis said U.S. officials he has talked to considered the UK to be first in the queue.

The Office of the U.S. Trade Representative will be seeking public comment and to hold a meeting  in January to inform the negotiating objectives for a potential U.S.-UK bilateral trade deal, according to a notice set to be published in the Federal Register on Friday.

Brexit should have been seen as a great opportunity by both the UK and the rest of the world – a G7 country building a trade policy from the ground up, said Shanker Singham, director of the international trade and policy unit at the London-based, right-leaning Institute for Economic Affairs.

Instead, he said, the UK could end up being seen by the U.S. as “a tiny version of the EU” that is not worth the effort needed to secure a free trade agreement.

Davis and MP Owen Paterson, another hardline Brexit supporter, said they didn’t believe the deal stood a chance in Parliament. They also said a “no deal” scenario was preferable to the current deal.

Unlike Brexit supporters, the business community has largely sought to maintain close ties with the EU single market, and industry groups so far have said they prefer the certainty of a deal over no deal.

  The USTR last month notified Congress of its intent to negotiate with the UK after the latter is out of the bloc. The UK is set to exit on March 29th.

The deal does contain some elements that could affect a future U.S.-UK trade deal. The big one is a “backstop” protocol for the Irish border. A longtime sticking point, the backstop as outlined in the draft deal would enact a UK-wide customs union in the event the two sides could not come to an agreement on their future relationship by December 2020, the end date for the transition period. The protocol would also keep Northern Ireland in line with many aspects of the European single market.

The deal does include an option allowing both sides to agree to extend the transition period to reach an agreement that would maintain a frictionless border between Ireland and Northern Ireland. If none was reached, however, the backstop would go into effect and the UK would stay in the backstop customs union “unless and until” a new agreement was reached. Additionally, the UK could not unilaterally leave the customs union — another element Brexit supports dislike.

Both the UK and the EU have said they do not want the backstop go into effect.

But Singham said the deal – even excluding the backstop – makes it likely the relationship between the EU and UK would involve a customs arrangement of some sort. Any arrangement like that would preclude the UK from negotiating its own tariffs or large parts of its regulatory regime, he said, and without that leverage, what could the UK offer the U.S. to get what the UK might want?

“This is the greatest tragedy of this deal,” he said. “It takes a country that could have been a major player in solving global problems, and it makes it completely irrelevant.”

At least one member of Congress was skeptical of any Brexit deal. “For many, many years, we’ve relied on Great Britain, especially, to carry our water in EU negotiations,” Rep. Ron Kind (D-WI) told Politico. “We’re not going to have that when it comes to their exit from the EU, so we’re going to have to find new avenues of relevancy within the EU.”

The withdrawal deal also protects EU geographical indications, which have long frustrated U.S. producers. They argue that European GIs are too restrictive and cover “common names” of products like certain kinds of cheeses and wines. The protections for GIs in the withdrawal deal does not guarantee the same protection in any agreement negotiated during the transition period, but the EU has made a point to protect its robust GI system in all its free trade agreements. — Hannah Monicken (hmonicken@iwpnews.com)

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