Mar 3, 2020

The UK’s Just-Released Document Laying Out Trade Agreement Goals with the US Sets a Positive Tone for Future Negotiations

But the document also takes a number of items, most notably the National Health Service, off the table
Daniel Griswold Senior Research Fellow , Jack Salmon Staff Writer

The government of the United Kingdom released its negotiating objectives for a US-UK trade agreement on Monday. And while the clear and positive message from the 184-page document is that the British are very keen on a deal, it also contains a few non-negotiable, bright red lines in health care and food standards.

Issued by the UK Department of Trade, the UK-US Free Trade Agreement (FTA) document notes repeatedly that the United States is the UK’s single largest bilateral trading and investment partner. For the UK, “An FTA represents a strategic opportunity to augment and codify our strong trade, investment, and economic relationships, bringing us closer to our largest bilateral trading partner and the world’s economic powerhouse.”

The UK document is in broad agreement with the US negotiating objectives released a year ago, although the UK version is more detailed and emphasizes some important areas noted in a recent Mercatus Center policy brief but downplayed or ignored by US negotiators.

For one, the UK goals note the benefits it will receive from increased imports from the United States: “Lowering [UK] tariffs could… both reduce the price of key consumer goods imported from the US in addition to reducing the cost of imported goods used as inputs for domestic production.” We hope US negotiators will adopt this same economically enlightened view.

Another UK goal for an FTA would be to allow professionals to move more freely between the two countries and to support mutual recognition of professional qualifications in such areas as accounting and law. The freer movement of people was also highlighted in “The Ideal US-UK Free Trade Agreement” proposed by a group of research centers on both sides of the Atlantic.

The UK Department of Trade also expects that negotiations will lead to the complete lifting of punitive “national security” duties on British exports: “We expect to secure the swift removal of unjustified measures on exports of steel and aluminum originating in the UK pursuant to Section 232 of the US Trade Expansion Act of 1962.” That is the least the US should do for a key ally.

The UK document notes that, on measures of service trade restrictiveness, the UK is more open than the Organization for Economic Cooperation and Development (OECD) average in all service categories, whereas the US is more open in half and more closed in half compared to the OECD average. The US should liberalize its services trade in air transport, maritime transport, and courier sectors.

On tariffs, most favored nation rates of US and UK tariffs are highest in agriculture, processed foods, and textiles and leather sectors. Tariff rates in these sectors, which run as high as 30-35 percent for certain goods need to be dramatically reduced. The FTA should also address automotive tariffs and non-tariff barriers.

Analysis presented in the UK document shows that a US-UK FTA could increase two-way trade between both countries by £15.3 billion (US $20 billion), a 7 percent increase from current levels. That is not quite the doubling or tripling of trade that President Trump has touted, but it is still significant, realistic, and positive.

As for those bright red lines, on Monday, the UK’s International Trade Secretary Liz Truss told the BBC that the government will not accept any diminishing of food standards or the National Health Service. The UK trade document reiterated the government’s position that “the NHS is not, and never will be, for sale to the private sector, whether overseas or domestic. When we are negotiating trade agreements, the NHS will not be on the table.”

On food standards, it is perhaps significant that the UK negotiating objectives do not mention specific sanitary and phytosanitary regulations that could be contentious, such as chlorine-washed chicken, steroid-induced beef, and genetically modified foods. Furthermore, in a speech at Oxford University on Monday, US Trade Representative Robert Lighthizer expressed confidence that such concerns would not derail negotiations.

As the UK objectives confirm, a bilateral trade agreement between the US and UK represents significant economic opportunities and potential benefits, including better jobs, higher wages, more consumer choice, and lower prices. These two developed, high-wage economies have the opportunity to set a precedent in the realm of international trade by significantly lowering trade barriers and driving up living standards for both parties.

Photo by Malte Mueller/Getty

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