UK-US trade deal

READING TIME 15 mins
UK-US trade deal

About UK-US trade

During the 2016 referendum campaign, senior figures in the Leave campaign promised a UK-US trade deal as one of the major prizes of Brexit. This is now the stated ambition of the UK Government, which consulted in 2018 on the parameters of a deal.

Although formal negotiations cannot begin until the UK has left the EU, both the UK and US administrations have at various points emphasised their keenness to agree a trade deal quickly, joint working groups are already meeting regularly to lay the groundwork for a deal and in February 2019 the US published its negotiating objectives. Depending on when Brexit takes place, a UK-US trade deal could be negotiated and agreed as early as 2020.

As the deal is yet to be negotiated and the UK Government is secretive about its objectives, we do not know exactly what its provisions will be. However, the US has been more explicit about what it would seek in a UK-US trade deal. Some of these provisions would have a profound negative impact on health, welfare and the environment.

In depth: Concerns about a UK-US trade deal

As the deal is yet to be negotiated and the UK Government is secretive about its objectives, we do not know exactly what its provisions will be. However, the US has been more explicit about what it would seek in a UK-US trade deal. Some of these provisions would have a profound negative impact on health, welfare and the environment.

TJM is concerned about the following potential impacts of a UK-US trade deal:


1. Health standards

The US makes no secret of the fact that it views European health and environmental standards as ‘trade barriers’. This goes beyond the EU measures restricting chlorine washed chicken and hormone-treated beef that the US has tried to dismantle through the World Trade Organisation and during TTIP negotiations. Indeed, the US Trade Representative’s (USTR) 2016 Report on Foreign Trade Barriers lists, among others, EU regulations on chemical safety (the REACH regulation), nutritional labelling, hormones in food, GMOs, milk quality and meat safety as measures it views in whole or in part as trade restrictions that it would like to “tear down”. This is part of broader US opposition to Europe’s use of the precautionary principle in its approach to protecting health and the environment. This agenda would be front and centre in any UK-US deal, and would dramatically increase the exposure of UK consumers to health risks in the food they eat. According to the former US Agriculture Secretary, such “issues” will be “easier” for the US to resolve with the UK than the EU.


2. The environment

Similarly, the US has different environmental standards to the EU’s, and the UK will have to choose which regulatory system it wants to align with. Non-regression of environmental standards and ‘Level Playing Field’ provisions comprise part of the Withdrawal Agreement, which both aim to ensure a base level of current standards after Brexit (if a deal is agreed). However, these only affect a narrow range of areas and are difficult to legally challenge. There are still ways in which a trade agreement with the US could affect the environment. For instance, many products which are produced in the US using less environmentally friendly practices might be sold in the UK, even if these practices are banned in the UK. A trade deal might also lead to US direct investment, which could put pressure on British local authorities to allow environmentally damaging activities such as fracking. In the EU, overriding principles (such as the Precautionary Principle or the Polluter Pays Principle) guide legislation. The UK and US do not have the same legal structure which enshrines these principles. It is therefore uncertain whether environmental standards will remain the same after Brexit, or whether a US trade deal will lead to deregulatory pressure.


3. ISDS

Investor-State Dispute Settlement (ISDS) allows foreign investors to sue governments for certain kinds of measures which harm their profits. The US tends to seek the inclusion of ISDS in its trade agreements. If ISDS were included in a UK-US deal, American investors in the UK could challenge policy measures that might disadvantage them. Historically, ISDS has been used by companies to challenge environmental policies, health regulations and other legal rights. For instance, a Swedish energy firm sued Germany for introducing policies designed to curb water pollution and carbon emissions. A US tobacco giant sued Australia for attempting to introduce plain-cigarette packaging legislation - a policy designed to protect public health. A French multinational sued Egypt for increasing its national minimum wage. Both British and American administrations are aware that ISDS is politically toxic. However, ISDS remains a risk as the UK government has refused to rule it out of future trade policy. Indeed, Liam Fox, the Trade Secretary, described attempts to remove ISDS as “nonsensical”.


4. Public services

A UK-US deal is very likely to include public services provisions. The Government has explicitly stated its ambition that the UK becomes a global leader in services trade. Similarly, in TTIP (a proposed but unsuccessful EU-US trade deal) negotiations the US pushed for greater access for its companies to UK contracts for public service delivery and a clause which seeks to ratchet and lock-in privatisation levels in public services. This could affect sensitive areas including NHS service delivery, and also education, transport and prison services. Opening up to US firms in this area can both speed up deregulation and privatisation, and also make it harder for these changes to be reversed.


5. Regulatory cooperation

A key aspect of TTIP was ‘regulatory cooperation’, where European and American regulators would work together to review and seek harmonisation on regulations in the EU and the United States. Similar provisions are found in CETA, a trade agreement between the EU and Canada, which establishes a ‘Regulatory Cooperation Council’ to review and propose regulations. One concern with this is that these councils lack the democratic oversight afforded to the public bodies which ordinarily make regulations. A second, similar concern is that these councils may be heavily influenced by private sector interests, not least because they are composed of trade officials rather than experts in areas such as health or the environment. Third, and perhaps most importantly, there are good reasons for separating out regulations from the context of a trade agreement. Since the legal and political purpose of a trade deal is to increase trade, it is likely that attempts regulatory cooperation will assess regulations solely, or at least primarily, in relation to how much they contribute to the total level of trade. This is an extremely narrow way of assessing regulations, which ought to be considered in terms of how well they achieve their social and environmental objectives.


6. Trade democracy

As with other post-Brexit trade deals, there are big questions about how a US trade deal will be negotiated and agreed, and how the public and civil society will be consulted. Trade agreements have a far-reaching impact on all areas of public policy, but UK MPs currently have virtually no say over the content of trade agreements and are often powerless to amend or reject them. This is due to an archaic convention which gives the Government power to begin negotiations, conduct them in secret and sign them without any input from Parliament. It is not even necessary for MPs to debate or vote on a trade deal before it is ratified. Ultimately this leads to a democratic deficit, whereby ordinary individuals are powerless to influence important trade agreements, and are not represented when decisions are made. Regardless of the content of a UK-US FTA, it is essential that the deal receives proper democratic scrutiny to ensure that it is designed in the public interest.


7. Restrictiveness of a US trade deal

In its negotiation objectives for a UK trade deal, the US administration made clear that the deal would be contingent on the UK aligning with some of the Trump administration’s geopolitical objectives. For instance, the proposals require the UK to “discourage politically motivated actions to boycott, divest from, and sanction Israel”, and “to ensure transparency and take appropriate action if the UK negotiates a free trade agreement with a non-market country.” Although the exact implications of this are unclear, the objectives cohere with the Trump administration’s record of using trade policy to achieve geopolitical ends - as seen in USMCA and policy on Mexican immigration. While the UK undoubtedly shares many geopolitical goals with the US, it may regret being tied to the Trump administration’s lines on Israel and other sensitive diplomatic situations. It is important that the UK does not compromise on a principle-led approach to international diplomacy for the sake of gaining a trade deal with the US.

Analysis: asymmetry of negotiating clout

One feature of trade diplomacy is that large regulatory powers often seek deals with smaller countries in order to develop a ‘model’ trade agreement which they can then use as a benchmark for other deals. For instance, the EU will use its agreement with Canada (CETA) as a template for trade negotiations with the US and Japan, and the US referred to its trade agreement with South Korea in the Trans-Pacific Partnership (TPP) negotiations, and hoped to create a model in the TPP for its negotiations with the EU.

However, the UK is unlikely to conclude an ‘ideal’ trade model with the US that represents its offensive and defensive interests. The US economy is six times larger than the UK’s, and 13% of the UK’s exports are to the US, compared to only 3% of US exports to the UK. Meanwhile the US has some of the best-developed negotiating capacity in the world, having concluded 12 bilateral trade agreements and one multilateral agreement since 2000, and engaged in protracted negotiations over the TPP and TTIP. The UK, on the other hand, is building its trade capacity for the first time in over forty years, while attempting to forge its future relationship with the EU at the same time.

Another factor is that the US is likely to use a UK-US deal as leverage for a more advantageous US-EU deal, which means the US is likely to fiercely assert its objectives. US trade policy is not currently dovish on this front, as was made clear in the US administration’s publication of its negotiation objectives for a UK-US trade deal. In 2017 the US’s Trade Policy Agenda for 2017 called for “a more aggressive approach” to trade, and the use of “all possible leverage to encourage other countries to give U.S. producers fair, reciprocal access to their markets”.

The Trump factor: America First

Donald Trump has built his business reputation on a ‘winner takes all’ approach to negotiations and built his political platform on an ‘America First’ approach to trade, which has characterised trade partners like China as ‘raping’ the US.

Trump’s trade team includes Commerce Secretary Wilbur Ross, who notoriously referred to Brexit as an opportunity to “take advantage of the inevitable relocations that will occur during the period of confusion”. Ross co-authored the Trump ‘Trade Doctrine’ – which likens VAT in other countries to a ‘backdoor tariff’ that blocks American exports. US Trade Representative Robert Lighthizer, former trade deputy under Reagan and trade lawyer and lobbyist for US exporters, is a specialist in using US trade policy to craft muscular responses to trade partners who are deemed to have violated agreements. Ross and Lighthizer both have a background in US Steel, something which has informed their protectionist outlooks and fixation on the trade balance.

Trade at what cost?

Last but not least, rushing into a deal with the Trump Administration could be both morally and diplomatically compromising for the UK. Trump’s presidency has overseen the rolling back of healthcare, the exclusion of entire populations from entering the US, the expedition of mass deportations and the dismantling of environmental protections. Meanwhile he has used his position to demonise races, religions, the court system, the press and even prominent members of his own party. In addition to his divisiveness, racism, sexism and science denial, Trump has also proved erratic and unreliable, lashing out at traditional allies and stoking global tensions.

This raises an important moral question about whether the UK should proceed with a deal which could provide President Trump international cover to bolster his domestic standing. It also raises a diplomatic question of whether the UK risks drawing closer to an unreliable Trump Administration while alienating its more traditional allies both inside and outside the US, many of whom are strongly opposed to Trump’s programme.

What TJM is doing about it

  • Campaigning for trade democracy to ensure that a US deal has rigorous Parliamentary scrutiny and input from civil society
  • Campaigning against ISDS to ensure that a US deal does not include ISDS
  • Working with civil society organisations, including Sustain, Greener UK, the RSPB, the National Pig Association and others to make sure that a US deal does not undermine food and environmental standards in the UK
  • Developing work around regulatory cooperation to ensure that a US deal is not used as cover for deregulation in the UK

Further information