Brexit plan might kill hopes of a US-UK commerce deal


Larry Summers: Trump's trade policy is 'misdirected'

Britain desires an in depth commerce relationship with the European Union. It additionally desires an bold free commerce cope with the US.

It in all probability cannot have each.

The prospect of a commerce deal between the 2 international locations is prone to be excessive on the agenda when President Donald Trump meets British Prime Minister Theresa Could on Friday.

Trump, who has spoken favorably about the UK’s departure from the European Union, has beforehand promised the nation a “very, very large deal, very in a short time.”

However in an interview with British tabloid The Solar that printed late Thursday, Trump said the UK authorities’s proposed association for commerce with the European Union after it leaves the bloc would “in all probability kill” a separate commerce cope with the US.

The Brexit plan printed by the UK authorities just some hours earlier is designed to maintain the nation intently aligned in key areas with the European Union. That may severely restrict its scope to barter new commerce agreements.

“It is a delusion to suggest that we are able to keep critically near the European Union and do unbiased commerce offers,” mentioned Peter Holmes, a commerce skilled on the College of Sussex.

Related: Trump criticizes British PM Theresa May over Brexit deal

The Brexit proposal goals to protect frictionless items commerce with the European Union, and keep away from the border checks and tariffs most feared by corporations with advanced provide chains and producers of agricultural items with quick shelf lives.

However it might additionally forestall Britain from providing different international locations together with the US the concessions on rules that type the idea of free commerce offers.

UK choices are restricted

Concessions on rules could be off the desk as a result of Britain wants to stay aligned with strict EU security and environmental guidelines.

Meals and agriculture present good examples: Genetically modified crops, animal feed with antibiotics and chlorine-washed rooster are banned within the European Union however widespread in the US.

American farmers would need these requirements to be watered down in order that they might promote their merchandise into the UK. However Britain will not be capable of agree that and keep aligned with the European Union.

It is a stumbling block that has been known as out by opponents of the plan together with Boris Johnson, who resigned as UK overseas secretary on Monday in protest.

“By surrendering management over our rulebook for items and agrifoods … we’ll make it far more troublesome to do free commerce offers,” Johnson wrote in his resignation letter to Could.

Woody Johnson, the US ambassador to Britain, appeared to agree, telling the BBC this week {that a} bilateral commerce deal between the 2 international locations is now “completely up within the air.”

Trump Theresa May UK
Theresa Could and Donald Trump.

Related: The making of a global trade war

It might even be troublesome for Britain to supply concessions on providers, which make up roughly 80% of its economic system.

Robert Basedow, a world commerce skilled and assistant professor on the London College of Economics, mentioned that mutual commerce in providers is already fairly welcoming to American corporations.

“And people sectors that stay pretty closed, for instance healthcare, I do not assume the UK has political assist to really open them up,” he mentioned.

America tried up to now to achieve entry to the healthcare sector as a part of commerce deal negotiations with the European Union. However UK protests over the problem helped derail the talks.

What about tariffs?

The UK authorities plan for Brexit additionally requires a future customs association underneath which Britain would gather EU tariffs on items sure for the bloc.

Doing so would enable the UK to set its personal tariff charges, and supply concessions to different international locations as a part of a free commerce deal.

However critics say the tariff plan is untested and obscure. Such a proposal would virtually actually be rejected by the European Union.

Related: Europe says trade fight with US will hurt economic growth

Excessive stakes

On Thursday, Could touted her nation’s “unmatched” commerce and funding relationship with the US, saying that the international locations are the biggest traders in one another’s economies.

However putting a useful commerce cope with the US was all the time going to be troublesome for the UK, which is able to lack the negotiating energy loved by the European Union.

“All people is aware of that the UK is determined to get a commerce deal, as a result of they merely haven’t any as soon as they depart the European Union,” Basedow mentioned.

If negotiations do get underway, Britain’s novice commerce negotiators are prone to face difficulties.

“If you consider it as a pc sport, the US is sort of the ultimate adversary that you just meet,” Basedow mentioned. “Beginning your negotiations with the US is generally a foul concept.”

CNNMoney (London) First printed July 12, 2018: 1:12 PM ET

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