Notes from the CEO – February 2019
Three days in Washington DC last week and the sense of anticipation about meaningful negotiations on a trade agreement between the US and the UK were in the air at every meeting we held. The US Commerce Department and Trade Representative (USTR) have completed the new US Canada Mexico agreement (USMCA) and phase 1 of a China deal and now all efforts will be focused on getting something done with the UK. Both sides have been talking about this since the 2016 referendum result and the leaders in both countries have made it clear that this is high on their agenda for 2020.
But, even with the support of the principals and the political desire to reach an agreement on both sides, there will be hurdles that will need to be overcome. We haven’t yet seen the detailed negotiating objectives from the UK, but we already know that the challenges will fall in three broad buckets; sequencing, balancing wins and losses, and making the case to the public.
The UK will attempt to negotiate its future relationship with the EU and this new trade agreement with the US in parallel; of course, you can understand the political reasons for taking this approach (and the potential to create negotiating advantages), but if the desired outcome is more open trade with fewer impediments with both the EU and the US, then detailed and constant communication between both negotiating teams will be necessary. BAB members continue to argue that reaching an agreement with the EU, that ensures no new friction in trade where none exists now, should be the priority but the government must assess what price it is willing or able to pay to achieve this; you can see this argument being rehearsed daily between the UK and the EU and this fight will need to be settled before anyone can move on.
Our guess, when the UK does publish its detailed negotiating objectives for the US FTA, is that there will be a lot of common ground but both sides will have new things that they want to achieve. Usually in successful negotiations, wins and losses are balanced, some items get sacrificed as non-essential and some are held to be so critical that no movement is possible. We already know what the US government is seeking to achieve, especially around market access but whether the UK has a similarly defined set of requirements (achievable at a federal level) that will enable the teams to create a win-win is not clear.
And if the sequencing can be managed and a balanced deal struck, the task of selling this to the people will still be huge. Interestingly, given the mixed history of support for trade deals in the USA, there is unlikely to be a big negative challenge to overcome in the States. There is a depth of real support for the US UK relationship across the country and the UK is not seen as a threat to American jobs. Unless the Irish border becomes a real issue, an agreement should get the support of Congress. In the UK, our sense is that it will be a tougher sell. There will be opposition from multiple groups (anti-globalist, environmental, labour market protectionists, anti-Americans and EU federalists) and on the big public issues of food and healthcare. So, government and business will need to make a positive case for an agreement and carefully and clearly take on and disarm the arguments that are thrown against it…and we believe they can.
This will be a major part of the agenda for BritishAmerican Business this year; alongside our program of convening events around the big issues for business we will be working hard to support the FTA process and the efforts of both the US and UK governments to get a deal done. We will be available to provide input on the substance of any agreement, give feedback from our members on both sides of the Atlantic and make the case for a deal out in the real world where its benefits will be felt. It’s going to be a full and exciting year!