Prime Minister Theresa May was here in DC on Friday to talk to President Donald Trump, and a US-UK trade agreement was one of the items they discussed:
At the top of the agenda is trade, as the two leaders try to navigate the U.S.-U.K. relationship. Mrs. May said she and Mr. Trump had constructive discussions about a future trade deal between the two countries.
“We are at a moment now when we can build an even stronger special relationship,” Mrs. May said.
Mrs. May said she spoke with Mr. Trump about how the U.K. and U.S. can start high-level talks to lay the groundwork for a trade agreement. The U.S. is a more important export destination for the U.K. than vice versa: After the EU, where nearly half of British exports go, the U.S. is the U.K.’s biggest overseas market.
I get the sense that many people on both sides of the Atlantic are excited about this, and it does seem like one of the most positive things on the trade agenda right now. In terms of the actual negotiations, it would probably be one of the quicker ones, although there are a number of questions about when the UK can actually start negotiating (legal and political barriers arising from talks with the EU; hiring more trade negotiators).
But trade negotiations can take a while, especially when complex and controversial issues are included. One thing I see already is some excitement about the possibility of addressing regulatory barriers to trade. This is from a recent article in the Economist:
... gummy regulations hold back commerce. Britain sends relatively few cars to America, for instance, partly because America and the EU use different safety standards. America has turned its nose up at British meat since a food-safety crisis in the 1980s. Haggis, a Scottish delicacy containing sheep heart, liver and lungs, is in effect banned.
A bonfire of rules and tariffs could help certain industries. Haggis makers are delighted by rumours that Mr Trump, whose mother was born in Scotland, wants to lift the ban. (“Consider it done,” he supposedly told one hotelier following his election.) Alan Winters of the UK Trade Policy Observatory at Sussex University says that British consumers could benefit if the home market were opened to cheap American food. Britain might allow in genetically modified crops, which are regulated more heavily in the EU, or buy from America’s highly competitive beef farmers.
But as the car industry shows, it is not tariffs but non-tariff barriers, such as differing regulations, that most impede British-American trade. One research paper finds that in the chemicals industry, EU exports to America face non-tariff barriers equivalent to a tariff of about 20%.
I worry a bit that we will see a repeat of what happened with the TTIP. The TTIP was supposed to be all about getting rid of regulatory barriers, but when the two sides sat down to talk about things, it became clear that they had different conceptions of the problem. In addition, many civil society groups were concerned about the impact on domestic regulation (some worried that domestic regulation would be undermined; others worried that the level of regulation would be increased).
Don't get me wrong, I think there is potential for international agreements to address certain regulatory barriers. I stand by an article I wrote with Inu in the context of the TTIP. As I recall it (Inu can weigh in if she remembers it differently!), some of our points were that: voluntary cooperation may work better than binding rules for dealing with regulatory issues; people should not over-promise on the economic impact of addressing regulatory barriers; and we should go slow by focusing on sectors that are less sensitive. On the last point, to take an example, allowing imports of British haggis is probably not going to bother too many Americans. In contrast, when I see statements like "Britain might allow in genetically modified crops" as part of a trade agreement discussion, I start to worry. If a trade agreement addresses genetically modified foods, there is no doubt there will be protests and controversy, and one tank of gas may not be enough to get it done.
