The U.S.-UK Free Trade Agreement Negotiations: Challenges and Opportunities
After four years of uncertainty and division over Brexit, the United Kingdom (UK) officially left the European Union (EU) on January 31, 2020. Since then, the UK has been seeking to establish new trade relationships with major partners, including the United States (U.S.), its largest export market outside Europe. Despite the Covid-19 pandemic and the presidential election of 2020, the U.S.-UK free trade agreement (FTA) negotiations have been ongoing, though with mixed progress and contentious issues. This article will examine some of the challenges and opportunities of this bilateral agreement and its potential impact on businesses, consumers, and geopolitics.
First, it is important to note that the U.S.-UK FTA negotiations are more complicated than some other recent FTAs, such as the U.S.-Mexico-Canada Agreement (USMCA) or the EU-Japan Economic Partnership Agreement (EPA). One reason is that the U.S. and the UK already have a substantial trade relationship, with bilateral trade of goods and services worth around $300 billion in 2019. However, this relationship is not entirely balanced, as the U.S. has a trade surplus with the UK in goods, while the UK has a trade surplus with the U.S. in services. Moreover, the UK has to negotiate with the U.S. not only on tariff reductions, but also on non-tariff barriers, such as regulatory standards, intellectual property, and data privacy. These issues are not only complex but also politically sensitive, as they affect many sectors and interests, from agriculture to pharmaceuticals to digital services.
Second, the U.S.-UK FTA negotiations face some external constraints and uncertainties that might influence their outcome. One of these is the context of the Covid-19 pandemic, which has disrupted global trade and supply chains, and led to a slump in demand and investment. This context has forced both the U.S. and the UK to prioritize their domestic recovery and public health over their foreign trade. It has also exposed some vulnerabilities of their economies and policies, from the dependence on China for medical supplies to the fragility of the global financial system. Additionally, the U.S.-UK FTA negotiations occur in the context of a changing world order and tensions among major powers, such as the U.S.-China rivalry and the EU-U.S. tensions over trade and security. These factors might affect the willingness and ability of the U.S. and the UK to make concessions and compromises in the FTA negotiations, as well as the trust and credibility of the FTA in the eyes of other countries and regions.
Third, the U.S.-UK FTA negotiations offer some potential benefits and opportunities for businesses and consumers in both countries. One of these is the reduction of tariffs and non-tariff barriers in key sectors, such as agriculture, automotive, and energy. This could increase the competitiveness and market access of U.S. and UK goods and services, especially for small and medium-sized enterprises (SMEs) that face higher transaction costs and regulatory hurdles. Another potential benefit is the alignment of regulatory standards and norms, which could facilitate the recognition and protection of intellectual property, data flows, and consumer rights. This could also enhance the cooperation and innovation between the U.S. and the UK in science, technology, and other strategic domains. Moreover, the U.S.-UK FTA negotiations could help to strengthen the transatlantic alliance and promote a shared vision of democracy, freedom, and prosperity, which are increasingly challenged by geopolitical and ideological threats.
In conclusion, the U.S.-UK free trade agreement negotiations are a complex and consequential process that has both challenges and opportunities for the two countries and the world. While the outcome of the negotiations is still uncertain and subject to many factors, including political changes, economic shocks, and social demands, it is important to recognize that the FTA negotiations are not an isolated event, but part of a broader context of global interdependence and competition. Therefore, the U.S. and the UK need to balance their interests and values, and engage in dialogue and cooperation with other partners and stakeholders, to ensure that their FTA serves not only their economic interests but also their strategic and moral responsibilities.