[Ip-health] Politico: The bright side of Brexit? A U.S.-U.K. trade deal

Thiru Balasubramaniam thiru at keionline.org
Mon Jul 11 07:44:03 PDT 2016


The bright side of Brexit? A U.S.-U.K. trade deal

As sprawling regional trade deals become increasingly toxic politically, a
trade deal with the U.K. could be relatively easy to negotiate and sell.


06/24/16 01:32 PM EDT

Updated 06/24/16 02:04 PM EDT

A new two-way trade deal between the U.S. and one of its oldest allies
could rise from the ashes of the United Kingdom’s exit from the European
Union and the already-foundering EU-U.S. talks.

President Barack Obama reassured the world Friday that British voters’
decisions to leave the EU would not affect “the special relationship”
between the two countries, despite having warned this spring that Brits
would move to "the back of the queue" in trade negotiations if they voted
to leave.

Story Continued Below

And several Republican lawmakers told POLITICO they'd be more than happy to
pursue a U.S.-United Kingdom deal once the smoke from an EU-U.K. split

"They've been a great trading partner to the United States for decades and
decades, and I wouldn't stop trading with them 'cause they got out of the
EU," Sen. Johnny Isakson (R-Ga.) said before the vote. "I'd be happy to
negotiate a bilateral agreement."

Senate Finance Committee member Isakson added, "it might even be easier"
than negotiating a broad agreement with the entire EU.

And that’s not an insignificant point.

As sprawling regional trade deals become increasingly toxic politically —
EU-U.S. trade talks have faced strident opposition in Germany and Austria,
for example, and the Trans-Pacific Partnership became a bogeyman during the
U.S. presidential primaries — a trade deal with the U.K. could be
relatively easy to negotiate and then sell to lawmakers and the public. The
prize would be reducing tariffs and other regulatory barriers the U.K.
would likely have as a holdover from EU policies.

"We're interested in having free trade with anybody," Senate Finance
Chairman Orrin Hatch (R-Utah) said when asked about the prospects of a
two-way agreement post-Brexit.

"We should now begin to discuss a modern, new trade agreement with the U.K
that not only continues but expands the level of trade between our two
nations," House Ways and Means Committee Chairman Kevin Brady said Friday,
adding he remains committed to an agreement with the EU as well.

If the Brits vote to leave the EU, "there will be a new bilateral trade
agreement,” Arkansas Sen. Tom Cotton declared on Tuesday.

To be sure, it could take up to two years for the United Kingdom to unwind
itself from the European Union, and the U.K. would be prevented from
negotiating separately with the U.S. until it has fully extricated itself
from the bloc. The former empire would also have to sort out its
relationship with the World Trade Organization.

How the markets got Brexit so wrong

At that point, if the president were so inclined, he or she would likely
face an easier job convincing Congress to back a two-country agreement than
a European-wide agreement, known as The Transatlantic Trade and Investment
Partnership or TTIP, which has already has drawn concerns from Senate
Majority Leader Mitch McConnell and other key Republicans over the EU's
stances on agriculture.

The struggles of the those talks make a hypothetical U.S.-U.K. deal seem
like a cakewalk by comparison.

Beyond the comparatively inviting political landscape, it’s easier to
negotiate a trade pact without having to navigate the political dynamics
of, in TTIP's case, 27 additional countries. Trade experts also say that a
two-way deal could encompass areas where the U.K. and the U.S. are more in
sync than the rest of Europe, such as financial services and the
recognition of professional credentials.

Donald Trump said Friday morning that the United Kingdom will “always be at
the front of the line,” when it comes to negotiating free trade deals. He
has expressed a preference for simpler trade deals.

"I want one-on-one," the candidate said in a rally in Indiana last month.
"I don't want to be tied up: If 'Country A' does this and if 'Country C'
does that, then 'Country D' will be able to come to — nobody knows what the
hell is going on. And the bad countries, countries that haven't treated us
well, benefit because they get the benefit of what the good countries are
getting. So everybody is taking advantage. It's a disaster."

Hillary Clinton was more cautious in a statement Friday, affirming the
close ties between the countries. Reacting to plunging global stock
markets, she said, “our first task has to be to make sure that the economic
uncertainty created by these events does not hurt working families here in

There’s also a strong economic relationship for the two sides to build on.
The U.S. is the U.K.'s most important trading partner - importing just over
$56 billion in goods a year. A fifth of the goods that the U.S. exports to
the EU go to the U.K., and, in 2014, there was almost $588 billion in U.S.
foreign direct investment in the country.

Senate Foreign Relations Committee Chairman Bob Corker (R-Tenn.) made it
clear that he was all for encouraging more trade with Britain, although he
continues to prefer a U.S.-EU trade pact.

“We will continue to work together,” he said of Britain, “to strengthen a
robust trade relationship and to address our common security interests.”

This wouldn't be the first time the two nations considered casting their
lot together. In the late '90s and early 2000s, after the North American
Free Trade Agreement went into effect, conservatives on both sides of the
Atlantic pushed the U.K. to spurn the EU and join the nascent trilateral
trade bloc. In 1999, the Senate Finance Committee even commissioned a
report to study the scenario.

"This report demonstrates the potential benefit of cementing our strong
relationship with Britain by joining with them in a free-trade
partnership," Senate Banking Committee Chairman Phil Gramm said in 2000. "I
am also convinced that such a partnership would go far toward removing the
trade barriers that are being built around the European Union."

The prospect of a deal with the U.K. had been floated for decades as NAFTA
came together, said Gary Hufbauer, a senior fellow at the Peterson
Institute for International Economics. Though talks on a U.S.-EU trade deal
have encountered some opposition from Brits worried about what it will mean
for their public health service, Hufbauer notes that free trade deals
already have broad support in the country -- an increasingly rare
phenomenon in Europe.

As part of the EU, moreover, their tariffs are low and their services
markets are already fairly open to foreign investment. Labor and
environmental rules, which have plagued deals like the TPP with developing
countries, would be simpler to negotiate because the U.S. and U.K. are more
compatible, he added.

"After one lifts one's head out of the dust and casts their gaze forward,
it could be an opportune moment to make a deal with the Brits," Hufbauer
said. "If you have the U.K., Canada and the U.S., that makes an attractive
package. Mexico could also take part."

Bill Reinsch, former president of the National Foreign Trade Council who is
now a fellow at the Stimson Center, is also bullish on opening negotiations
with the U.K. while “reaffirming our commitment to the EU.”

“President Obama may have put [the U.K.] in the back of the queue when it
comes to negotiating a trade agreement, but he should put that aside and
move quickly to work out a bilateral agreement that builds on our
relationship," Reinsch said.

One roadblock that has snagged the Trans-Atlantic talks would also be an
issue in a U.S.-U.K. deal --how to handle financial regulation, the U.K.'s
main demand in the TTIP talks, said Hosuk Lee-Makiyama, director of the
European Centre for International Political Economy.

The U.S. has resisted the push, both by industry and the European
Commission, to include financial regulatory cooperation as part of TTIP,
over worries that it could disrupt implementation of the Dodd-Frank law.

"You could argue the necessity for regulatory cooperation is less between
U.K. and U.S." than other European countries, he said in an interview. "The
U.K. is far more deregulated in its approach. ... But they'd still have to
scope the agreement in a way that would work for the U.K., post-Brexit.
Would they actually throw financial services under the bus?"

But Hufbauer thinks that after some years elapsed and the anger that
propelled Sen. Bernie Sanders' primary success has subsided, the United
States would be more willing to discuss a financial regulation chapter in a
free trade deal.

"I think it would be easier," Hufbauer said. "By that time, all these
Dodd-Frank hiccups will be over."

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