Anyone who has ever done any work on international trade will know that it generally involves looking at lengthy documents and, depending on the stage of the process, have been scrubbed of anything even resembling colour (and hopefully ambiguity). As the UK has agreed a deal with the US people understandably want to know what it entails but pretty much all we have to go on at this point is a five page document setting out the deal in general terms which you can read here. As an aside it was released at 6pm on a Friday which we can probably put down to officials scrambling to Work Across Whitehall to get sign off from other government departments (and the lawyers) rather than it being something which the government is ashamed of.
The government is right to not be ashamed of it. Yes it’s a narrow deal and is not a long hoped for Free Trade Agreement, but the government should be proud of what it has done and those in opposition should stop being so churlish and commend it.
While it is true that many UK businesses exporting to the US will be in a worse position than they were before ‘Liberation Day’, they are in a better position than they would have been without this deal. We saw something similar with the rollover deals which the UK signed countries who we already had deals with through our membership of the EU. Many people (including Labour politicians) sneered at these and claimed that they were simply ‘copy and paste jobs’. There is some truth to this. Some of the deals did end up being identical while some were enhanced and so the criticism ignores the fact that they still all had to be renegotiated all while the Trade Department also negotiated new deals with other countries and the government frantically tried to secure a Brexit deal.
More importantly, it protected businesses and jobs - often in some of the more deprived parts of the country. I wrote about this for CapX all the way back in February 2022 in the context of the Greenland continuity deal where I pointed out that the deal would be a lifeline to seafood processing businesses in Scotland and Yorkshire and the communities which depend on them. This deal might not achieve much for the people reading this, but it will help the steel, aluminium, and automobile industries which have been struggling due to government failure.
It’s also true that the UK has liberalised its tariffs more than the US has. This has been pounced on by journalists such as Robert Peston as well as opposition politicians claiming that Starmer was weak and capitulated to Trump and so the US ‘won in the negotiation’ and got the better deal. This just reveals their economic ignorance. Trade is not a zero sum game (even though it is so often treated this way by governments). Imports are the real prize in trade as they offer greater choice and lower costs for consumers and firms who rely on intermediate goods while forcing businesses to up their game and become more productive due to foreign competition. The fact that the UK government did not place jagged rocks in its own ports and make its people poorer is a very good thing. If there is a ‘winner’ in all this then it’s the British people. As an aside – and something I’ve mentioned before – the government needs to do a much better job at championing imports and sadly my idea for an ‘Importing is GREAT’ campaign while I was at Trade was thwarted by the powers that be.
Moreover, whatever your views on the issue, this is a Brexit benefit in that it would not have been possible if the UK was still a member of the EU. Of course the EU has more bargaining power than the UK as it has far more heft. Also at this stage I would still recommend prioritising the EU over the US if it comes to it (although that’s not a decision which will probably have to be made). However, size is only one side of the equation. The UK now has an independent trade policy and this has allowed it to be much more nimble, strike deals more quickly, and tailor those deals so that they align more closely with what the UK wants. I wrote about this in April 2023 in the context of the enhanced deal with Japan. I personally think that Geographical Indications are idiotic and should be scrapped but they mattered to the UK and it managed to get far more than with the deal it had with Japan through the EU as its negotiators didn’t also have to push for French, German, Italian etc interests as well. Those who championed Brexit should be mindful of this when they criticise the deal.
Furthermore, despite being very limited in scope, it does pave the way for another Brexit benefit: a comprehensive FTA between the UK and the US. This is hinted at in the government release where it is mentioned the ambitions to cover trade in both goods and services. Some people may argue that this is unlikely to materialise given that Trump and Navarro are who they are and the US will likely be busy dealing with other countries. However, it would seem that the Trump Administration is in panic mode and this could be in the UK’s interests. Ironically we did see this with Brexit as other countries knew that the UK really needed more trade deals for political reasons. Given that the US has decided to erect huge trade barriers with pretty much every other country and Americans are about to feel the consequences of that, Trump will find himself under pressure to start signing more deals while conceding on some red lines (chlorinated chicken etc). Most of the chapters of a FTA between the UK and the US were agreed and drafted during the last Trump Administration, assuming that they haven’t been destroyed it should be possible to get something agreed relatively quickly.
The Art of the Dhal
The UK has also agreed a deal with India, again after years of negotiations. I will be writing something on this but would say at this point that, although not perfect, both sides could have liberalised further on agriculture (although the UK was probably right not to slash tariffs on milled rice).
The reaction to it has been similar to the US one. I would point out that the communications from the government have been pretty shoddy on all this. This has long been an issue with the media team at one point being based in the basement of the Foreign Office where they couldn’t get mobile signal and if you called the landline there would often be nobody to pick up the phone. There was also the ‘Soy Sauce Debacle’ where somebody in the media team decided to post something about the Japan deal after watching the Great British Bake Off without checking with anyone in Private Office. However, even if the government has fumbled the bag on comms it is still disappointing to see people who would normally support free trade start taking pot shots at the government over it in order to score a few political points.
More importantly, the fact that the UK has finally got a deal with India supports my argument that a comprehensive FTA with the US could actually be reached. This is because one of the reasons why India was so keen to get something signed was due to all the uncertainty over Trump. Like with the US, most of the chapters for the deal between the UK and India had been agreed and so it was easy to finally get it over the line.
We obviously don’t know what is going to happen given that Trump and Navarro are at the wheel and it could turn out that I was wrong on Trump being a disaster for the UK’s trade interests. Who knows?! To wrap up, free trade is a wonderful thing and the UK needs much more of it. The deal between the UK and the US is in no way a comprehensive FTA but it should still be welcomed and those who should know better should not be criticising it. Whatever your thoughts on HM Government it should be commended for its efforts and the skill of the officials and diplomats (including Lord Mandelson) for getting this deal done. Officials (rightly) don’t get to share the limelight and I’m sure he’d be too modest to acknowledge this but I imagine that such a deal would not have been possible if it were not for Graham Floater who is leading the negotiations. I was fortunate enough to work with him and he really is excellent.
Thanks as ever for reading. Enjoy the rest of the weekend!