In pursuing new bilateral free trade agreements (FTA) with Australia and New Zealand, the EU may outflank the UK who is prevented from signing up with non-EU third countries before the end of a ‘transition period’, set for December 2020. However, Britain’s Department of International Trade is carrying out ‘trade missions’ confident that the UK can negotiate and ratify its post-Brexit trade deals short of enforcement. But detailed and substantive FTA talks are still to come and will take much longer. Implementation will depend on when the UK leaves the EU Customs Union (if indeed it does) and on what the future UK – EU trade arrangements will be. Without this knowledge, non-EU countries will be negotiating with the UK in the dark.
British Looks to Australia and New Zealand for Trade
Britain is keen to restore and expand its commercial ties with Australasia in part to make amends for ditching previous trading arrangements when it rushed to join the European Economic Community (EEC), the forerunner to the EU in 1973. Meanwhile, EU Ministers have been given the go-ahead to start negotiations with both New Zealand and Australia. Jean-Claude Junker, President of the EU Commission, greets the discussions by saying:
“…they will build on the recent successful agreements with Canada, Japan, Singapore, Vietnam, as well as Mexico, among others.”
But as with the EU Comprehensive Economic and Trade Agreement (CETA) deal with Canada, the talks are likely to be protracted. Both sides will push for more favourable terms, particularly for their agricultural goods, such as Australian beef or New Zealand lamb and dairy products.
The Special Relationship
Since the failure of the 2016 Transatlantic Trade and Investment Partnership (TTIP) talks with the Obama Administration, the EU has become increasingly concerned with a more aggressive US trade policy which is not even sparing its closest allies. The latest actions by the Trump administration to impose 25% trade tariffs on EU steel and 10% on aluminium imports became effective on the 1st of June 2018, with the likelihood of EU retaliation. Wilbur Ross, US commerce secretary, confirmed there would be no exemptions for the EU (which includes the UK) in regards to the imposition of steel and aluminium tariffs. This action and the continued dangers of a trade war does not bode well for post-Brexit UK.
The US is Britain’s biggest trading partner outside the EU, representing 16.2% of UK external trade. But with a trade surplus in favour of the UK, the US will no doubt be seeking to correct this imbalance. Closer trading relations with the US may expose lucrative sectors of the UK economy to takeover bids, especially for NHS contracts and others in the agricultural and pharmaceutical sectors.
There is no indication the US will be less ‘protectionist’ with the UK. Pursuing the mantra of ‘America first’, the US will seek concessions on a wide front. The public has continually been bombarded with reports in the popular press that suggest the UK may have to accept (what are claimed to be) inferior US food standards, a fear that is currently downplayed by UK trade ministers. British consumers are accustomed to more rigorous EU regulations on all aspects of consumer protection.
British Concerns Over US Trade
The UK food and drink sector, for example, will have good reason to be alarmed if cheap US beef products flood the British market threatening the UK farming community. Low-cost brands of US whisky under the brand label ‘Whiskey’, not to breach EU labelling regulations no doubt, could flood the UK market, affecting one of Scotland’s flagship exports. Additionally, it is hard to see the US opening up its home market to UK’s financial services.
In August 2017, Donald Trump heralded a promise to sign a trade deal with Britain “very, very quickly,” suggesting “there is no country that could be closer than our countries”. This statement alluded to the “special relationship”, but trade negotiators would be unwise to rely on this in new UK–US bilateral relations. The on-going North American Free Trade Association, NAFTA, re-negotiations that Canada and Mexico have with the US provided an insight into the tough trading climate.
Lately, the US has been back-tracking from multilateral agreements calculating that it can exercise its economic might more effectively in bilateral relationships. Britain siding with its EU partners, France and Germany (and in effect China and Russia), over the US decision to impose new sanctions against Iran after unilaterally pulling out of the Joint Comprehensive Plan of Action (JCPOA) Iran Nuclear deal, suggests the ‘special relationship’ has its limits.
There is no telling how UK foreign relations will develop in the future. The departure from the EU in March 2019 is not stopping the UK reinforcing its ties with Europe on matters of collective security and collaboration in the fight against terrorism. It is important to remind those seeking new global horizons that only twenty-one miles divide Britain from mainland Europe.
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