Category Archives: Britain

Britain, Economic, Government, International trade, Politics, Society, United States

UK-US trade deal: Parliament must vote on any agreement

TRADE DEAL

Intro: Abolishing tariffs would be welcome for UK firms, but not at the price of reducing high regulatory standards or a reset with the European Union

LOOKED at dispassionately and objectively, a bilateral trade agreement between Britain and the United States is of relatively small economic significance to this country. Even ardent supporters of UK-US relations will find it difficult to argue otherwise. Back in 2020, for instance, Boris Johnson’s government estimated that a US deal “could increase UK GDP in the long run by around 0.07%” – a statistical calculation that is not exactly transformative. The view touted by some Brexiters that a US trade deal would fire up the entire British economy was always fantastical. Based on the assumption of a yearning for deregulation, there was little public support, even among leave voters themselves. Any urge of that kind now is even more delusional, in the wake of Donald Trump’s tariff wars.

The deregulatory alarm is hopefully a thing of the past. But global trade has new traumas too. Trump’s protectionist policies and bullying of US rivals are resetting the terms. There are nevertheless specific reasons why it is in Britain’s interest to pursue free trade talks with the US. Chief among these is the direct threat posed by current tariffs, especially on cars and pharmaceuticals. There is also the distinct prospect that a 10% tariff will be re-imposed on all UK exports to the US after the current 90-day pause ends in July.

The problem with any trade deal lies with the prices that the US may try to extract for tariff reductions or exemptions. And while the U.S. vice-president, J.D. Vance, has said that he sees a “good chance” of a deal, this could still be contingent on UK concessions in sectors such as agriculture, sanitary rules, and digital regulation. These are the same sectors that, for good reason, proved to be stumbling blocks in the post-Brexit discussions. Efforts to rebrand things like AI, biotech, and digital infrastructure, as strategically vital industries of the future, do not dispel some real threats now facing British food standards, healthcare, or online controls.

All this is multiplied by the Trump administration’s unreliability and geostrategic approach. Trump’s policy in Europe is to weaken and destroy the EU. Urged on by right-wing Brexiter politicians, the president sees pulling Britain away from the EU’s orbit as part of that effort. So, however, does the EU. As a result, any attempt by Washington to offer generous terms to the UK in particular sectors is likely to make any reset with the EU far more problematic. Sir Keir Starmer says that Britain does not need to make an either/or choice. Insisting that Britain can have its cake and eat it, that’s hardly the brutal reality being faced; neither the US nor the EU will necessarily take the same generous view that Starmer holds.

Even if the prospective UK-US deal is less wide-ranging than it once might have been, it is still significant. Politically, the Trump factor also makes any such deal more explosive. UK treaties and international trade deals are traditionally delivered under prerogative powers. As the Brexit argument about a “meaningful vote” showed, there is a very limited role for parliament. That needs to change. It would be intolerable in the UK-US case. This is clearly a matter for parliament to debate, both during and after negotiations, and for both houses of parliament to vote on.

In recent days, the Labour chairs of the Commons foreign affairs and trade select committees called for such votes. The Liberal Democrats and the Scottish National Party are both in favour. The UK government should make clear that no agreement will go ahead without a meaningful Commons vote in favour. Democracy cannot be usurped on this issue.

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Britain, Economic, European Union, Government, Politics, Society, United States

EU reset: No time for UK passiveness

EUROPEAN REALIGNMENT

FANATICS of Britain’s departure from the European Union have struggled to quantify the Brexit dividend and what benefits it brought, but when Donald Trump unveiled his schedule of global tariffs they finally had a number to point towards. It was the difference between the 20% levy imposed on all continental exports and the 10% baseline figure payable on British goods.

A week later the gap closed leaving Brexiteers melancholic and dejected when Mr Trump reversed his plans. What the tariff schedules will look like at the end of the 90-day “pause” is no more predictable than any other feature of current US policy. There is no obvious concession from the UK government that might induce Washington to lower its 25% barrier against car exports, and the 10% rate on everything else looks non-negotiable.

Meanwhile, dialogue with the EU about closer cooperation continue apace. The UK hopes to have a framework agreement in place in time for a summit in London in May. The primary focus is security, but that is intended to be a forerunner to closer trade alignment.

As an indication of accelerating rapprochement, Rachel Reeves, the Chancellor, has just attended a meeting of EU finance ministers in Warsaw. Plans have been announced for a pan-European defence procurement fund with the UK expressing an interest to be included. There are hurdles still to be overcome but also strong will on both sides to make it happen. It is a measure of how much more constructive diplomacy has become under Labour. No Tory government would have sought such collaboration. Regime change in Westminster made a closer EU-UK relationship possible, then Mr Trump’s rampage of destruction through the norms of transatlantic security and global trade made it urgent.

The Brexit withdrawal treaty and subsequent trade and cooperation agreement were deliberately shaped by Boris Johnson’s government to impede reintegration on any level. Irreversible divergence was the whole point. But, while there is no great appetite in Brussels to revisit the terms of Brexit that damaged British businesses and interests more than the EU, recognition of a mutual strategic interest and a more constructive disposition are necessary. The long-term economic rational is being hampered as the UK continues to operate within red-lines drawn by domestic electoral imperatives.

European leaders fully understand that democratic politicians must defer to public opinion. But with Sir Keir Starmer having earned goodwill through his diplomatic advances, the prime minister’s reluctance to ever challenge the fallacious premises of Brexit, even after winning a landslide general election victory last year, raises doubts about the true scale of his ambition when it comes to the EU reset. That misgiving is magnified whenever British ministers talk enthusiastically about their dealings with Mr Trump, who doesn’t hide his hostility to the European project. Sir Keir insists it is not a binary choice, but it will become one as soon as concessions to the White House threaten to destroy trust in Brussels or further impede access to the single market.

The claim that the UK can be equidistant between Europe and the US may feel like keeping options open, but in Brussels it looks like a reversion to typical British Eurosceptic ambivalence. Sir Keir faces a stark strategic dilemma, and his options get worse the longer he defers the choice.

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Britain, Economic, European Union, Government, International trade, Politics, Society, United States

Trump’s tariffs: a deliberate and revengeful choice

WORLD TRADE

DONALD TRUMP’S revisionist structure of world tariffs against an already embattled trading system is as though an asteroid has crashed into the planet, devastating everyone and everything that previously existed there. The comparison is useful but there is this important difference. If an asteroid struck the Earth, the impact would at least have been caused by ungovernable cosmic forces. The assault on world trade, by contrast, is a completely deliberate act of choice, taken by one man and one nation.

The US President’s decision to impose tariffs on every country in the world is a shocking and momentous act of folly. Unilateral and unjustified, it was expressed in indefensible language in which Mr Trump described US allies as “cheaters” and “scavengers” who “looted”, “raped”, and “pillaged” the US. Many of the calculations on which he doled out his punishments are perverse, not least the exclusion of Russia from the condemned list. The tariffs – imposition of direct taxes – mean prices are certain to rise in every economic sector – in the US and elsewhere – fuelling inflation and very likely recession. Trump will presumably respond as he did when asked about foreign cars becoming more expensive: “I couldn’t care less.”

The tariffs – a minimum of 10% on all imports to the US, with higher levels on 60 nations that have been dubbed the “worst offenders” – throw a hand-grenade into the rules-based global trading order. These are large hikes, even for nations like Britain that have escaped the higher tariffs. They are indiscriminate between sectors, highly discriminatory against nations, even to the extent of penalising uninhabited islands in Antarctica. Foul.

The world trading system established under US leadership at Bretton Woods after the Second World War has been overturned. In effect, the nation that has underpinned the global economy for the last 80 years has expelled itself from the trading system it always led. That system’s cardinal principle – that countries in the World Trade Organisation should treat one another equally – has been blown apart.

The ceremony on which Trump made his announcement conveyed the thrill he derives from bullying and domination. A month after shutting down US development aid, his retribution list embodies special contempt for the world’s poor – 47% tariffs on Madagascar, the world’s ninth poorest country, for instance, or 44% on devastated Myanmar. While much pre-announcement rhetoric was directed at China, some of the toughest tariffs have been inflicted on countries such as Cambodia, Vietnam, Thailand, and Laos. The impact on US soft power is likely to be devastating.

In the UK, the government is trying to remain stoic. Like its trustworthy trading allies, Britain must do what it can to maintain the rules-based trading system by keeping calm. But economic war is clearly beckoning. The UK is now said even to be preparing a list of reciprocal tariffs on US goods. It is particularly vital that Britain defends its interests in food and health systems, and against the powerful digital tech giants.

Any kind of notion that Britain is some kind of winner in these circumstances, thanks to Brexit, is nonsensical. This country’s supposedly closest ally, the US, has just hiked the cost to British exporters by 10%, with an even greater rise of 25% in the case of steel, aluminium, and cars. The consequences of Trump’s tariffs will not be restricted to world trade but will impact on the global economic system more generally. This is a momentous macro moment. It will require macro responses.

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