Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
The prospect of a comprehensive UK-US trade deal was put on hold when Joe Biden entered the White House in 2021, despite five rounds of formal trade negotiations under Donald Trump’s Presidency. On a visit to the US this week, Anne-Marie Trevelyan appeared optimistic that, against the backdrop of the Ukraine crisis, the Biden Administration might be warming to the idea of revisiting a closer trading relationship.
Speaking to reporters during her visit to Baltimore, Trevelyan said that, “Team Biden have leaned in and want to get going on getting our trade teams talking more fully about the issues that are important to both of us.” She said she hoped new negotiations on a comprehensive trade agreement could start by the end of the year.
Some have pointed to Biden’s opposition to Brexit and his stance on the Northern Ireland Protocol as explanations for his reticence towards a UK trade deal.
However, more significantly, to date the Biden Administration has expressed little interest in engaging in any major new trade liberalisation with anybody, not simply with the UK, making it clear that the domestic economic agenda is the priority.
The strong Trump-era desire to protect US manufacturing jobs remains, as do significant US tariffs on Chinese imports. Despite promising a foreign policy reset, and declaring “America is back”, Biden’s “worker-centred” trade agenda has in many respects seen a continuation of several of Trump’s key unilateral policies, which primarily centre on trying to change Chinese behaviour on subsidies and other trade distortions.
There has been little sign up to now of Washington seeking to reengage in major bilateral or multilateral trade initiatives. Neither across the Atlantic, with the UK or the EU, nor in the Indo-Pacific, with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to the Pacific deal Trump abandoned and which the UK is seeking to join.
There have been attempts to address specific issues with US allies. For example, long-running disputes between the US and the UK and EU over aircraft subsidies for Airbus and Boeing have been settled.
The deal cut with the UK saw the removal of US tariffs on Scotch whisky and Stilton cheese. The US also dropped its threat to impose tariffs against five European countries, including the UK, over digital services taxes designed to raise revenue from the US tech giants, after the OECD brokered a global deal on corporate tax.
This week, the US and the UK reached an agreement to ease tariffs on UK steel and aluminium shipments, removing the 25 per cent US tariff on UK imports in favour of a more generous quota system. Washington reached a similar deal with Brussels last year. In return, the UK has suspended retaliatory tariffs on US products such as bourbon whisky, Harley-Davidson motorcycles and Levi’s jeans.
The UK’s second largest steelmaker, British Steel, is owned by a Chinese firm and the US has demanded that any UK steel company owned by a Chinese entity “must undertake an audit of their financial records to assess influence from the People’s Republic of China government.”
It remains to be seen whether there will be any progress towards a comprehensive UK-US trade agreement in the medium term. Officials were clear that it was not on the agenda at this week’s meeting and Katherine Tai, the US Trade Representative, would not be drawn as to when or if discussions for a formal free trade agreement might start. “I think the issue is what kind of collaboration is going to be fit for the purpose of addressing the challenges that we have today,” she said. “I’m not going to exclude any options.”
The UK is currently adopting a “twin track” approach to the US, which includes the pursuit of “mini-deals” with individual US States, on issues such as services that are often regulated at a state level, and continuing to lobby Washington for a deal with the federal government.
The UK is not alone in urging Washington to reopen the question of bilateral trade agreements. Christian Lindner, Germany’s Finance Minister, has called for a resumption of talks on a US-EU trade agreement. He told Handelsblatt this week, “Especially now in the [Ukraine] crisis, it is becoming clear how important free trade is with partners around the world who share our values.”
The backdrop of the war in Ukraine certainly increases the strategic logic of deeper trade ties between allies with shared interests. Trevelyan noted that the crisis had highlighted the need to “crystalise” UK-US economic cooperation. “We have worked hand in glove with the US in the last month, looking at sanctions…So I’m very optimistic,” she said.
Tai echoed the point. Citing the “battle between democracy and autocracy”, she added, “it’s never been more important for us to work to strengthen our economic ties with our closest allies, like the United Kingdom.”
Just as the global economy was beginning to emerge from the Covid-19 pandemic, the war is imposing another significant shock. Meanwhile, the resilience and vulnerabilities of global supply chains have been under increased scrutiny as the world has become more complex and uncertain. The effects of US-China economic rivalry have been compounded by the pandemic and now by war in Europe.
The disruption to European energy markets is clear for all to see. Russia and Ukraine are also important exporters of other commodities. Together, the countries represent 53 per cent of the share of global trade in sunflower oil and seeds, and 27 per cent of the share of global trade in wheat. Ukraine supplies 70 per cent of neon gas, which is used to make semiconductors, while Russia is the leading exporter of palladium, which is needed to make catalytic converters.
Vladimir Putin’s invasion of Ukraine has galvanised Western diplomacy around an unprecedented package of economic sanctions against Russia, the provision of arms to Ukraine, and a renewed focus on investing in military deterrence. Given that this crisis looks set to cast a long shadow over the geopolitical landscape, the same focus needs to be applied to the spheres of economics and trade.
Individual countries can take domestic steps to improve supply chain resilience, but even large markets such as the US will continue to rely on international cooperation. This week, Biden said that, “There’s going to be a new world order out there, and we’ve got to lead it. And we’ve got to unite the rest of the free world in doing it.”
Closer co-ordination and liberalisation between like-minded allies could reduce dependencies and increase security of supply. Revitalising trade relationships through trade agreements is an obvious way to do this. Notably, Trevelyan has flown on to Ottawa to kickstart negotiations on a new bespoke trade deal with Canada, a major step towards UK membership of the CPTPP.
Other steps might include establishing strategic economic relationships for critical raw materials and agreeing common standards on screening inward investment over national security and human rights concerns.
All of which would be helped if Washington could be convinced to reengage with the world of trade beyond its present narrow focus on China.