Is a free trade deal between the US and the UK a genuine possibility?
The Tories better hope it is. Because from where we currently stand, I see only two ways out of Brexit not being a very rocky road: one, a US-UK free trade deal that isn’t constructed in a way that is terrible for the UK; two, the disintegration of the EU via a Le Pen presidency, or the Dutch leaving, or Putin’s machinations, or whatever other mechanism. If neither of those routes open up, either the UK faces a distinct period of financial difficulty or manages to stay in the EU somehow – or massively fudges Brexit by essentially staying in the EU in all but name. This latter possibility appears to be completely impossible at present due to the motions of the May government, but we do live in strange times.
You didn’t answer the question: will a UK-US free trade deal happen?
It is actually very possible, but it is worth explaining that such a deal is mostly out of the hands of the UK government anyhow. Sure, they can get the Queen to meet Trump and even hire Farage as a trade envoy, yet they still would be doing so hoping for the best. Whether it happens or not is at the whim of the Americans, as all aspects of the “special relationship” have been post-Suez.
Would it really be successful enough to get the UK out of the Brexit hole?
Theoretically – unless the deal was so terrible it negated the considerable upsides. The US is a comparable market to the single market; it is a matter of what actual access was gained off the agreement from a UK perspective. Also, the UK having a free trade deal with the US would make Britain very attractive to businesses from all around the world. The chances of a non-EU UK doing free trade deals with other countries would increase greatly if Britain could bag a free trade deal with the US first.
But let us now come onto what might stand in the way of such a deal taking place. One, Donald Trump ran on a protectionist, anti-free trade platform, so the idea that he is itching to do a brand new free trade deal with anyone would seem to go against the grain of his campaign rhetoric, even though he is now making noises about wanting to do a US-UK trade deal “very quickly”. Two – and much more importantly – even a deal constructed relatively in Britain’s favour could come with massive downsides that the UK would have to be mindful of going into the negotiations, should they take place. For instance, food standards, just to take a very obvious example. It is well known that America has lower standards in many regards towards food preparation than does the EU. Currently as a member, the UK has to adopt the high, EU standards on everything. If it were to try and negotiate a free trade deal with the US, history says that the Americans are extremely unlikely to raise their standards to an EU level just for the sake of a trade deal with the UK. This means that either the UK would keep its own standards to an EU level internally and face American firms being able to “dump” lower standard products onto the UK market – or simply lower food standards to a US level across the board, something which could have political repercussions for the Conservative Party in the medium to long term. Can you recall the “Romanian horse meat” scandal of several years back? Imagine that on a ten times greater scale and you have some idea of the potential tabloid fodder that could become available eventually as a result of this option.
There is this theory about how a US-UK trade deal would be one between two developed nations with similar GDP per capital levels; thus, it wouldn’t run into the same issues the US-Mexico portion of NAFTA has thrown up, namely firms relocating jobs to Mexico to take advantage of cheaper wages. Yet the US and the UK have very different economies in many respects, and this raises a number of questions. Would freedom of movement of people be on the table between the UK and the US? History suggests no – the US wouldn’t offer this to Canada, so it is difficult to see how this would be given to the UK. Even if it was, how would the UK then deal with the potential problem of poorer Americans moving to the UK to take advantage of the fact that the UK has a national health service?
On the other hand, without freedom of movement, how would the whole thing work? NAFTA as a precedent suggests that any upsides to a deal that allows capital to move relatively freely but not people ends up hurting lower skilled workers significantly. While part of this is down to disparity of economies, that is not necessarily the deciding factor: what if UK firms figured out that moving to the US was worth it just for the lower amount of regulations, for instance? If the jobs could go to the States but not the workers, this would flag up nicely the real problems in this area. I suppose the UK could just bring all regulation down to a US level, but again, there would be massive political fallout from this: you can’t take workers from legally being owed twenty statutory days leave a year down to zero days leave without them noticing.
Whatever happens with the US, Britain is still left with the problem that led to Brexit, namely that globalisation has created winners and losers and western governments have become rather worse at compensating the losers – even in Europe, supposedly under the spell of a social democratic hegemony.