UK-US trade talks start this week. So why is this better than the UK-EU negotiation (or not depending on yr Brexit view), how do you judge a trade agreement anyway, what's in it for the UK, and why might UK-US be chlorinated chicken for plates? Settle down for a while... 1/
Starting point. Schedules at the WTO giving all members equal access to markets in terms of tariffs and services, plus core rules. For a special deal on market access you need a Free Trade Agreement (FTA), which may also set extra rules for bilateral trade. 2/
Thanks to the WTO we know average tariffs. For the US they are 3.4%, for the EU 5.2%. But those averages mask huge variations, agriculture tariffs in the EU average 12%. In the US 5.3%. But this doesn't mean it is necessarily cheaper to export to the US, because regulations... 3/
Both the EU and US have significant regulatory (aka non-tariff) barriers particularly on agriculture. So ideally in a free trade agreement or FTA we want to reduce both tariffs (higher in the EU) and regulatory barriers (let us assume equal). 4/
We also need to look at UK export interests. Let's pick a couple - whisky and cars. For whisky, regulations - in particular discrimination against foreign alcohol or failure to protect against fakes - are as important as tariffs. In both EU and US there are few issues. 5/
For whisky sales the best trade agreements would be in markets where there are more concerns than EU or US. There are currently tariffs in the US, as a result of a trade dispute between EU and US. To remove these doesn't need a new deal. 6/
Cars. The average tariff in the US on cars is 2.5%. In the EU it is 10%. Now the US has threatened to increase this, but has not done so. We also have differing regulations between EU and US which in effect mean different cars even if they look the same. 7/
For these UK interests, and in general, the US is a more open economy than the EU. But in both there are plenty of barriers, whether high tariffs on particular goods, or needing to meet particular regulations. So what happens when you negotiate with the EU or US? 8/
Take the EU. They will reduce or eliminate most tariffs, and remove many regulatory barriers in a trade deal. But have big asks in return. You have to reduce your tariffs and other barriers, protect their cherished Geographical Indications (food from special areas), and.. 9/
The EU also insist on what they consider fair competition, meaning minimum standards of labour and environment protection, prohibitions on government subsidies, following interllectual property laws and so on. For everyone, not just the UK. 10/
What of the US in a trade negotiation? Well, they'll probably reduce remaining tariffs. But that's about it. No special regulatory provisions (regulators independence is important), no removal of market discrimination in favour of US companies. 11/
The US expects from trade partners that US products should be freely available for sale (which mans acceptance of US farming produce like chlorinated chicken), US standards considered as international (so industrial products can also be sold), plus... 12/
The US also expects trade partners to meet fair competition standards in areas like intellectual property, labour and the environment. Pretty similar to the US, and like the US most likely with tougher provisions for neighbours. So where does this leave the UK? 13/
Sign a US trade deal and in return for tariff reductions (few significant, but there are peaks, for example in ceramics) we have to change rules on food and industrial standards, plus meet minimum level playing field standards. Plates for chlorinated chicken. 14/
Sign an EU trade deal and in return for more significant tariff reductions we have to accept EU rules on certain foods plus meet level playing field standards, and we'll get greater reductions of regulatory barriers if we sign up to EU regulations. 15/
Extra twists, inevitably. Not all EU and US rules are compatible. The EU wants geographical indications protected, the US want them challenged. Plenty of US food is currently illegal in the EU. US farmers are angry about this. US and EU industrial standards differ. 16/
The trade world is developing. Not only are level playing field provisions getting tougher, but it is also getting harder to have trade deals with both EU and US. There are potentially competing clauses. It is hard to talk to both atr the same time. 17/
So back to the UK, what do we want from trade agreements? Is whisky the priority, in which case neither EU or US are important? Is it changing domestic law to allow US food in, in which case the US is the priority? Is it low barriers to trade with the EU? 18/
And with UK interests we have a problem. They've never been defined by government. We don't know if we want trade agreements to boost exports of services or goods. And which types. The general answer from the government has been yes. Not much help... 19/
There are different ideas in business and civil society. When I asked business a couple of years ago there was a clear winner for which country we should do a trade deal with. China. Highest existing barriers. Unlikely now. Many want to see us prioritise developing countries. 20/
Obviously we don't know how the current crisis changes our economy. But it has been pointed out many times that we're very strong in services. Free Trade Agreements typically do little for services. For that we might be better off using other methods. 21/
You sometimes hear the phrase '21st century trade agreement'. Does it help? Sadly not much, there will be e-commerce provisions in any deal with either of EU or US, data flows are a core part of the modern economy. Not much difference there. 22/
What about the economics? A US trade agreement is forecast could add 0.07% of GDP, or double if aligning with US rules. But that would mean not aligning with EU ones. And an FTA with the US could ironically mean US companies disinvesting in the UK. 23/
An EU FTA will be economically negative compared to today, but positive compared to no-deal. Again the level of the benefit will depend on the closeness of the relationship. But overall we can expect some economic hit because our trade barriers will overall rise. 24/
In the end the EU v US question is political. A US deal is a core part of Brexit narrative that US interests have funded generously. An EU deal is associated with remain campaigners (and some who wanted to see the EU join EFTA). 25/
Meanwhile the US, particularly under President Trump, is careless with allies and mean in trade agreements. The EU is much more generous, but with greater conditionality and usually a lot more time. Time for the UK to decide... 26/ and with apologies for length /end
PS already thinking what I forgot... yes the NHS probably won't be affected by either US or EU trade deal, UK farmers and possibly the food industry may lose from a US one, watch out for investor state dispute settlement, still a possible, and will Parliament ever debate this?
Always typos... the second and third US should be EU...
