• International
    • Export

Cementing the special relationship – UK/US Free Trade Agreement

  • Article

As negotiations on the UK/US Free Trade Agreement (FTA) continue, the UK’s Chief Negotiator1, Oliver Griffiths, took some time out of his busy schedule to join our October Trade webinar and share some insight on the objectives of the negotiations, the process itself and where the opportunities lie for UK businesses.

The opportunity

The US is an important trading partner for the UK, with total trade reaching over £230bn in 2019. A comprehensive Free Trade Agreement (FTA) with the US could help create real opportunities for UK businesses. Currently, even though the US is the UK’s biggest bilateral trading relationship, taking about 19% of our exports, and the investment relationship is worth around $1tn, there isn’t a preferential arrangement in place between the US and the UK. Nor is there a preferential agreement in place between the US and the EU. That means there are real opportunities to negotiate potential advantages for UK exporters into the US market.

Thinking about areas of opportunity, Griffiths highlights sectors that stand particularly to gain. “Getting advance digital and data chapters is going to be enormously valuable. Similarly, if we can get something that is pushing towards regulatory cooperation on financial services, it’s going to make a vast difference. As two technologically advanced and services-based economies, both sides share an ambition to go further on this.”

One of the big bugbears of businesses investing or trading in the US is the restriction on movement of talent, which Griffiths stresses is an important point of negotiation. “We want something that reflects the strength of this trade and investment relationship.” Griffiths notes that a lot of the power here lies with the US Congress. “If we can secure mobility that would be a huge win for our business community.”

Objectives

The core objective is to help UK businesses realise the opportunities available in the US market, and input from businesses sharing their experience has very much informed the overall direction of negotiations.

Trade agreements today are much broader in scope than has historically been the case, including digital and services, as well as the more traditional areas discussed in trade agreements such as customs and tariffs. “The important point is to make the tariff you’ve negotiated sufficiently different from the MFN (most-favoured nation) tariff that it’s worthwhile for businesses in terms of additional certification requirements,” says Griffiths. An MFN tariff is the tariff rate a country charges to another country, with which it doesn’t have a free trade agreement.

From the US perspective agriculture is a key priority, he explains. “The US is one of the huge global exporters in agriculture, and this is something that matters for every single state. However, digital services and data and financial services are the future drivers of economic growth, so there’s an emphasis on those too.”

Process

Beginning in May, the negotiations have taken place over five rounds to date. A typical round sees 30-35 sessions running, often in parallel, so this is a huge undertaking. The negotiation itself is structured in chapters, which cover different areas of policy, such as digital, services, or customs – to name just a few.

Griffiths cautions against “the danger of seeing trade negotiators as mythical creatures. Fundamentally this is about people that understand what they’re talking about and can then push a hard bargain with the other side, and they’re smart.”

Griffiths highlighted that UK trade negotiators have already rolled over more numerous FTAs that the UK has been party to as a Member of the EU, as well as reaching Agreement in Principle on the UK-Japan Comprehensive Economic Partnership Agreement.

The constitutional make up of the US adds an additional complexity to the negotiations. The United States Trade Representative negotiates on behalf of the Federal Government, which has total autonomy over some issues – for example – tariff rates. But there are additional state level rules (alongside federal rules) on other issues such as procurement. However, Griffiths said that the Government has built up a large team at state level to directly interface with the states, so that state barriers can be addressed – both within and outside of a free trade agreement. The UK already conducts a significant amount of trade with the US, and the UK has people on the ground supporting UK traders.

Issues

Popular media coverage of the deal has focused on chlorinated chicken, but as Griffiths points out, “I've been given a really clear mandate from the Cabinet, which is we’re not compromising on food standards.”

One of the other issues is the ongoing Airbus-Boeing dispute and the associated retaliatory tariffs on goods such as Scotch whisky. “We have made absolutely clear to the US that sorting this out, and also the section 232 tariffs on steel and aluminum, is part of the total trade package that we are looking at,” says Griffiths.

The team has also factored in the impact of the US presidential election on the negotiations, with Griffiths’ direct experience of the Bush/Obama handover during his time serving at the British Embassy in Washington providing insights into what may be to come. “The continuities between the Bush Administration and the Obama Administration when it came to trade agreements vastly outweighed any differences. I don’t want to minimise the importance of any switchover but it’s not like you’d be starting again on a blank sheet.”

As the team have noted in the readout2 of the most recent (fifth) negotiating round “both sides are confident that we are on track for a comprehensive agreement which would provide a significant and mutual benefit to our economies”. The team believes there is a compelling case to build on the significant progress already made and conclude a trade agreement. The UK and US teams have been continuing talks at official level during the weeks following the US election.

Tomorrow Ready

Access tools, resources and insights to help get your business fit for the future.