UK goes shopping for trade deals
Prime Minister Johnson is placing all his chips on landing big wins at the earliest
It’s an odd paradox of Brexit that having won its trade freedom, the UK may find it harder to pursue free trade. The former was an oft-cited objective of Brexit, but the latter has been made a central pillar of Boris Johnson’s desire to create a “Global Britain”.
More than four decades have passed since Britain last negotiated a trade deal, but it now plans to hold up to five sets of trade talks simultaneously. The guiding philosophy is an abiding belief in the value of free trade, which Britain plans to use its negotiations to promote.
Free trade agreements are Johnson’s most pressing foreign policy objective. But they don’t come easily. Negotiating a single deal takes sustained political will from both sides, a deep bench of expert negotiators, a coherent strategy, detailed consultation with various stakeholders, time (usually several years or more) — and luck.
While negotiating tandem deals isn’t unknown, it’s even more complicated. “South Korea and Chile ran talks with the US and European Union simultaneously; one negotiator involved described it to me as a nightmare,” recounts David Henig, director of the UK Trade Policy Project. The complexities reflect the resources required to run tandem negotiations, but also the need to keep track of which discussion lines have moved with which party and to keep things simple for regulators.
It can’t help when two of the parties are trade elephants like the EU and the US, who themselves are at odds with each other over a host of trade issues.
Moving the pieces
Johnson wants free trade deals with the EU and the Americans, to be concluded before the end of this year; but he’s also negotiating deals with Japan, Australia and New Zealand. He referred to the plan as “the great multi-dimensional game of chess”.
Now his pieces are fanning out across the board, or boards, at breakneck pace. Johnson has set out his objectives for the EU talks, asking for a comprehensive deal but rejecting the demand that Britain adopt a host of European rules and regulations.
In this particular game, however, the UK has started off by sacrificing its Queen. The price of trade freedom was leaving a largely friction-free European single market of 450 million people. Negotiations with the EU are about damage limitation as new barriers go up, not removing obstacles to trade.
Despite all the brouhaha around Brexit, the main focus was on non-EU deals. The government also launched a public consultation on the UK’s new global tariff schedule, which would apply to countries where there’s no free-trade deal in place.
The UK has been rapidly lawyering up. The trade ministry’s team overseeing all negotiations has expanded from 119 staff in 2016 to more than 700 trade lawyers and experts in 2019; it outnumbers even its US equivalent. This trade army may not be battle hardened, but if Britain makes a mess of it, it won’t be for lack of muscle. Clear political direction is another matter.
What can Britain hope to achieve? Getting a deal with Japan would be positive for Johnson and might reassure some carmakers that companies such as Nissan Motor Co. will stick around in the UK. But it’s hard to see how any agreement would compensate for the damage Brexit inflicts on the UK-Japanese partnership by ending Britain’s role for Japanese companies as a gateway to Europe.
Agreements with Australia and New Zealand also fall into the category of “nice to haves”. Australia, however, already rejected a British proposal for visa-free work travel between the two countries; they are worried about a brain drain and getting low-skilled workers in exchange.
The win that matters
The real prize is agreement with the Americans. This is not primarily a matter of economics. The upside to the British economy from such a deal would be modest — adding about 0.2 per cent of GDP in the long-term — but it would be a hugely symbolic achievement for Johnson.
While some hope the US talks will put pressure on the EU to make concessions, that seems like a long shot; and one that carries risks. If a US deal gets bogged down, any pressure on the EU side is gone. Worse, if the Americans press demands that are politically toxic, Johnson may find public patience wears thin. It’s not clear that a quick US deal can go much beyond tokenism. “I really struggle to come up with too many forms of market access that you could potentially offer the US that would hurt the EU more than it would hurt the UK not having a good deal [with the EU],” says Dmitry Grozoubinski, a former Australian trade negotiator.
Donald Trump, a big Brexit supporter, has promised a “massive” trade deal, one reason Johnson may not want to wait. US and UK delegations have been meeting for more than two years and leaked notes from some of the early sessions in July 2017 showed a willingness on the US side to find common ground, and a realism about what’s achievable.
“Trade is not always a happy area; this is,” US Trade Representative Robert Lighthizer said during one bilateral meeting. But it was also clear that the US wants the UK onside in its disputes with Europe over issues from services and “Geographic Indicators” (names for food and drink that matches where they’re made, such as Parmesan cheese) to agricultural chemical regulations and data.
That will get awkward eventually: The EU and the US both like to hug trade partners close. Britain’s outgoing US ambassador Kim Darroch said that he expects the Americans to push aggressively to open up Britain’s agriculture and healthcare sectors to US exporters. He thinks the UK probably won’t get much in return.
“A US-UK trade deal is likely at some point, but it will not be easy, and it is unlikely to make up for what has been lost with the EU,” Simon Lester, a trade expert at the libertarian Cato Institute, says. “The Trump administration has mostly gone in the direction of protectionism rather than free trade. They may be willing to liberalise a little bit with the UK, but so far they have not been willing to do too much in other negotiations.”
A lot of noise
All of this will be closely watched back in Parliament — another board in the multidimensional chess game. Johnson has a fresh electoral mandate and a large majority, but he can’t take that for granted.
Richard Tice, chairman of the now redundant Brexit Party, has urged the government to be even bolder in its EU negotiations. “We must not wait for the EU to be ready to talk in March. Instead, we should shock them, while they are fearful and weakened,” he said.
The idea is absurd to anyone who’s been involved in a trade negotiation, but Nigel Farage’s party, and plenty of Conservatives, plan to hold Johnson’s feet to the fire so he doesn’t backslide.
And this may also be about a future blame game. For all the fanfare, Johnson’s trade crusades probably won’t yield great victories; and the public may lose faith in the effort. As Emmanuel Macron has found in France, it doesn’t take much for a honeymoon to end.