UK must move fast for US deal

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Hi there from Washington, which is providing much excitement as we enter the final stretch of this 2020 presidential election. Last week saw the final debate, with President Donald Trump and Democratic candidate Joe Biden clashing over whether or not the US is “rounding the corner” on coronavirus, as well as arguing on topics ranging from race and immigration to energy and fracking.

Our main piece today is on how the UK might shift its footing to deal with a Biden government on trade. Tit for tat is with Susan Danger, chief executive of the American Chamber of Commerce to the EU, while the chart of the day illustrates the seasonal rise in fruit and vegetable imports from Europe for British customers.

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Time to ‘Bidenise’?

With the US presidential election now little more than a week away, foreign diplomats and trade types are preparing in earnest for the possibility of a Joe Biden administration. Nobody is doing this more so than UK prime minister Boris Johnson’s “global Britain”, for which securing that all-important US trade deal will prove the fruits of going it alone after leaving the EU.

Economically, even at best, the deal is not worth a lot to the UK. But politically it matters a lot. At least for now. However, the Johnson government faces a tricky task. Having dealt with Trump’s protectionist trade tsar Robert Lighthizer, the UK faces a potential Democratic government with different diplomatic and trade priorities — in the words of one British official, it needs to “Bidenise”. 

What does that look like? In a previous life, Biden backed a lot of the free trade deals that Trump has either ripped up or railed against. He supported the much-hated Nafta trade deal with Mexico and Canada that voters in the rustbelt states blame almost wholesale for the loss of factory jobs. He voted for the normalisation of the trading relationship with China that paved the way for its ascension to the World Trade Organization in 2001.

The mood on China among US politicians and voters has changed dramatically since the early 2000s. Biden, knowing this, has pivoted. Like Trump, he is now a China hawk and advocates some amount of protectionist trade policy designed to halt the rampage of globalisation, including taxing US companies for moving offshore and implementing federal procurement rules incentivising government agencies to buy US-made goods. If he wins, we will probably see differences in approach and implementation when compared with the Trump administration, but they share a common scepticism over unchecked globalisation. 

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That said, when it comes to striking trade deals, there will be differences of focus between Biden’s Democrats and Trump’s Republicans. Democrat lawmakers on Capitol Hill traditionally focus more on environmental protections and workers rights and labour standards, and the UK will need to do the leg work to make sure it can show it cares about a green future. It is already clashing with Brussels over the inclusion of guarantees on respecting international climate change commitments in its trade deal, and is now likely to face the same from Washington.

US Democrats have taken notice of garment factories operating under sweatshop-like conditions in Leicester, England © Getty Images

On labour issues, you might think the UK with its relatively developed laws and regulations would be on safe ground. But one Democratic congressional aide pointed out that the party was paying very close attention to labour abuses — and cited British media reports of garment factories operating under sweatshop-like conditions in Leicester (as covered by my colleague Sarah O’Connor) as something that they have noticed and do not like.

On Brexit, too, the UK will face a difference in attitude from Democrats. While Trump officials past and present commend the exit of the UK from the EU and are sympathetic to a no-deal scenario, the Democrats prize alliances and will not applaud the UK walking away without an agreement in place. That said, the Brits are hoping that as long as the Irish border issue is not messed up, Democrats can be placated over whatever emerges from deal talks.

But one huge difficulty is Biden’s own admission that trade will take a back seat in his administration. “I would not sign any new trade deal until we have made major investments in our workers and infrastructure,” he said last year, adding that his trade policy would “start at home, by investing in strengthening our greatest asset — our middle class”. This might mean that Biden is not superfast, either, to appoint his new chief trade representative. If he does not win the Senate, confirming his appointees will also take a little longer (because Republicans will have control of all of the committees key to confirming his candidates).

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Because of all of this, the UK is hoping it can get an “oven-ready deal” that Biden has to waste no energy on. And, as we have reported before, the US legislation governing the way trade bills pass through Congress expires in July. To be covered by that legislation and to make sure the deal passes relatively swiftly through Congress, lawmakers need to be notified that the deal is ready by April, and then presented with the text about a month afterwards. British officials are still batting for that deadline. Let’s hope they know how to Bidenise fast.

Charted waters

Will Brits have jam in January? As the chart below shows, UK imports of fruit and vegetables from the EU usually peak in the first quarter — just as customs chaos stemming from a brand new (or no) Brexit deal is likely to be at its worst, as Chris Rogers, research analyst at S&P Global Market Intelligence points out. This year was slightly unusual: imports dropped more sharply than usual as we headed into the summer, during lockdown. Perhaps all those tins of beans stockpiled in March will come in handy after all.

Line chart of Monthly, by £m  showing UK fruit and veg imports from the EU

Tit for tat

Susan Danger, chief executive of the American Chamber of Commerce to the EU, joins us to answer three questions.

Are you expecting that a UK-EU trade deal will be agreed in the coming weeks and what form do you think it will take?

American companies remain very cautious but are encouraged by the latest statements from both sides. Negotiators should make the best use of what precious little time is left to strike a deal. Let’s remember that a no-deal scenario would be a disaster for companies of all sizes on both sides of the Channel. It is in the interest of both sides to remove barriers and ensure regulatory cooperation. I hope the deal will be as comprehensive as possible, within the limits of what is politically feasible. With both citizens and companies affected by a global pandemic, we need to limit the uncertainty caused by Brexit, ensure stability on the financial markets as well as urgently focus on recovery and growth.

What’s the best way for transatlantic relations to heal given recent trade tensions?

The EU and the US need to focus on a positive trade and investment agenda and work together on common challenges, such as the reform of the WTO, digital standards and industrial subsidies. A step-by-step approach — closing deals on specific issues — is the best way to build trust, strengthen the relationship and ensure continued dialogue. I would express caution against terms such as ‘strategic autonomy’. The emphasis needs to be on intense transatlantic cooperation, especially as we all face the impact of Covid-19. Sixteen million jobs on both sides of the Atlantic rely on the EU-US partnership.

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What’s the most realistic path forward for the WTO that is likely to please both the US and the EU?

Both the EU and the US agree on the need to reform the WTO, so cooperation remains the only way forward. I see three priority areas in the revision of the WTO rulebook. First, plurilateral talks should be given a greater role in negotiations among member states. Second, the monitoring role of the Secretariat should be strengthened to improve the way governments submit notifications to the WTO. Third, the EU and the US should continue to discuss the future of the dispute settlement mechanism as it remains instrumental to the multilateral trading system.

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