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Published On: Wed, Oct 30th, 2019

Here’s Where the U.S./U.K. Bilateral Trade Deal Stands

On an August visit to London, U.S. national security advisor John Bolton assured U.K. government officials that the United Kingdom would be “first in line for a trade deal” with the United States following the U.K.’s planned October 31 exit from the European Union.

Bolton proposed iterative, “sector by sector” agreements, rather than an overarching trade deal, pointing to the manufacturing sector as one where a deal could come together quite quickly.

He reiterated the American government’s support for a “no-deal” Brexit, wherein the United Kingdom leaves the European Union before inking a treaty with the bloc. Economists and investors are broadly skeptical of a no-deal Brexit, but British MPs may have limited recourse to prevent Prime Minister Boris Johnson’s government from following through.

photo/ DANIEL DIAZ via pixabay

A Deal Is Already in the Works

Happily for Johnson, a U.S.-U.K. trade deal has been in the works for some time. The United States Trade Representative formed a working group to “[lay] the groundwork for a potential future free trade agreement once the [U.K.] has formally exited the European Union.”

The working group will continue to contend with a variety of competing interests and is sure to accommodate the views of American advocates for fair trade. But it’s encouraging that the group has already inked agreements around key goods, including wine, distilled spirits, and marine equipment. These relatively modest successes may bode well for the more sweeping and ambitious deals that will need to be agreed soon after the United Kingdom’s exit.

Not As Easy As It Sounds

Unfortunately, more work remains to be done — and external events could yet sidetrack a truly comprehensive trade agreement.

To be sure, the U.S.-U.K. relationship has improved quite a bit since the Brits burned down the White House in the War of 1812. They call it the “special relationship” for a reason — the American and British governments really do get along well.

Why, then, are so many economists and political handicappers skeptical about the prospect of a broad-based U.S.-U.K. trade deal following a no-deal Brexit?

The reasons are too numerous to go into here, but by far the most salient is the question of the “Irish backstop” — the expectation that the E.U. and U.K., or at least the U.K. country of Northern Ireland, will retain close relations with the E.U. (and specifically Ireland) indefinitely. The backstop is essential to preventing the reimposition of a hard border — customs stations, fencing, the whole nine yards — between Ireland and Northern Ireland, which share the Emerald Isle’s landmass.

No one should want a hard border between Ireland and Northern Ireland; economically, the countries are joined at the hip. The problem is, the official position of the U.K. government is that the United Kingdom will leave the E.U. on October 31, with or without the backstop. E.U. negotiators find this position unacceptable — as do Congressional Democrats in the United States, the support of whom would be required to pass any post-Brexit bilateral trade deal with the United Kingdom.

The prospect of a comprehensive U.S.-U.K. deal coming together in the wake of Brexit could well hinge, then, on what happens with the Irish backstop. For those with a vested interest in the outcome, the last-ditch Brexit negotiations happening right now bear close watching.

Author: Wahab Sheikh

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