Sellers of Scotch Whisky, West Country cheddar and Stoke-on-Trent ceramics are those who potentially have a surprising vested interest in who wins the
Sellers of Scotch Whisky, West Country cheddar and Stoke-on-Trent ceramics are those who potentially have a surprising vested interest in who wins the US presidential election.
While who runs the world’s largest economy, one looking to rebound after the coronavirus pandemic, obviously has repercussions for everybody, Britain might have more of a stake than most.
Not only because of the so-called ‘special relationship’ between Britain and the US, but also because of how much the Government has made much of striking a trade deal with the US after Brexit, something the European Union itself has yet to manage.
How important would this be, and how much will the chances of any deal depend on who wins the White House?
Donald Trump and Joe Biden’s contest for the White House could have repercussions on how quickly a trade deal between the UK and US gets done after the election
How important to the economy is trade with the US?
Maybe even more than a post-Brexit agreement with the EU and rolling over existing deals with the likes of Japan, a trade deal with the US seems right at the top of the Government’s to-do list.
Negotiations are currently in their fifth round having begun in May, with international trade secretary Liz Truss concluding the latest stage of the talks last month.
Truss tweeted the UK was ‘in a good position to move forward after the election’, while her department said it had ‘agreed much of the legal framework for a future agreement’.
But the move may be more symbolic than anything else, more about showcasing Britain’s ability to strike its own trade deals than the impact of any agreement itself.
The Daily Mail’s Alex Brummer, for example, called a new trade deal ‘overrated’.
The Department for International Trade even admitted in March when it set out guidelines for the talks that a UK-US trade deal would boost the UK economy by just 0.16 per cent, or £3.4billion, 15 years on from any agreement.
|Category||Value in 2019|
|Total goods and services trade||£211bn|
|Physical goods trade||£101.75bn|
|UK exports to the US||£48.6bn|
|Source: United States Trade Representative|
Critics say this hardly makes up for the loss of trade and the impact of barriers put up by the UK’s decision to leave the EU’s single market and customs union.
Currently, the US is already the UK’s largest trading partner outside of the EU and the trade we do with it is larger than with any single EU member state, accounting for a fifth of exports last year.
The UK has been locked in trade negotiations with the US since May, with the latest round of talks finishing last month
The Department for International Trade estimated UK-US trade was worth £220billion last year, and its US equivalent put it at £211billion, making us the United States’ seventh-largest trading partner.
The UK is the destination for 4 per cent of all US exports, most notably gold, aircraft, fossil fuels and machinery, while we are their eighth-largest supplier of imported goods, accounting for 2.5 per cent of US imports.
But while we already do plenty of trade with the US, it’s not to the same level of depth as with the EU, something a new trade deal might not help with much.
Why bother with a deal then?
While at a UK-wide level any trade deal with the US might not have a huge impact on the UK economy, ‘there are significant opportunities in specific sectors’, the think tank Policy Exchange said in July.
‘While on average US tariffs are low, there are exceptions where UK exports would stand to gain from liberalisation.’
The US levies around £451million a year in tariffs, or taxes on imports, on UK goods each year, according to the Department for International Trade.
At the end of last month the DIT said the latest round of trade negotiations ‘included discussions on market access for goods’, which could determine whether UK exports benefit from reduced tariffs.
Single malt Scotch Whisky has been subject to a 25% import tariff in the US since last October, when it was slapped with the tax as part of a dispute between Airbus and Boeing
This could especially help the Scotch Whisky industry. Single malt Scotch has been subject to a 25 per cent import tariff since last October after a World Trade Organisation dispute between Airbus and Boeing over state aid subsidies.
With such a tariff pushing up the cost to American importers and consumers, the industry has lost £200million in exports, according to the lobby group the Scotch Whisky Association, which has urged the Government to negotiate the scrapping of the tariff in any trade deal.
The DIT said in March that the other parts of the UK economy which could benefit from lower tariffs included the £2billion ceramics industry, currently subject to rates of ‘up to 28 per cent’, and Britain’s car industry.
The Department for International Trade said the UK’s car industry could benefit from a UK-US trade deal, as exporters ‘currently face both tariffs and non-tariff barriers’
Already the UK’s most sold good to the US, comprising 14 per cent of all exports there last year, ‘automotive exporters currently face both tariffs and non-tariff barriers which could be addressed’ in a trade deal, the DIT said.
Jennifer Revis, a trade partner at the law firm Baker McKenzie, wrote last month that at a time when UK car manufacturers face potential restrictions on trade to their biggest market, ‘a combination of high elasticities and high existing barriers to trade means that an ambitious US trade deal has the potential to provide a significant offset to Brexit’.
She said a US agreement could help reduce the projected loss in export revenue from Brexit and the coronavirus by billions of pounds.
Law firm Baker McKenzie last month estimated a UK-US trade deal, and membership of the Trans Pacific Partnership trading bloc of 11 countries, could ease the impact of a no-deal Brexit on Britain’s car industry
A sour taste in the mouth?
Both the DIT and Policy Exchange have also argued a US deal could boost the prospects of UK agriculture, by reducing existing tariffs of up to 17.6 per cent on cheddar cheese and British lamb and beef, allowing ‘UK farmers to export more produce to the US.’
However, any liberalisation would work both ways, and the idea of allowing US food products into the UK has proved incredibly controversial.
Great British Bake Off judge Prue Leith and chef Yotam Ottolenghi are among those who have warned of a fall in UK food standards following a post-Brexit trade deal between the UK and US
Only last month an alliance including Great British Bake Off judge Prue Leith, chef Yotam Ottolenghi and ‘the nation’s PE teacher’ Joe Wicks urged the Government to back British farmers and not allow UK supermarkets to be flooded with ‘substandard’ US produce like chlorine washed chicken by lowering food standards as part of any deal.
Although about standards rather than tariffs, this could be a potential dealbreaker for the US, as could the issue of NHS drug pricing, amid concerns UK patients would have to pay more for their prescriptions if American pharmaceutical companies get their way.
A petition by the UK’s National Farmers Union asking the Government not to sacrifice UK food standards in any future trade deal has attracted more than 1m signatures
Does it matter who wins the White House?
Rhetorically, Donald Trump and Joe Biden could hardly be further apart on the subject of a UK-US trade deal.
In a tale of two tweets, the current president in June last year said a ‘big trade deal is possible once the UK gets rid of the shackles’ after Brexit.
The former vice president meanwhile has focused more on the potential barriers to trade.
In September, Democratic presidential candidate Biden tweeted any deal ‘must be contingent upon respect for the Good Friday Agreement and preventing the return of a hard border’ in Ireland, amid concerns the UK could renege on obligations set out in its withdrawal agreement with the EU in the event of a no-deal Brexit.
But the issues may really be on style, rather than substance.
Donald Trump last year insisted a ‘big trade deal’ was possible between the UK and US after Brexit
‘A Biden presidency would not necessarily have radically different priorities for trade negotiations with the UK’, Policy Exchange stated in July.
‘US trade objectives largely reflect stakeholder concerns and retain a degree of bipartisan consensus.’
This was echoed by Sam Lowe, senior research fellow at the Centre for European Reform think tank, who tweeted last month that ‘The US objectives for UK-US trade deal under Biden would be pretty much the same as under Trump, particularly on agriculture’.
Post-Brexit food standards might still be a stumbling block then, although he suggested there could be fewer issues surrounding drug prices.
However, Britain’s relationship with Northern Ireland may prove more of an issue for a Democrat-led White House and Congress than a Trump second term.
Democrat presidential candidate Joe Biden insisted any UK-US trade deal was only possible if there was no return of a hard border in Ireland, a potential fear after Brexit
And while the former vice president’s own style, one perhaps less prone to launching trade wars or hitting America’s partners with tariffs, could work in the UK’s favour, he has embraced a ‘buy American’ economic policy focused on domestic companies after the pandemic, meaning there is likely to be less of a focus on striking new trade deals abroad.
‘While there is no reason to suspect a Biden presidency would oppose the principle of a deal with the UK, there is a question over whether he would prioritise it to the same degree as President Trump’, Policy Exchange wrote.
Trade policy expert David Henig tweeted last month under Biden a UK-US trade deal would be unlikely to be in place ‘before 2023’, and Sam Lowe added that although a UK trade deal ‘would certainly be nice to have… the number one priority will be rebuilding bridges with the EU.’
To echo former President Barack Obama, who Joe Biden served with, a Democrat retaking the White House could see the UK once again ‘at the back of the queue’.