The United States & United Kingdom Trade Negotiations

On October 16, 2018, the Trump administration notified Congress that the President intended to negotiate a trade agreement with the United Kingdom (U.K.) once it leaves the European Union (EU). The U.K., for the first time in decades, will be free of the European Union and thus tasked with writing and developing its trade deals. It is a high-risk gamble for the U.K. to venture out on its own without the collective strength of Europe bolstering its negotiating position.

The United States, under the Trump administration, has repeatedly sought to rewrite the rules of international trade, increasingly prioritizing bilateral deals with the stated goal of “making America great again.” In essence, the Trump administration believes that by engaging with smaller, less economically dominant countries like the U.K. in a trade deal, the administration can leverage the United States’ economic might to force the U.K. into supporting specific priorities of the administration. Many of the ‘priorities’ in the Summary of Negotiating Objectives appear in legalese, but, upon closer investigation, it is clear what the U.S. is after. One of the stated goals of the deal is [t]he United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities for trade and investment with the U.K. This is quite vague and is typically a goal for every country, in every trade deal. However, if we continue reading, the summary goes on to say: [o]ur aim in negotiations with the U.K. is to address both tariff and nontariff barriers and to achieve fairer and deeper trade in a manner consistent with the objectives that Congress has set out in section 102 of the Trade Priorities and Accountability Act. Finally, we get some substantive talk. The U.S. government is effectively saying that it would like to negotiate a joint tariff reduction. The use of tariffs has been the Trump administration’s most unique and bold economic policy experiment over the past three years. Past administrations, including the Obama, Bush ‘43, and Clinton administrations largely shunned the use of tariffs, seeing them as an ineffective negotiating technique that, more often than not, drove resentment and fueled retaliatory measures. The Trump administration, however, has taken the opposite view and has actively wielded tariffs as a powerful instrument to extract promises and concessions from other countries. It remains to be seen whether the U.S. will be successful in dangling its existing tariffs on U.K. goods as bait and extracting coveted concessions.

 The summary delves into more esoteric regions of international trade like rules of origins. The U.S. wants to ensure that the rules of origin incentivize production in the territory of the Parties, specifically in the United States. This has been a focus of the Trump administration. Here, the push to buy American extends beyond the U.S. to countries like the U.K., where officials seek enforceable language that will level the playing field in terms of trade and promote the purchase of American goods. One issue that we have seen recently in the news is the issue of how to tax technology giants like Google, Amazon, and Facebook. These are three of the most profitable companies in the world. They operate digital platforms, making it an ambiguous and politically fraught task to assign where their profits are derived and how to tax them. Countries like France and the U.K. have taken hardline stances against these tech-behemoths, and President Trump has denounced these hawkish actions. Secure commitments not to impose customs duties on digital products (e.g., software, music, video, e-books). – Ensure non-discriminatory treatment of digital products transmitted electronically and guarantee that these products will not face government-sanctioned discrimination based on the nationality or territory in which the product is produced. This language is unambiguous in its wording. The Trump administration wants to protect these American businesses and thus be the sole beneficiary of their outsized profits.

 At the very end of the summary, there is a surprising focus on a single third-party country — Israel. Over the past few decades, Israel has become one of the United States’ closest allies and is seen by some critics as an arm of the U.S. military in the Middle East. Nevertheless, the U.S., especially under the Trump administration, has repeatedly sought to protect Israel and its interests. It has gone as far as blocking numerous U.N. Security Council Resolutions, moving the official U.S. embassy and recognizing Judaism as a nationality. Therefore, it should not come as no surprise to see the U.S. insert language into the summary that underscores its commitment to protecting Israel. The summary states [w]ith respect to commercial partnerships: Discourage actions that directly or indirectly prejudice or otherwise discourage commercial activity solely between the United States and Israel; Discourage politically motivated actions to boycott, divest from, and sanction Israel; Seek the elimination of politically motivated nontariff barriers on Israeli goods, services, or other commerce imposed on Israel; and Seek the elimination of state-sponsored unsanctioned foreign boycotts of Israel, or compliance with the Arab League Boycott of Israel. This language is astonishing. It lays bare the lengths to which the Trump administration is willing to go to protect Israel. It is a clear sign of the value the current administration places on its relationship with Israel, perhaps at the expense of a more amicable relationship with the U.K., a far more established international player. It remains to be seen whether the U.K. is willing to negotiate its stance towards Israel, which is in line with the rest of Europe. Most of Europe is unanimous in its condemnation of Israeli settlements in the West Bank, supports a two-state solution, and was critical of the United States’ move to shift its embassy from Tel Aviv to Jerusalem, a move that infuriated most of the Arab world.