It would be tempting to dismiss the comments by Donald Trump on the prospects of a trade deal between the United States and the United Kingdom after Brexit as just part of the usual presidential noise.
Tempting, but wrong. The US president has simply pointed out the obvious: the UK cannot maintain free trade with the European Union and at the same time strike new trade deals with other countries, such as the US. If the UK commits to follow EU rules and regulations in goods and agricultural products, as it said last week that it wants to do, then it will not be able to sign a new and different trade deal with the US .
As Trump put, in his interview with the Sun: “If they do a deal like that, we would be dealing with the European Union instead of dealing with the UK, so it will probably kill the deal.” He half backed away from this yesterday – saying a trade agreement could still be on and backing away from the “ kill the deal” comment. But he was right the first time – if the UK does stay tied to EU rules, there won’t be any point.
The US, for example, would surely push as part of a trade deal with the UK for wider access for its agricultural products to British markets. Whether this would include the much-discussed chlorine-washed chicken is open to question, but the US would certainly look for a relaxation on EU rules currently followed by the UK which cover things such as animal standards, antibiotic use, genetically modified crops and so on. And in the White Paper published this week the UK says it wants to keep these rules.
Global Britain
Trump’s interview has been jumped on by the hard-Brexit lobby, which has been pedalling the nonsense of a new “global Britain”. But they need to be careful, too. Because what Trump has pointed out undermines their case that Britain can have it both ways after Brexit, maintaining something like current trade arrangements with the EU while still signing new deals with countries such as the US. Boris Johnson’s comment – that the UK can have its cake and eat it too – stands exposed as a farce.
And if you have to choose between the certainty of containing free-trade arrangements with the EU, versus the hope of signing new deals with the likes of the US, then there really isn’t any choice at all. The EU market accounts for 43 per cent of all UK exports – and almost half UK exports of goods. The US accounts for 18 per cent.
And the argument goes beyond these figures. On one side, the UK – if it chooses to leave the EU trading bloc – faces big losses in existing markets. The UK financial sector, for example, is up in arms because the White Paper published during the week said Britain would not adopt the EU rule book for services trade.
Meanwhile, the economic gains from a trade deal with the US would not be huge – after all, the two sides trade relatively freely at the moment. As tariff levels – or import taxes – imposed are low, the main gains from a UK/US trade deal would come from changing procedures, rules and regulations. This is complicated, controversial and would take time, and the economic gains would not be huge.
Trade experts say the only way to do such a deal quickly would be for the UK to more or less sign up to US terms – precisely what Trump would want. And remember this is a president now threatening a trade war to get his own way.
Theresa May’s White Paper recognises, in part, the need to stay close to the EU, though whether she can retain support for this is unclear.The deeper we have got into this, the more we understand how complicated and embedded the EU single market and customs union are in the way everything works. And the more it is clear just how difficult leaving would be, never mind recreating a new trading arrangement following Brexit.
Just consider what we have heard this week about preparations if the UK crashes out of the EU without a deal. The European Commission is warning about chaos at ports and airports, and civil servants in London have examined putting electricity generators on barges in the Irish Sea to ensure the North still has a supply. And this is before you start doing a full tot of the costs to businesses and consumers.
Trade deal
As the country most exposed to this – apart from the UK itself – Ireland will want the talks to continue. We need a withdrawal deal to be signed and for the transition period – the standstill due to last from March 2019 under the end of 2020 – to come into force. We will then hope that a future favourable trade deal can be negotiated.
The Government will be encouraged that the UK wants to continue free trade in goods and agricultural products with the EU in the long term. However, as we need support on the Border backstop – which must be signed up to in a legal form as part of the withdrawal process – Ireland will have to play a careful hand, recognising the scepticism some other member states will have on parts of the latest plan from London.
Where now? For the talks to proceed the Border backstop issue appears the key block to finalising the withdrawal agreement The UK has said it will sign a backstop – but we just don’t know what kind of one it means. The two sides also must agree a political declaration on their future relationship – a kind of framework for future talks. And as we have said there are clear differences here, though some of this could be left for future negotiations..
Trump has outlined the choice facing the UK clearly – keep free trade with the EU or ditch it in favour of doing new deals with the US and others. The UK can’t have it both ways. Ireland will hope that the UK chooses to keep its trade links with Europe. This would be the logical thing to do. But after a week like we have seen, who could rely on logic winning the argument.