Some 78 years after Churchill coined the phrase ‘the special relationship’ to describe the alliance between the UK and the US, both powers must continue to seek ways to deepen their economic ties and accelerate economic growth in order to meet the demands of global leadership.
So it was very promising to have the United States Trade Representative Katherine Tai in London and to see Prime Minister Keir Starmer meeting with President Biden in Washington last week.
There is much to be discussed. The UK and US have not yet been able to secure a trade agreement, despite the US being the largest foreign direct investor in the UK and the UK being the second largest in the US. Each country employs over 1 million people from the other, and there have been eight state trade memoranda of understanding with the UK. Clearly, there is untapped potential here. It would also be a wonderful legacy for outgoing President Biden, who has not pursued any trade agreements in office, and an early win for Starmer that his predecessors could not accomplish.
An agreement can be achieved in a couple of ways. The primary means would be to use the comprehensive and bi-partisan US-Mexico-Canada Agreement (USMCA), which passed the US Congress in January 2020. The UK could join the North American agreement or alternatively, use the basis of the agreement as the foundation for a bilateral agreement.
The USMCA is the most thorough and broad trade agreement of its kind. It covers digital trade and e-commerce, critical minerals, intellectual property rights, agriculture, manufacturing, and significant labour and environmental regulations. Its supply chains are protected and resilient, which a trusted ally like the UK could easily join and contribute to from day one. Both countries already have agreements via the Atlantic Charter (2021) and the Atlantic Declaration (2023), which cover AI technology, clean & nuclear energy, critical mineral sharing and quantum technologies.
It makes sense for the UK to join a trade agreement which meets the demands of both the political Left and the Right in each country, and one that will likely be renewed by Congress. The UK’s new Labour Government has concerns over green energy and labour provisions, which this agreement covers and it has Democrat Party support. So the long and protracted negotiations of the past can be bypassed more easily. There will of course be much to work through, but the framework of the USMCA creates a starting point that is further along.
It is also vital, in geostrategic terms, for the UK to adopt a US competition-based regulatory system, instead of the heavy-handed and burdensome approach of the European Union (EU), where trading partners are pressured to adopt onerous regulations drafted in Brussels. However, the Labour government is more EU-focused in its thinking. Chancellor Rachel Reeves recently said that Labour will ‘forge a closer relationship with our nearest neighbours in the European Union’. This risks distancing the UK from the US, hurting overall trade with America. It is not in the UK’s interest to align with the EU on these matters, leaving behind the economic potential with the largest economy in the world and the UK’s best ally.
UK membership of USMCA would also help to combat China’s unfair practices by creating ‘gold standard’ global regulatory frameworks across a range of sectors. This would complement joint efforts on national defence such as AUKUS.
With the USMCA up for review in 2026, there is no better time than now to start these conversations. A UK-US trade agreement should be on the agenda for both Biden and Starmer: it is a clear economic and geopolitical win.
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