In 2020, when she was then Secretary of State for International Trade, Liz Truss went to Washington D.C. to meet with President Donald Trump as part of the UK government’s negotiations for a Free Trade Agreement (FTA) between our two countries and to also tackle a few trade disputes. We sent Truss off with a bottle of Scotch with the message essentially being: stop levying tariffs on this great British export. Trump gave Truss a copy of ‘The Art of the Deal’ with the inscription: ‘To Secretary Truss, Let’s get a great deal, Donald’.
This shows two important things. Despite what many of the naysayers have argued, a trade deal between the US and the UK would be in our nation’s interests and President Trump is supportive of such a deal, at least in principle.
A free trade deal between the UK and the US would be beneficial for the UK for a number of reasons. First, it goes without saying that the US is the richest country on Earth with a huge population of wealthy consumers. Anything which opens up the US market and gives UK firms greater access to American consumers by making their products cheaper and therefore more attractive is obviously good for UK firms. It means higher profits, which in turn leads to higher wages for workers and more jobs being created. This is a relatively uncontroversial point.
At this point, someone might point out that relatively little of what the UK exports to the US is impacted by high tariffs, so there isn’t much to be gained from a FTA. This is a fair criticism and I’ve written before on why it is a problem that modern FTAs only tend to focus on tariff reduction.
However, even if it did only lead to a modest increase in goods exports, such a deal would still be beneficial to the UK. Moreover, it creates an opportunity for the UK and the US to work on a new model for FTAs. For example, the FTA could look at liberalising rules of origin and tackling red tape. It could also make it easier for services companies to trade in the other country through relaxing visa rules for high-skilled workers and introducing the mutual recognition of qualifications. This is what has been happening under the Memorandums of Understanding between the UK and several American states and could serve as a template for a comprehensive FTA.
A deal with the US wouldn’t just benefit the UK by boosting exports. Trade negotiations are often viewed as a zero sum game, where the ‘winner’ is the country who gets to export more while the ‘loser’ is the one who has granted greater market access to the other. This stems from the notion that exports are good and that imports are at best something we have to tolerate in order to export more. The opposite is true. Imports force domestic firms to up their game and become more productive, which leads them to create innovative new products, increase their profits, create jobs and boost wages and living standards. Even more importantly, they give consumers greater choice and lower prices.
Some unproductive firms would go bust as a result, but while this is obviously sad for the owners, it is no bad thing for the country. It is all part of creative destruction and will allow the capital and workers tied up in those firms to be used more efficiently in more productive enterprises.
On a related note, we need to mention agriculture. That will be the biggest sticking point, as practically all countries are very protective of their agricultural industries. Trump is unlikely to agree to any deal which doesn’t see the UK grant greater market access for American produce – including chlorinated chicken and hormone treated beef – and the UK is unlikely to want to do this. This shouldn’t stop us from trying, however. We might well be able to fudge a compromise solution to get around this: having worked with them, I can say that our trade negotiators are fantastic.
Even if a solution can’t be found, the Government should not scupper a trade agreement on these grounds. As mentioned above, imports are great because they make firms more productive and the same is true of farming: many farmers will benefit from the increased competition. It would also be wrong to stand in the way of UK households being able to access more affordable food, especially when so many of them are trying to make ends meet and so many of them are forced to rely on food banks.
This would obviously be an incredibly tricky sell, but the Government should do all it can to help farmers to readjust and to assuage the fears of consumers. Generous grants should be given to farmers so that they can invest in new technologies which will help them to improve productivity. At the same time, the Government should embark on a programme of export promotion in order to help British farmers make the most of a trade deal with the US.
The UK produces some of the best food in the world and to very high welfare standards. This produce would be incredibly popular with American consumers if it is marketed in the right way. Despite chlorinated chicken and hormone treated beef being perfectly safe, not everybody would want to eat it and that is of course up to them. As I’ve written for this site before, we could get around this by introducing a labelling system which will let consumers know how their food was produced.
Finally, an FTA with the US could help the UK achieve its aims of shaking up the global trading system. As mentioned above, how countries actually do FTAs needs to change. Moreover, the WTO is in need of fundamental reform and more needs to be done to tackle countries which engage in unfair and illegal trading practices such as China. None of this can be done without the US, but if it is working closely on trade with the UK then this could be enough for the EU to take reform seriously as well.
As for Trump being keen on a deal, good progress was made on a deal under his first term. Negotiations fizzled out as President Biden was just not that interested in doing deals with anyone. We cannot say for certainty if a FTA would have been agreed, especially due to issues around agriculture, but it was not impossible. In fact, the UK did achieve many of its goals such as lifting the decades long ban on the import of British lamb and also the lifting of tariffs. Trump is also an Anglophile who likes the UK and likes making deals, which obviously helps.
Should the UK aim to forge smaller deals on the way, such as agreeing to buy more US goods in exchange for being exempt from tariffs? Yes. Do I think the UK should pursue a deal at any cost? No. However, a comprehensive FTA with the US is potentially on the table and would bring huge benefits – the Government should seize the opportunity.
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