How realistic is a sectoral trade deal between US and UK?
John Bolton, the most senior Trump administration official to visit the UK since Boris Johnson became prime minister, has taken a broad approach to his brief as the US national security adviser by weighing in on the issue of a post-Brexit trade deal between the US and the UK.
On Monday, he suggested the two countries could take a “modular” approach towards a “comprehensive” deal by carving out areas where it might be possible to reach an accord more quickly.
What lies behind this approach and is it realistic?
What is John Bolton promising the UK?
The US national security adviser wants a sectoral deal in which certain parts of trade — he mentioned manufactured goods and cars in particular — would be dealt with quickly or an “early harvest” in trade negotiators’ terms, before moving on to the rest of the economy later.
Why is the US national security adviser talking trade?
Good question. Trade is properly the province of the Office of the United States Trade Representative. True, the National Security Council does traditionally have an influential point person for international economics, but it is USTR that leads negotiations and deals with Congress.
Mr Bolton’s intervention is clearly aimed at bolstering the UK as a foreign policy and security ally. The two countries are, after all, part of the world’s most powerful intelligence-gathering alliance, the “Five Eyes”, along with Australia, Canada and New Zealand. The Trump administration is concerned about the UK being crippled by Brexit. There are similar concerns in some quarters of Congress. Tom Cotton, a senator from Arkansas and well-known foreign policy hawk, recently organised a letter with 44 other Republican senators, offering the UK unspecified help in the event of a no-deal Brexit.
Some national security hawks in Washington have become increasingly concerned about what they see as a hard line on the Irish border taken by the EU in support of Ireland’s stance on the border. Ireland traditionally has a large bloc of vocal supporters on Capitol Hill. Nancy Pelosi, Democratic Speaker of the House of Representatives, has repeatedly said she will block any US-UK deal that does not respect Ireland’s interest in the Good Friday Agreement.
Would a trade deal be legal?
Technically no, but stopping it depends on someone taking on the US. World Trade Organization rules outlaw a bilateral deal that does not cover “substantially all the trade”. In reality, there is no clear definition of what that means, and very little litigation has been brought that touches on it. In any case, the US has little concern for the WTO dispute settlement system, to which it is refusing to appoint judges. But the UK, which will just be establishing itself as an independent member of the WTO, is unlikely to be quite so cavalier with the rules.
Will Congress pass it?
This is the real constraint. US exporters, including farmers, wield great power in Congress and can easily block trade deals they do not like. It is hard to imagine a piecemeal deal — and particularly one excluding agriculture — being warmly received on Capitol Hill.
More likely, Congress will tell the administration to go back to the UK and get a broad-ranging agreement. This will most likely include issues that are highly sensitive in the UK, such as the now-famous chlorinated chicken, and possibly pharmaceuticals pricing that may affect the NHS, together with other huge swaths of trade including services.
The US is negotiating a bilateral deal with the EU that includes zero tariffs only on industrial goods, but people familiar with the talks say that USTR is so sceptical of getting such a narrow deal through Congress that they are focusing on much smaller regulatory issues that do not need congressional approval.
Won’t the export interests be overridden by national security considerations?
Unless an existential threat to the US is involved, probably not. The US does sign deals with foreign policy motives. President George W Bush pushed through a bilateral with Australia, then led by his close ally John Howard, in record time in 2004. But they are often primarily symbolic. The US-Australia deal, for example, gave Australia’s highly efficient farmers little extra access to the US market.
Even for such a large deal as the twelve-member Trans-Pacific Partnership, which had the strategic aim of countering Chinese influence in Asia, Congress held the deal up complaining about such mundane issues as the length of time that pharmaceutical companies had exclusive rights over the data used to create patented drugs, and the fact that the tobacco industry was carved out of a provision allowing companies to sue governments. When it comes to national security against the farmers in Congress, if not necessarily with Mr Trump, the farmers usually win.
So is there any point to this at all?
Substantively, probably not. But politically, if the UK’s Mr Johnson manages to convince MPs and the public to ignore all the issues above, he may well be able to assuage concerns about the trade impact of a no-deal Brexit.