Trade, Development, and Immigration

It’s hard to imagine two countries better suited for a liberalising trade deal than Britain and the US

Now might seem an odd time to be considering new free trade deals with the US, when President Donald Trump has just escalated his trade war with China by imposing new tariffs on $200bn worth of goods.

The UK, meanwhile, is still focused on resolving the uncertainty surrounding its future trading relationship with the EU. Talking seriously about a possible UK-US free trade agreement may feel a bit premature.

Yet that is precisely what policy experts from 11 think tanks on both sides of the Atlantic have been busy debating this year.

The culmination of that effort is a paper entitled “The Ideal US-UK Free Trade Agreement: A Free Trader’s Perspective”, published on Tuesday by the Initiative for Free Trade in London and the Cato Institute in Washington.

This in-depth report includes the draft legal text, summaries, and explanations of what the authors consider provisions worthy of the model free trade agreement.

Free trade is about the freedom of people to transact as they wish, with whom they wish, and without politicians and bureaucrats as gatekeepers. Therefore, genuine free traders tend to be sceptical of agreements, which are usually more about managed trade than free trade.

Rather than liberalise the rules and provide consumers with greater choices, trade agreements too often contain provisions that protect incumbents from challengers by locking in existing advantages, requiring long tariff phase-out periods, and limiting competition in industries through rules that masquerade as serving prudential or socially desirable purposes.

Too often, the terms are pro-business, pro-labour, or pro-special interest, when they should be pro-market.

The prospect of a bilateral UK-US agreement affords two of the world’s largest economies – both traditionally committed to the institutions of free-market capitalism and the rule of law – the opportunity to break new ground and pioneer the rules of a genuinely liberalising, modern trade agreement.

By removing tariffs and significantly reducing behind the border barriers that inhibit market integration, such a model will have a transformative effect, on both economies and beyond.

With some limited exceptions, the final model for an ideal agreement calls for: zero tariffs on all goods; zero non-tariff trade barriers; zero restrictions on competition for government procurement and on foreign direct investment; rules to make mutual recognition of potentially protectionist product standards and regulations more feasible; prohibitions against the use of anti-dumping measures; and prohibitions against restrictions based on scientifically unsubstantiated public health and safety concerns and national security concerns that do not meet certain minimum standards.

Despite the current uncertainty in both the UK and US policy environments, now is the ideal time to be giving serious thought to a bilateral free trade agreement. In six months, the UK will have repatriated its trade policy decision-making. Striking smart, new trade agreements will be crucial for Britain to maximise economic opportunities post-Brexit.

Meanwhile, before the year’s end, the Trump administration is likely to wrap up its trade renegotiations with South Korea, Canada, and Mexico, clearing the decks for a shift in focus to new, bilateral free trade agreements.

The US ambassador to Britain noted last week that Trump has a “robust appetite” for a bilateral trade deal with the UK, which suggests that commencing negotiations in late March 2019 may very well be within the realm of possibilities.

It is difficult to imagine two countries that are better suited for a state-of-the-art, comprehensive, truly liberalising trade agreement than Britain and the US. And now the substance of that agreement has already been written.

Governments, it’s over to you now.

This article first appeared in City AM. 

Dan Ikenson is director of Cato’s Herbert A. Stiefel Center for Trade Policy Studies, where he coordinates and conducts research on all manner of international trade and investment policy.

Head of Regulatory Affairs

Victoria joined the IEA’s International Trade and Competition Unit in Spring 2018. She is a lawyer and practiced for 12 years in the fields of technology and financial services, before joining the Legatum Institute Special Trade Commission to focus on trade and regulatory policy. She has published work on the implications and opportunities of Brexit in financial services and movement of goods and the issues in connection with the Irish border. Before entering the legal profession Victoria worked for Procter & Gamble in the UK and Germany.

1 thought on “It’s hard to imagine two countries better suited for a liberalising trade deal than Britain and the US”

  1. Posted 29/09/2018 at 18:29 | Permalink

    The UK has actually done very well out of being in the European Union. Yet our society continues to become more unequal with an ever increasing push toward a free market economy. There seems to be a equilibrium between market freedom and state intervention.
    In the UK it seems often that we have pushed the free-market too far and allowed aspects of our society to become dysfunctional, communities are fracturing, many feel left behind and angry. One of the responses to this being the referendum vote.
    The UK has an under-current of change, a dynamic will to use our best products and new technologies to move forward, this needs to be given the chance to develop and spread for everyone to have the opportunity to be part of it. The only way this will happen is with a UK in Europe and working with friend’s in The Americas, Australia, New Zealand and elsewhere. The UK have been very good at killing the ‘golden goose’ loosening out to other, we must keep a best and prosper.

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