What to Expect as U.S.-U.K. Trade Talks Resume
With official negotiations set to resume this week, a trade agreement between the United States and the United Kingdom has the potential to not only aid post-COVID economic recovery, but strengthen ties between the UK and its second largest trading partner.
In a recent study published by the OECD, the UK is projected to be hardest hit developed nation by the COVID-19 pandemic, with an estimated contraction of 11.5%. Although a trade deal between the U.S. and U.K. is estimated to boost the U.K. economy by just 0.16% over 15 years, the nature of the deal could be used as a basis for future FTAs with both country’s major trade partners.
Among the provisions expected to be covered are greater access for U.S. agriculture including a possible dual tariff scheme where agriculture products which meet U.K. food standards would be allowed at little to no tariff. Those products which do not meet U.K. standards would then be allowed at a much higher tariff rate. Also, discussion around Britain’s implementation of a digital services tax in an effort to reduce or eliminate retaliatory tariffs from the U.S.
There are other provisions experts hope to see included which they believe will provide greater long-term value for this agreement and future FTAs alike. Among these include a chapter dedicated to Small and Medium Enterprises (SMEs). The ability for small business to operate, and operate internationally, is viewed as a key factor in U.K. recovery. By paving the way for businesses in the service sector to operate internationally, many believe the U.K. will be able to reopen more quickly and on a greater scale, in turn offsetting large industries such as hospitality and tourism which are expected to take longer to recover.
To achieve this, the deal needs to be recovery focused, keeping SMEs in mind, in an effort to reduce barriers for all businesses. This would include simplified customs forms, negotiated less from a shipping and logistics perspective and more from that of businesses; increased access for workers, allowing for greater cooperation between U.S. and U.K. based businesses; and a reduction or elimination of the digital services tax, incentivizing businesses to enter markets virtually, before opening foreign offices.
There are of course other factors to be considered, chief among which is the result of U.K.-EU negotiations and the potential for the U.S. to reopen discussions with the continent. Regardless, both sides are looking to have a deal in place prior to this year’s presidential election in order to avoid defaulting to the U.K. Global Tariff if no deal is agreed to prior to January 1st of next year.