LONDON — Trade talks between Britain and the U.S. continue apace — just don't mention the looming election.
The third round of negotiations entered its second week on Monday and the British government hopes to make headway across the board. But with former Vice President Joe Biden holding a commanding lead in the polls over Donald Trump, U.K. negotiators face the prospect of a change in the lineup of the opposing team before a final deal is struck.
So why talk now?
“The extreme unpredictability of American policy until after the election means what might or might not be available from the U.S. to the U.K. is just inherently unknowable,” said Ian Shapiro, Sterling professor of political science at the Yale School of Management.
The way the November election turns out, he said, could reshape the future of the U.K.-U.S. trade deal in ways Britain cannot control and he cautioned the U.K. about its chances of striking a quick mini deal before the end of the year.
However, U.K. officials and business leaders don't expect many American trading priorities to change significantly even if there's a switch in the White House.
The fast start to talks is less about concluding an agreement and more "about the urgency [for the U.K.] to develop trade policy independently in the face of Brexit," said a member of Britain's business community, who spoke on condition of anonymity.
The sentiment was also echoed in a report by center-right think thank Policy Exchange, which argued "Brexit emphasizes the need for the U.K. to recalibrate its relationships with the world’s three major economic and geopolitical hubs — North America, Asia-Pacific, and Europe." For the U.K., that means the value of a U.S. deal is "as much geo-strategic as it is commercial."
There are also some on the British side who hope talks with the U.S. will increase pressure on the European Union, aiding the U.K.'s parallel negotiations with the bloc.
Whereas both sides were bullish about a quick deal last September, telling the Sun newspaper one could be struck by July 2020, they now play down prospects of a deal by the end of the year.
“It’s going to take time, to be honest,” U.S. Trade Representative Robert Lighthizer told an Economics Club of New York event in June.
“We’ve been clear that there is no specific timeframe [for a deal],” said a U.K. Department for International Trade spokesperson. “Our focus is on getting a deal that works in the best interests of the U.K.”
What if Biden wins?
If Trump does lose November's vote, Lighthizer might push to reach an agreement before Biden takes office on January 20. But even if that happens, U.K. officials could find themselves back at the negotiating table once Lighthizer’s replacement is in place.
If Republicans maintain control of the Senate, it could also be months before all of Biden’s Cabinet nominees are approved. Other nominations, such as for secretary of state or defense, are likely to take precedence over Lighthizer’s USTR position, which will likely cause more delay.
Whoever is in the White House next year must wrap up talks with Britain by April 1 to qualify for “fast-track” status and speed the deal through Congress. This is because the ability for Congress to “fast-track” a deal expires on June 30 and the White House must give Congress 90 days' notice of plans to give an agreement that status.
Another complication could be if Biden was less enthusiastic about striking a large trade deal with Britain and instead picked up where the Obama administration left off in its pivot toward the East, Shapiro said, calling it “Obama's big unfinished piece of business.”
This could potentially see Biden rejoin the Trans-Pacific Partnership trade agreement that Trump abandoned by executive order in early 2017. After Trump pulled out of the pact negotiated by the Obama administration, the remaining 11 countries made some tweaks and renamed it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Last month, U.K. Trade Secretary Liz Truss put the importance of the government’s talks to join the Asia-Pacific bloc on par with the U.S. deal as Britain searches for more options for geopolitical alignment.
“The assumption in Whitehall is that if Biden wins, we won’t need to do a bilateral trade deal because we might both end up in CPTPP. That is already committed to high standards of animal welfare. Some of the sting will be removed from those issues,” a Tory adviser told the Sunday Times.
Biden's campaign officials have also played down his appetite for large-scale deals.
“He's not gonna go [into office] in 2021 and start talking about re-entering or about entering new trade deals before he has done the work at home to make the investments in American job creation, American competitiveness, and American communities,” a senior official told reporters last month.
Special relationship
But the election is far from over yet, and former Trump administration officials argue both sides could gain from a U.S.-U.K. agreement.
“I think there are very significant practical reasons why both countries are interested in an FTA,” said former USTR General Counsel Stephen Vaughn, a partner in the international trade team of law firm King & Spalding. “We’re both market-based economies that have a long history of trading with each other. We have close relationships in almost every area of international dealings, and from the U.S. perspective, it would be the biggest economy with which we have ever done an FTA.”
Vaughn, who worked closely with Lighthizer for years, notes that both countries have strong services sectors and strong protections for intellectual property rights. It makes sense for the two sides to fashion an agreement that reflects that situation and becomes a model for other trade pacts, he said.
Geopolitically, the agreement would underscore the deep relationship between the United States and the U.K. and give Washington a lift in dealing with an array of issues with both China and the EU, added Clete Willems, who worked in the Trump White House as deputy assistant to the president for international economics and deputy director of the National Economic Council.
Willems, who now works at the Akin Gump law firm in Washington, took issue with the idea that the U.K. is involved in one-sided negotiations with the United States, where it will be forced to give up more than it can expect to get in return.
“The reality is in a negotiation like this, the U.S. is clearly also going to give up things for the U.K. and it’s going to be very helpful to their industry,” Willems said. “They are a major country with a major economy and they are an equal partner to the U.S.”
He brushed off suggestions that the U.S. pursuit of strong intellectual property protections for its pharmaceutical companies would hurt the U.K.
“The U.K. has one of the most advanced pharmaceutical sectors in the world. So having groundbreaking pharmaceutical provisions is going to benefit the U.K. as much as it benefits the U.S.,” Willems said.
Sticking points
That said, there are difficult issues for the countries to resolve that make a deal this year unlikely.
In particular, on agriculture, where there is strong resistance in Britain to allow more imports of U.S. meat products because of concerns over animal welfare, including the veterinary drugs used by U.S. producers and methods used to decontaminate slaughtered poultry.
A U.K. government spokesperson said Britain “has been clear it will not sign a trade deal that will compromise our high environmental protection, animal welfare, and food safety standards.” Chlorinated chicken and hormone-injected beef, they point out, “are not permitted for import into the U.K. This will be retained through the EU Withdrawal Act and enshrined in U.K. law at the end of the [Brexit] transition agreement.”
Another tricky issue is the U.K.’s decision to move ahead with a digital services tax, which the United States sees as a discriminatory tariff imposed on its biggest tech companies, such as Google, Facebook, and Amazon. Key U.S. lawmakers have signaled they are unlikely to approve an FTA with the U.K. unless there is a favorable resolution.
“Unilaterally imposing a discriminatory tax that unfairly targets U.S. businesses damages efforts to achieve a multilateral solution and unnecessarily complicates the path forward for a U.S.-U.K. trade deal,” said Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and the panel’s ranking member, Senator Ron Wyden (D-Ore.), in a joint statement last week.
However, many American companies, and especially those with operations in the U.K., are more interested in the outcome of the U.K.-EU negotiations than the trade talks between Washington and London.
Still, even some who have been less enthusiastic about the U.S.-U.K. negotiations see potential gains.
“This negotiation was inspired more by politics than economics,” said Michael Smart, a managing director at Rock Creek Global Advisors, an international economic policy advisory firm, and a former White House and Senate aide.
“But it could deliver commercial benefits if it breaks new ground on trade liberalization and regulatory convergence. In order to do that, both sides need to be flexible and creative on issues like agriculture, investment, digital trade and financial services,” Smart said.
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