UK to pursue parallel US trade negotiations as leverage against Brussels

Downing Street might be keen to move on quickly and talk about the “levelling up” of the country, but even after we leave the EU in 10 days time, Brexit is likely to remain the defining feature of this government.

That would be the case anyway. But it is especially true because of the desire in No10 to pursue the fullest of Brexits, with total regulatory freedom and only a standard free-trade agreement with the EU.

– Out with the old –

Seen from No10 and 11, the willingness to defy incumbent big business, who want to stay close to Brussels, follows its own internal logic. Yes, the status quo will end and industries such as car manufacturing might decline as a result. But the status quo allowed the stagnation of Britain’s regions. Car manufacturing is yesterday’s industry anyway. Why tie Britain’s future to it, when a new, dynamic economy can be forged free of Europe’s overbearing regulation?

This isn’t as simple as trading with the world instead of the EU. It’s a transformation as fundamental as that from a goods-based economy to a services-based one. That’s why the Chancellor can cheerily proclaim that there will be zero alignment with the EU from 2021. It’s no different to throwing off coal-mining directives.

Quite how that will turn out in the long-run is anyone’s guess. But it has significant short term consequences, not the least of which is what it means for the conduct of the coming negotiations.

– The man with no name –

Reports today are that No10 wants negotiations underway with the US over a trade deal as soon as possible, so as to provide leverage in talks with Brussels.

The plan is to be like Clint Eastwood in A Fistful of Dollars, playing the feuding families off against each other and walking away with the profit. The difference here is that they know what Johnson is doing.

Meanwhile, the EU has been making clear its red lines and has no intention of letting the UK become a deregulated rival off its coast. A presentation from the Commission yesterday showed that Europe wants the power to fine Britain if it breeches level playing field guarantees. That’s not something London will look kindly on.

In short, these won’t be the friendly negotiations some had predicted.

– It’s been a while –

Whether it will work or not is another question. The UK’s capacity for negotiations is limited and untested. Britain hasn’t had to negotiate its own trade deals for nearly 50 years, but we will soon be in simultaneous talks with the EU, US, Australia and New Zealand.

The EU is, reportedly, not that worried. They point to the strength of the Irish lobby in Washington DC and believe that Dublin effectively holds a veto over any US-UK deal.

– Salami-sliced deals –

A more pressing issue may simply be the incredibly tight timetable. To have any bearing on the EU talks, the US negotiations will have to happen at the same breakneck speed. As in talks with Brussels, that probably rules out a broad, all-encompassing deal. Instead, it may need to be sector-by-sector. (Indeed, The Times reports that the US ambassador has met with Tory MPs about just such deals.)

On its own, that’s not a problem, but it does tend to mean a less ambitious deal. Whereas multi-sector deals allow compromise across areas – agriculture concessions in return for pharmaceutical ones, say – sector-by-sector deals make big concessions difficult.

This is all a consequence of Johnson’s desire to get out of the transition period and get out fast. But it’s also a reflection of the maximum-divergence Brexit he is pursuing. In that world, alignment with the EU is worth little.

By Daniel Capurro,
Front Bench Editor

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