TPP leaders at a summit in Manila in 2015, from left: Japanese Prime Minister Shinzo Abe, Malaysian President Najib Razak, US President Barack Obama, Mexican President Enrique Peña Nieto and New Zealand Prime Minister John Key

The UK-US trade deal and the irrelevance of politics

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Hello from Brussels. Another bad week for the wine and spirits industry, slapping the US exporter with a new EU tariff round – as approved by the World Trade Organization last month – as punishment for illegal subsidies to Boeing. You must feel sorry for the winemakers and distilleries in Europe and the US, innocent bystanders in an independent trade dispute. When it comes to consumers, our sympathies are deeply tied to Americans. European drinkers can expect US vodka and brandy price increases, which is impractical. Her colleagues in the United States are cursed for drinking single malt scotch, a serious human rights violation.

today Main piece explores why the fragile UK-US political relationship doesn’t make much of a difference to a bilateral trade deal, which for unrelated reasons is unlikely. Transition to EU-US relations, Great stories of the trade looks at how lobsters aren’t really as important as all of that while ours Chart of the day highlights a record increase in British economic output.

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Poultry permits beat post-colonial husbandry

British politicians and Westminster media have thrown themselves into one of their favorite and most shameful tizzies: Is Britain still the USA’s best friend or just an embarrassing ex that America broke up with in the late 18th century and who is no longer getting out can? Phone? Year after year, London’s obsessive neediness continues. Who does President-elect Joe Biden call first after an election? What are the exact GPS coordinates of the bust of Winston Churchill in the White House? Are the gifts home after bilateral visits good enough? For our money, this is the final, compassionate takeover of the entire sad phenomenon.

This time around there is much talk of the Democrats’ lingering resentment against British Prime Minister Boris Johnson’s remarks about Barack Obama’s partial Kenyan ancestry and the paranoia of the Westminster media about whether the Irish-American Biden has been avenged for 800 years in English and British imperials Oppression.

Trade Secrets’ interest, of course, is whether some general friction in the relationship will undo the UK-US bilateral trade agreement that is being negotiated. We previously laid the major hurdles for an agreement before the White House Trade Promotion Agency expires next summer. In our opinion, the process is more dominated by these substantive issues than by the need to steer political gestures in either a positive or a negative direction.

Optimists point out that Britain’s security and military cooperation relations with the US, such as membership of the Five Eyes spy network, will remain intact. It’s hard to imagine Britain stomping away in a fit of post-colonial pike – you might say it stretches its eye to tease its face – because it hasn’t prevailed on anything else. But that doesn’t guarantee a trade agreement. The geopolitical, security, and military aspects of foreign policy reside in different parts of the US government – and often in a different branch of government – than the trade sectors. Often times, there is a surprisingly weak connection between the two.

US trade policy has a very strong sphere of influence on Capitol Hill and is fueled by its own die-hard interests. The US trade agent negotiates with the chairs of the Senate finance and house committees, who metaphorically sit on each shoulder, and they have powerful business and union interests on their shoulders.

True, there are one or two major US foreign policy ties that could override commercial concerns. Unfortunately for the UK, one of them is support for Ireland. A no-deal Brexit and its threat to the Good Friday Agreement would not mean an agreement with the US.

But even if the GFA were respected, and even if the current Democratic Chair of the Middle and Middle Committee, Richard Neal, were not a beacon of the Irish-American caucus of Congress, he would not be taking dictation from the friends of the UK in the EU at Foreign Office or National Security Council to reach a bilateral trade deal. If the UK government is serious about not allowing chemically washed chicken (it’s probably a rhetorical bypass, to be honest), the irritation in the US farm lobby would be a bigger blow to a UK-US deal than one offensive remark by Johnson could have been made a few years ago.

TPP leaders at a summit in Manila in 2015, from left: Japanese Prime Minister Shinzo Abe, Malaysian President Najib Razak, US President Barack Obama, Mexican President Enrique Peña Nieto and New Zealand Prime Minister John Key © Saul Loeb / AFP via Getty

The best example of the divide between geopolitics and trade was the Trans-Pacific Partnership in Obama’s second term. TPP was defined by the Obama administration as the trade component of its geopolitical “fulcrum for Asia,” which implicitly aimed to drive back Chinese influence in the Asia-Pacific region by exporting the US economic model.

The takeover of China has bipartisan support in Washington. But even before Donald Trump got the US out of TPP, he encountered determined opposition in Congress for reasons of commercial lobbying. The tobacco industry refused to outsource its adorable products from investor-state regulations that allow companies to sue governments. Big Pharma insisted on more power to keep exclusive access to data used to develop biological drugs. Fighting for supremacy in the world economy is one thing, but fighting simple cigarette packaging is the real problem. Apparently.

Accustomed to a centralized political system that allows for quick favors and business to be conducted, UK ministers are often slow to understand that capital in Washington is not necessarily fungible. Recall Tony Blair’s sorely deluded belief as UK Prime Minister that supporting George W. Bush’s Iraq misfortune would give him recognition in Washington that could lead the US to resolve the Israel-Palestine conflict . (Interested observers will find that Israel-Palestine remains decidedly unfixed.)

Will a US-UK deal be closed by next summer? Probably not. But that’s not really the wounded pride. It’s about commercial substance. US trade policy is a cold-blooded affair that is weakly influenced by political sentiment. That’s fun to see.

Mapped waters

The UK economy grew its fastest in the third quarter, but the recovery was weaker than that of the US and the euro zone and remains threatened by recent lockdowns. British economic output rose 15.5 percent in the third quarter compared to the previous three months. This is the fastest pace since records began in 1955, according to the Bureau of National Statistics.

The line chart of GDP is based on 2019 (Q4 = 100) and shows that the UK economy has recovered less than in comparable countries

Great stories of the trade

A lobster processing plant in Maine.  The US likely struck the mini deal with the EU only to help Republican Senate candidate Susan Collins in her battle for re-election
A lobster processing plant in Maine. The US likely struck the mini deal with the EU only to help Republican Senate candidate Susan Collins in her battle for re-election. © Robert F. Bukaty / AP

Today we are not only following a myth, but also advocating a little perspective. This week, the EU-US nano-agreement signed in August, culminating in the EU tariff cut on American lobsters, was approved by the trade committee in the European Parliament. In reality, it’s tiny, and likely agreed by the US, to help Susan Collins, the Republican Senate candidate in Lobster-heavy Maine, in last week’s elections. (She won, though honestly it probably wasn’t the lobsters that did.)

But to hear the rhetoric coming from Brussels, you’d think they just invented the WTO. “It is the first tariff reduction agreement between the EU and the USA in more than 20 years,” boasted the centrist group “Renew Europe” in parliament. “This agreement also confirms the EU’s strong adherence to WTO rules and rules-based trade.”

Consistent. It’s just a couple of lobsters. It also comes the week the EU made $ 4 billion in imports from the US with tariffs on Boeing subsidies. Perhaps Brussels should tone down the triumph of tariff reduction until this problem is resolved.

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