Dynamic Capital Quick UK – USA Free Trade Agreement? - Dynamic Capital

“We’re going to work very hard to get it done quickly, and done properly” – President elect, Donald Trump. Without counting the EU as a single entity, the UK is currently the 7th largest trading partner of America, if one accounts for the total exchange between both nations.  With Britain voting last year to leave the European Union, the uptick in trade between the two nations will likely hit a bump in the road as Britain is not legally allowed to begin negotiating any new trade deals until it officially leaves the EU in 2019.  America is already in the process of negotiating a trade deal with the EU – Brexit means America will need to start fresh with the UK and negotiate a new one.

In the UK, there is the perception that Trump has a streak of isolationism because of his campaign rhetoric against Mexico and NATO, and the fact that he has been extremely critical of NAFTA are causing some in the UK to question what kind of deal will be made. He made a habit of attacking companies that use NAFTA to open factories in Mexico then sell to the US, and has even threatened to renegotiate (or violate) the terms of terms of the agreement and place tariffs on companies attempting this, to discourage future job loss.  He has also said he is opposed to the TTIP (the free trade agreement currently being negotiated between America and the EU), so whether the disdain for free trade we saw during the campaign carries over into his presidency remains to be seen.

However, since the UK is a developed nation, it is a different dynamic as companies won’t be able to take advantage of cheap labor as they can in Mexico, so it is less likely American jobs will be shipped overseas, and there is less reason for him to look on it unfavorably. The UK has also been one of America’s strongest allies in international politics, siding with America on most international issues so that will undoubtedly help too. That being said, even the simplest trade deal between two friendly partners takes years, and official negotiations won’t even be able to begin until Britain officially leaves – at least two years from now, likely in 2019.

Additionally, unofficial talks are still allowed. Theresa May will likely be traveling to America in the near future so she can meet with the new administration, and her spokesman has already indicated she will be interested in having early discussions that don’t violate current obligations to the EU. As there is only a 3% average tariff between the EU and America, it won’t be the tariff barriers that delay negotiations, but the non-tariff barriers covering everything from banking regulations, to car safety standards, to animal welfare and environmental protection. Each nation will be motivated to force their regulations onto the other to make life easier, so the challenge will be finding that delicate balance that benefits the most people in both nations.

For example, the UK has much stricter regulations on food standards, GMOs and hormones in farm animals, so allowing in American food without any tariffs could put British farmers at a disadvantage.  The UK has nationalized healthcare – would they allow in competition from foreign private health care companies? America and the EU have been negotiating their deal since 2011, but issues such as these and the bureaucracy have prevented talks from progressing at a faster rate.