Overview of the suggested free-trade deal

A free-trade deal is often an agreement that is introduced as a way to strengthen relations between countries and encourage continued trade. This is done through making trade between the countries cheaper and, in some cases, either reducing or doing away with trade tariffs too. The agreement generally applies to the trading of goods but may occasionally extend to services as well. Furthermore, another way of encouraging trade activity is through scrapping limits or quotas and allowing countries to import and export goods with minimal restrictions.

So what is the purpose of having implementing tariffs and quotas in the first place? Well, considering that allowing cheaper imports may threaten local manufacturers and risk welcoming poor quality goods into the country, governments implement them as control measures and quality check methods. Therefore, as much as a free-trade agreement may seem appealing to some, it has a far-reaching impact in the country and its economic and trade activity. This may be the reason for the contention and ongoing negotiations on the proposed United Kingdom-United States Free Trade Agreement (UKUSFTA), whose negotiations began in early May 2020. Some of the key points that form part of the proposed deal reportedly include trading goods, investments, intellectual property, the environment, anti-corruption, as well as digital trade in goods and services, and cross-border data flows, amongst others.

Impact on countries involved and way forward

Economically, the UK has not been part of the EU since January 2020; however, due to certain negotiations that still needed to occur and points of clarity, it remained part of the EU’s single market and customs union until the end of the year. Post-Brexit, there has been much speculation and conversation on how the UK’s economy will perform in subsequent periods. With that being said, the GBP and USD as a currency pair remains of interest, particularly following the tumultuous conditions of 2020 and the volatility it experienced. With the USD being the most traded currency in the world and the GBP being the fourth most traded currency on the global market, this is a particularly important pairing. Much like any other currency pair, the GBP/USD pairing is heavily impacted by the performance of both economies and currencies in their individual capacities. Naturally, this is informed by several microeconomic and macroeconomic factors. Highlighted as some of the key influences are political developments, gross domestic product (GDP), inflation, interest and exchange rates, as well as trade activity.

Despite the slow start and progress on the proposed deal, healthcare and agriculture seem to be of importance between the two countries. The UK, however, expressed initial reluctance to the representatives of the US health sector expressing their intentions to expand to the UK. Another point of contention that was alluded to previously is the trade deal opening the door to unfair competition because of cheaper goods from outside, which poses a risk to local manufacturers. This is reportedly the case in the agricultural sector, as farmers are against food products being imported and sold at relatively lower prices. According to experts, the US stands to benefit from the deal if the two aforementioned sectors, healthcare, and agriculture, fully welcome it, while the UK is said to have very little to gain from the agreement.