Trump and Johnson can reach post-Brexit trade deal if China and chickens don't get in the way

Three and a half tumultuous years after the British referendum on leaving the European Union, Brexit officially took place in late January. After a resounding electoral victory, Prime Minister Boris Johnson and his post-Brexit government will make trade expansion a top priority, reorganizing trade agreements not only with the EU, but with countries around the world . In the coming months, the United Kingdom will begin negotiating a free trade agreement (FTA) with its main trading partner other than the EU: the United States. Agreement can be reached quickly, but only if both parties are willing to recognize political realities.

An FTA between the United States and the United Kingdom makes sense for both countries. It would join the largest and fifth largest economies in the world. Both countries are developed, modern and high-wage economies. Both have strong financial sectors that could benefit from more liberalized trade in services. Both would benefit from liberal but high-level rules covering digital commerce and electronic commerce, the new frontier of commerce in the 21st century. Reducing as many tariffs as possible and facilitating uninhibited investments must be a top priority.

UK Department of International Trades negotiation goals, published in early March, nonein the USA as Great Britains the largest bilateral trading and investment partner. the department estimates that U.K.-U.S. total trade was valued at $ 220.9 billion, or about $ 284 billion, last year. The United States accounts for almost 20% of total British exports and 11% of its imports. An FTA between the two countries, the department said, could boost trade by more than $ 15 billion (about $ 19 billion) and boost total wages in the UK by $ 1.8 billion (about $ 2.3 billion). . Not only would both parties benefit economically, but a swift agreement with the UK would also give Washington leverage in all renewed negotiations with the EU, which were recklessly abandoned in late 2016, following the Brexit referendum and the election of President Donald Trumps. .

There is clearly an enthusiasm on both sides to reach an agreement quickly. Elizabeth Truss, the UK secretary for international trade, recently wrote a column in the Wall Street newspaper expose the economic merits of an agreement. Meanwhile, a bipartisan group of senators recently wrote a letter to the US trade representative, Robert Lighthizer, urging the administration to make post-Brexit FTA between the two countries a priority.

Nevertheless, the negotiations will be fraught with pitfalls. Extremely sensitive issues should be taken into account or avoided. Transatlantic enthusiasm must be tempered by cold political realities.

The first is the problem of the Chinese telecommunications giant Huawei. Citing security concerns with Huaweis' connection to the Chinese government, the Trump administration, bolstered by a large bipartisan group of senators, urged the UK to abandon plans to use Huawei components in building its 5G network infrastructure threaten to hold back a certain intelligence if the British advance. Johnson recently canceled a planned trip to Washington after tensions over the issue exploded during a phone call with Trump. Until it is resolved, it will dominate all negotiations between the two parties.

Equally serious are the problems surrounding health care. The Trump administration is likely to pressure the UK to tighten its intellectual property protections for pharmaceuticals, which would benefit U.S. pharmaceutical companies but raise prices for the Britains National Health Service (NHS). It is a non-starter for several reasons. First, as the UK Department for International Trade has made clear in its negotiating principles, the price the NHS pays for drugs will not be on the table. It & # 39; s an unequivocal statement. The issue of drug prices and the potential impact of an FTA with the United States also played a prominent role in last year's British election campaign, Labor candidate Jeremy Corbyn using it to beat Johnson. The subject is clearly sensitive.

Second, the Democrats in the United States Congress will also not support the strict protections of pharmaceutical intellectual property in an FTA with Britain or with any country, for that matter. Arguing that tougher intellectual property protections on pharmaceuticals could make health care even more expensive for Americans, Democrats successfully fought similar provisions in the recent agreement ratification process United States-Mexico-Canada. Getting an agreement approved by the Democrat-controlled House of Representatives will require compromises, and this is one of their main demands.

For political reasons, higher intellectual property standards also don't make sense. The United States and Britain already have fairly strong protections for intellectual property owners. Both parties are members of the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which establishes a baseline for protection and enforcement of intellectual property rights. A basic requirement to respect the laws of others and enforce their own would be sufficient for an FTA. There is no need for TRIPS-plus rules.

Finally, there is the issue of food safety or what trade specialists call sanitary and phytosanitary standards. Most of the controversy relates to chicken exports to the United States.

In 1997, the EU banned the use of chlorine and other disinfectants to clean meat at the end of the food production process, a common practice for some meats in the United States. As a result, exports of chicken from the United States to the United Kingdom are virtually non-existent. Now that the UK is outside the scope of EU law, the American chicken lobby will surely push to increase exports. Lighthizer recently restless concerns about chlorinated chicken saying: science-based standards and then consumer preferences will solve this problem, and the United States and the United Kingdom will not follow separate routes based on chicken. Regardless of the merits of the bans and the new status of the British outside EU law, the issue of chlorinated chicken is so controversial in the UK that any effort to weaken the ban would slow down considerably or could derail the talks. The US sales representative should avoid the subject if he wishes to quickly conclude an FTA.

Finally, there is the issue of deceptive tariffs on steel and aluminum, collected under the dubious cover of national security. The Johnsons government is asking the United States to remove tariffs on steel and aluminum. In other words, steel and aluminum imported from the United Kingdom do not in any way threaten the national security of the United States. A recent study by economists Kadee Russ and Lydia Cox found that there were 75,000 fewer manufacturing jobs due to the tariffs for steel and aluminum, not counting the additional losses among American exporters faced with tariffs imposed by other countries in retaliation. It is high time to lift tariffs for all countries, but especially for imports from a long-standing ally like the United Kingdom.

A high-quality FTA between the United States and Britain would have many benefits for both parties and could reaffirm the special relationship that has long existed between the two transatlantic powers. But trade negotiators must beware of the pitfalls and exercise caution.