Farming is key to a UK-US trade deal, whoever is president

July 17, 2020

Later this month, the UK and the US will conduct the third round of talks on a new trade agreement. The successful conclusion of a deal with the US will be challenging but would provide a major strategic prize for the UK, as I explain in a new report for Policy Exchange released today, “The art of a UK-US trade deal”. The paper looks at the challenges and opportunities facing negotiators over the coming months.

What effect would it have on the economy? Well, the Government’s modelling suggests reducing trade barriers via a US FTA could provide a modest increase to UK GDP of up to 0.16% over the next 15 years. But in an increasingly contested world, it is difficult to fully capture the benefits of agreeing high-standard rules in new and emerging economic industries with like-minded partners, such as the US. The value of a UK-US deal is as much geostrategic as it is commercial.

The world’s economic geography is increasingly centred around the three major economic and geopolitical hubs – North America, Asia-Pacific, and Europe. Whatever the result of the current UK-EU negotiations, the English Channel is set to widen. Therefore, the UK must deepen its relationships across the Atlantic and also around the Pacific rim. China is increasingly becoming a special case.

We have entered a new period of digital globalisation and competition, with services reliant on cross-border data flows now rivalling traditional trade in goods in generating economic value. The US and China are the dominant players in the new digital economy. Yet, up to now, the UK has been a participant in a European approach that is world-leading in producing new regulation but where firms have struggled to compete on the global stage. Both the UK and the US have traditionally prioritised the free flow of data, and developing a coordinated approach on these issues, and others such as protecting intellectual property, would provide a valuable platform for UK firms to innovate and compete with the world leaders.

But a UK-US deal will not be easy. There are obstacles and existing disagreements to overcome, including the UK’s decision to implement a digital services tax.

Perhaps most significantly, we are seeing that the liberalisation of agriculture is politically controversial in the UK, but it is unlikely that any US administration will do an FTA without it. The debate risks becoming completely dominated by hyperbole over issues such as chlorinated chicken or hormone-treated beef.

The starting points should be to promote consumer choice, while ensuring consumer safety. The UK already has the right, under World Trade Organisation rules, to prohibit the import of unsafe food. Labelling, either via domestic legislation or voluntary certifications, can be used to inform consumers of food production methods. However, blanket bans on imports, not supported by scientific evidence, will be viewed as a protectionist move by both the US and other international partners, and will make the conclusion of trade agreements more difficult.

The UK’s domestic and international policies must also be joined up. For agriculture, this means that tariff liberalisation should be phased in gradually, giving UK producers time to adjust to new trading conditions. This would reflect the gradual introduction of the UK’s Environmental Land Management scheme, replacing the EU’s Common Agricultural Policy, allowing for market exits or adjustments by farmers who find their current business models uncompetitive. Meanwhile, it should also be remembered that agricultural liberalisation is an opportunity for some UK exports, particularly beef and lamb.

The US Presidential election is likely to be held before negotiations conclude but the outcome would not radically alter the negotiating priorities in Washington. A Biden Presidency might not place the same high priority on a UK deal as a Trump Presidency, but both would continue to push US agricultural interests.

A US deal should play its part in a wider UK trade strategy. The UK has also opened negotiations with Japan, Australia and New Zealand. These deals are seen as stepping stones to UK accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade pact signed by a further eight countries around the Pacific rim, including Canada and Singapore. Reaching agreements with the EU, US and the CPTPP countries would ensure Global Britain is plugged into the heart of the global trading system.

However, all of these agreements will require the UK to make tough choices. There is no sense in leaving the EU and trying to keep everything else exactly the same. As the global economy slowly recovers in the wake of the Covid-19 pandemic, it is essential that the worrying rise in protectionism is reversed. The UK and its allies should further the cause of trade liberalisation in actions as well as words.

Stephen Booth is Head of the Britain and the World Project at Policy Exchange.

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