After Brexit, the UK must move quickly to secure both trade in good and services with the U.S. Are bilateral or multilateral agreements the solution?
In an effort to persuade the British people to vote to remain in the European Union, President Barack Obama threatened that Brexit would see the UK “move to the back of the queue” on future trade relations.
Now that the UK’s exit from the EU has come about, the United States has softened that language. House Speaker Paul Ryan has already called for the Obama administration to begin talks with London about a new US-UK bilateral trade agreement to mitigate Brexit’s trans-Atlantic commercial impact.
While the European Union, including the UK, currently has 32 trade agreements in force, significant gaps exist, including the lack of agreements with the U.S., China, Japan, India, and Australia.
Several of these are currently being explored by the EU, particularly the Trans-Atlantic Trade and Investment Partnership (TTIP) between the EU and the U.S. Yet when the UK leaves the EU, TTIP negotiations will no longer be able to serve as a vehicle for negotiating favorable trade ties between the U.S. and UK.
Mutual interest in a bilateral, trans-Atlantic trade agreement is not surprising. In 2015 U.S.-UK trade reached over $50 billion. For the UK, the United States is its largest single export market other than the remaining 27 states of the EU, with over 11% of total exports traveling across the Atlantic. Consequently, stabilizing this trade relationship is critical for both parties.
Trade in UK-US services remains a top priority
Of perhaps even greater significance than securing uninterrupted trade between the US and UK, is the fact that London must work quickly to secure an agreement with Washington over the trade of services.
Currently, the UK is party to the negotiations of the Trade in Services Agreement (TISA) by way of the EU. Like the TTIP, TISA is a multilateral trade agreement to ease barriers to the trade of services which includes 22 negotiating states and the European Union.
Far outpacing the manufacturing of goods, services account for over 75% of American and over 80% of British GDP, making an agreement in this area critical for both states.
Britain’s services exports currently total over $120 billion annually, with approximately $28 billion exported to the United States. Barclay’s estimates that within a decade services will account for over 50% of the UK’s total export market; hence a trade partnership with the United States will be essential.
Securing a services trade agreement will also serve to prop up what could be an ailing financial sector in London, with an influx of skilled, professional labor to support the industry.
To protect this critical and growing export sector the UK may join the TISA as a signatory independent of the EU, and use bilateral trade agreements to address areas of the TISA which have already been negotiated and agreed upon.
Negotiations on these critical areas are likely to be easier and faster than the much larger, multilateral negotiations preferred in Washington. Rather than satisfying the requirements of multiple state signatories, bilateral negotiations would streamline demands and avoid the risk of third parties limiting the scope of negotiations.
Further, whereas the TTIP has become increasingly toxic politically on each side of the Atlantic, a simplified U.S-UK negotiation would allow each participant to start afresh.