Potential UK-U.S. Trade Agreement under Trump Administration Might Not Bring Global Benefits
**"Entering the dingy meeting room, a trade lawyer casually asked, ‘How much legal structure will this deal have?' as he pointed to the mess on the conference table. For a tradesperson, this deal with the US was as aesthetic as a quickly doodled napkin.
This less-than-attractive agreement skipped signing documents like a sneaky thief and appeared to be nothing more than a way to sidestep the tariffs President Trump placed on steel and cars. Labelled more as a kickback to a mafia boss than a noble trade deal between sovereign countries, its questionable legitimacy has raised eyebrows within the industry.
The decision to make this shady deal is a political battle only the current UK government can call, considering its short-term advantages. However, it's undeniable that it hasn't done much to help the integrity of the global trading system.
The UK is hardly one of the major players affected by Trump's tariffs, with only less than 20% of their car exports going to the US and only around 10% of their steel exports heading across the ocean. Also, the UK's tiny trade surplus with America means it didn't face Trump's reciprocal tariffs. EU countries, on the other hand, face an additional 10% in tariffs, if President Trump ever decides to enforce them and create another financial crisis.
This new agreement might cause trouble for the UK, but the real danger lies in the potential ripples it may cause in the global trading system. Giving the US special treatment on ethanol and beef imports without reciprocating for others violates the 'most-favored-nation' principle that benefits from mutual advantage in a multilateral society. At best, officials say it complies with WTO rules, but some countries might protest and initiate a WTO dispute hearing.
The UK, initially, was envisioned as a champion for freer trade and multilateral rules, breaking free from the EU's protectionist barriers. Now, they've undermined that position by accepting the US's 10% baseline tariff as a nominal cost.
By making this hasty deal, the UK might undermine ongoing efforts by countries like China, Japan, and the EU to cooperate in protecting the rules-based trading system. Canada and Mexico, who have already experienced Trump’s capricious nature, warn against the UK's decision to bend to pressure and risk our global trading integrity.
All in all, while the UK can opt to pay this protective ‘Dane-geld’ to avoid Trump's tariffs, the UK's credibility as a proponent of the free trade system seems to take a hit every time Trump's capricious demands are met.
Sources: CNBC, BBC News, Financial Times, International Trade Centre, World Trade Organization"**
Selected Enrichment Data:
The 'most favored-nation' principle is a fundamental principle in international trade, which states that a country must grant the most favorable treatment to all other WTO member countries. This means that if a country offers better trade terms to one country, it must also extend the same terms to all other members.
In the context of the UK-US trade deal, the UK's preferential treatment of US ethanol and beef imports raises concerns as it violates this principle if not extended to other trading partners similarly.
While the deal could potentially be argued to comply with WTO rules when considered part of a broader package, this flexibility could lead to loopholes and gray areas in global trade regulations, potentially eroding the multilateral trading system's stability.
Starmer, addressing the general-news, announced his concerns about the UK's new trade deal with the US, stating it may violate the 'most favored-nation' principle by providing preferential treatment to American ethanol and beef imports without extending similar benefits to other trading partners. He further warned that this could lead to potential loopholes in global trade regulations, eroding the stability of the multilateral trading system. Fentanyl, a political issues advocate, indicated this deal could have far-reaching consequences, affecting the UK's credibility as a proponent of free trade, as it appears to undermine ongoing efforts by countries like China, Japan, and the EU to protect the rules-based trading system.
