US-UK Deal Should Not Prevent Trade Negotiations with China
By Ryan Nabil
Considering the high probability of Britain leaving the European Union without a deal, the British government needs to line up potential trade agreements. Given shared transatlantic values and the importance of closer US-UK economic ties, post-Brexit Britain needs to sign a trade agreement with the United States. At the same time, the United Kingdom must also ensure that deteriorating US-China relations do not prevent Britain from signing a trade agreement with China.
In August 2019, Secretary of State Mike Pompeo declared that Washington is “ready with a pen” to sign a trade agreement with the United Kingdom. To accelerate the process, former National Security Adviser John Bolton recommended a series of sector-by-sector trade deals, which would allow London and Washington to bypass politically sensitive issues, like the access of US firms to British agriculture and the National Health Service.
A US-UK trade agreement is undoubtedly a step in the right direction for post-Brexit Britain. Once Britain leaves the European Union, London needs an ever-closer partnership with Washington. Since the United States is the world’s largest economy and Britain’s largest single-country export market, Westminster is right to prioritize a deal with the United States.
But a US-UK trade agreement should not hinder Britain’s trade with other major economies. As Daniel Hannan points out, Chinese economic growth adds the equivalent of a Belgium and Luxembourg to China’s gross domestic product every year. Recognizing China’s political importance to post-Brexit Britain, Boris Johnson recently commented that he will seek closer ties with China than his predecessors, pointing out that Britain was one of the first Western countries to join the Asian Infrastructure Investment Bank.
While the British and Chinese political establishments will continue to have substantial political differences—over democracy, cyber espionage, and Hong Kong, among others—a trade agreement with China is in Britain’s best economic interests. That is why the UK government needs to ensure that the US-UK agreement will allow Britain to negotiate a deal with China.
More specifically, Britain needs to be careful of any provision that will prevent the UK from signing trade deals with other nations. In the US-Mexico-Canada Agreement set to replace the North American Free Trade Agreement, Washington stipulated that it has the right to rescind the agreement if Canada or Mexico signs a deal with a “non-market country.” Although the Canadian government downplayed the importance of this clause, Ottawa and Mexico City cannot sign a deal with Beijing without jeopardizing their relations with Washington.
Similarly, in February 2019, the US Office of the Trade Representative published a list of objectives for the US-UK deal, stipulating that the agreement can be terminated if Britain concludes a deal with a “non-market country.” Such a provision will effectively prevent Britain from signing an agreement with China—unless Washington itself concludes a deal with Beijing. Therefore, the United Kingdom needs to ensure that the bilateral agreement excludes such provisions.
Critics might point out that Westminster lacks the leverage to do so in trade negotiations with the United States because the British economy is significantly smaller. Yet, with the world’s fifth-largest economy, Britain has a GDP larger than Canada, Mexico, or South Korea—the three countries with which the Trump administration negotiated a trade agreement. Despite congressional Democrats’ stated opposition to a trade deal with the United Kingdom on the likely terms of a hard Brexit, a potential US-UK agreement would likely pass quickly. Last month, forty-five Republican senators pledged unequivocal support for a US-UK trade deal in a letter to Boris Johnson and Democrats would quickly come around when confronted with the facts of a hard Brexit and presented the opportunity to minimize economic disruption.
Furthermore, amidst US-China trade tensions and domestic political upheavals, President Trump needs diplomatic victories, especially in trade. As a result, President Trump recently softened his stance towards Britain. In August, the Trump administration announced that bilateral trade negotiations could exclude politically sensitive issues like agriculture and healthcare. By emphasizing independent trade policy as a politically sensitive issue, Britain needs to avoid the non-market country clause in a potential US-UK trade agreement.
That does not mean, of course, that Britain should endorse all aspects of China’s UK policy. Given the security implications of Chinese investment, the United Kingdom needs to be cautious in its approach to China. Westminster should also consider a new independent review process to determine if Chinese state-influenced enterprises should be allowed in British 5G networks. The UK also needs to bolster the monitoring process for investments by companies with close ties to foreign militaries. Finally, in future trade negotiations, the British government must ensure that UK companies enjoy the same market access in China that Chinese firms do in Britain.
A US-UK trade agreement is a step in the right direction, but it must not restrict Britain’s independent trade policies with high-growth economies. Equipped with the right US-UK deal, Britain will be well-positioned to negotiate a favorable agreement with China.
About the Author
Ryan Nabil is an MA student in global affairs at the Yale Jackson Institute for Global Affairs. He also worked as a Harold W. Rosenthal Fellow in Congress and as an economic policy researcher at the American Enterprise Institute in Washington, DC. Ryan’s articles have been published in Foreign Affairs, National Review, and The Washington Post.