Commerce, Economy / Finance, Neo-liberalism

Britain’s trade talks with the United States are in trouble

Jul 12 2019

By Anna Isaac – The Telegraph

Britain has failed to make meaningful progress towards a free trade deal with the United States amid “chronic” staffing shortages and communication breakdowns in Whitehall, according to a cache of documents seen by The Telegraph.

Details of meetings spanning two years show how overstretched departments have been working “at cross purposes” as transatlantic talks have repeatedly stumbled over politically sensitive topics such as rules on health, farming and the finance industry.

Officials have begun to fear that American frustration with the lack of agreement or even partial agreement could end hopes of a post-Brexit partnership envisaged at the centre of a “global Britain” trade strategy.

In one message a British diplomat warns that this week’s visit to Washington DC by Liam Fox, the trade secretary, could look like a “bit of a desperate bid” to demonstrate progress.

The cache of correspondence and memos shows gradually rising concern among officials about Britain’s ability to conduct such complex negotiations.

The documents bring further scrutiny to a relationship under strain following the leak of criticisms of the Trump administration by Sir Kim Darroch, the British ambassador to the US.

His resignation on Wednesday prompted anger across Whitehall over a perceived breach of diplomatic norms. Meanwhile it is understood that the US cancelled a planned meeting between Dr Fox and Mr Trump’s commerce secretary Wilbur Ross.

Even in the earliest talks, the UK struggled to keep pace with US negotiators. One email from late last year shows that the Trump administration had began sending “less senior” officials to meetings.

The shift, which occurred in July, reflected Britain’s inability to get “the right people in the room”, according to the correspondence.

It came despite a Whitehall amber-red alert, which signalled a risk of failure and warned that the discussions were talks were rapidly “falling behind schedule”.

British officials blamed the bureaucratic missteps on of a lack of communication between key trade departments of Business, Energy, Industrial and Strategy, the Department for International Trade, the Foreign Office, the Department for the Environment and Rural Affairs, and the Treasury.

Yet the amber-red alert remained in place early this year, underlining a lack of progress. A Whitehall source told The Telegraph that shortages of expert trade officials were a “chronic problem”.

Changes to the Brexit schedule have also resulted in the most able civil servants being shunted around crucial roles, compounding the instability.

The Department for International Trade rejected such assessments. A spokesman said: “On Wednesday the UK-US Trade and Investment Working Group began its sixth meeting involving over 100 officials from the two sides. It has now covered all major policy areas that needed to be covered before our two nations begin negotiations on an actual free trade agreement. Formal talks cannot begin until after Brexit.

“Only yesterday the International Trade Secretary returned from Washington where he held high-level trade discussions with key figures in the administration, including Ivanka Trump and the US Trade Representative, Robert Lighthizer. We are well prepared for trade negotiations with our biggest trading partner. To suggest otherwise is completely and demonstrably false.”

The documents seen by this newspaper reveal how negotiations with the US are forcing ministers and officials to confront the difficult choices of life outside the EU.

One email, dated last month, warned that British plans to make Silicon Valley giants pay more tax risked a roadblock in trade negotiations. The Government aims to impose a digital services tax that will target Google and Facebook, among others, but faces pressure from the US trade department to wait for the OECD to agree international rules.

Documents show that throughout trade discussions, American officials have sought to draw Britain out of the EU’s sphere of influence. British negotiators said Washington had repeatedly “painted the EU Commission as the bad guys” as they sought to influence the post-Brexit legal system. American officials said “it was easier to change a regulation before it is finalised”.

Notes from one meeting between Dr Fox and Mr Lighthizer in 2017 also show the US official seeking UK backing for reform and “innovation” at the World Trade Organization.

David Jones, a former Brexit minister and Tory MP, said that US animosity towards the EU was understandable, as “the EU has operated as a cartel. It is protectionist, it is an exclusive economy.”

Senior EU sources hit back, saying they were concerned that Britain could become a pawn in US disputes with Brussels. They also warned that adopting US standards in areas such as food and medicine would have a knock-on effect, closing off parts of the EU’s single market for British companies.

“The UK has a crucial choice to make in terms of where its own preferences lie, such as on US food standards and the EU regulatory approach to risk,” said one senior EU official.

“How it interacts with the EU will be affected by that choice. In any case UK business exporting to the EU [will need to be] inside the regulatory sphere of EU, irrespective of what model the UK chooses.”

The desire for a US trade deal among British politicians, including Tory leadership frontrunner Boris Johnson, does not guarantee one will be signed.

Britain’s struggles in negotiations are matched by a shopping list of international concerns for the Trump administration.

One former US trade negotiator said: “If Trump decided to go for it, he’s got his hands full with Nafta and [North] Korea, and even then the UK would have to free itself from EU. We’re talking about somewhere down the road.”

Joe Owen, director of the Institute for Government’s Brexit programme, warned it was doubtful that Whitehall had the capacity to manage conflicting demands from the US and the EU on trade.

“The risk is big policy decisions get made by the UK based on US demands for a free trade deal, rather than thinking about what the UK’s requirements are first and reconciling them with the US. So you could end up with a back-to-front approach,” he said.

A senior MEP told the Telegraph that the UK would be “easy pickings for America” in talks.

 

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