Trump + trade: what should Theresa May be asking for?

Author(s): Tom Cargill; Matt Kilcoyne; Catherine McBride; Marianne Schneider-Petsinger

July 12, 2018

Address globalisation concerns with a popular global international trade initiative

By Tom Cargill (BFPG)

Donald Trump arrives in the UK to a storm of controversy and protest. Whilst much of the focus on his personal views and confrontational style is understandable, it risks overlooking some of the fundamental social and economic concerns that brought President Trump to power. It also risks ignoring the resonance these ideas have among many communities across the UK who feel they have lost out in an increasingly globalised world. This sense of alienation is not unique to the UK or the US. Yet events have spurred a sense of common experience in the way many people in the UK and US have not felt the benefits of wider economic growth.

One initiative which might recognise that common experience and use the depth of the civil society links between the UK & US, might be a common popular global international trade initiative. This would bring together community leaders from both countries alongside business and policy makers to discuss how the popular concerns about trade and globalisation might be addressed in a way which enhances US & UK leadership of the common values they have long championed.

Such a dialogue could act as a sounding board for politicians for both countries, as well as a way to build more constructive ideas for international engagement on an issue that is clearly dangerously distorting international trade discussions. It would also build relations between two allies who have a proud tradition of supporting an international system based on fairness and rules, which is now being increasingly questioned.

Politics must not trump trade

By Matt Kilcoyne (Adam Smith Institute)

Trump’s landing at a time when his policies risk grounding more and more trade.

The tit for tat tariff walls are well on their way up and, as Trump’s border critics know well, once walls are up it’s hard to bring them down. But, Mr Trump, let me be clear: tear down those walls.

This visit is a chance though to show that Britain and America are actually in a special relationship and while there will be loud protests in London there will be real benefit in the talks behind the scenes.

Both embattled, Trump and May need a clear signal to the world that their visions will work and that trade deals are possible between two friendly countries. While May’s EU stance precludes a free trade deal for some goods, there are major gains for Britain’s financial services firms if they can act in the US as a home company. British businesses should relish the opportunity to sell to 320m consumers in a $20tn economy.

We can save billions if our companies can bid for public contracts in the USA on a level playing field. Just as Spanish and French firms do for British contracts right now. And all our citizens benefit from better services, delivered cheaply.

Yes there will be protests, yes they’ll be loud. But they shouldn’t be taken as evidence we aren’t keen to work with our closest ally. Politics must not trump trade.

Accelerate preparations for free trade negotiations

By Catherine McBride (Institute of Economic Affairs)

I put this question to the IEA Trade Advisors when they visited London a few weeks ago. The IEA’s trade advisory team have years of experience establishing bilateral and multilateral trade agreements around the world; their answers were surprisingly similar.

Theresa May and Donald Trump should agree to accelerate preparations for free trade negotiations between the US and the UK. Such preparations can be started now without encroaching on the UK’s exit arrangements with the EU and will mean that a US/UK trade agreement can be swiftly signed when the transition period is completed.

Trump wants to agree a bilateral trade agreement with a country where the US has a trade surplus in goods such as the UK and appears to be less concerned about services where the UK has a trade surplus with the US. It is also important for the UK to show the EU and the rest of the world that they have really big trade options outside of the EU.

A trade agreement based on mutual recognition of standards between the UK and the US would be effective and could be quickly agreed. Such a trade agreement would still allow the UK to commence domestic regulatory reform when it moves outside the EU. Many countries have found that improving their domestic regulations had a greater effect on their economy than lowering trade barriers. So it is important that any UK US trade agreement avoids an overly prescriptive rule book and allows the UK to reform any EU regulations that are no longer or never were applicable to the UK’s economy.

Theresa May must walk a tightrope between conciliation and opposition

By Marianne Schneider-Petsinger (Chatham House)

As President Trump exacerbates trade disputes, considering import restrictions on cars and automotive parts after having imposed steel and aluminium tariffs in the name of national security, Theresa May must walk a tightrope between conciliation and opposition.

She will need to simultaneously rebuke Trump’s existing (and looming) tariffs and strike a mollifying note in hopes of preventing a tit-for-tat dispute escalating into a full-blown trade war. The prime minister will want to position herself as an intermediary between the US and the EU to de-escalate trade tensions.

Notably, president Trump has threatened to pull the US out of the World Trade Organisation (WTO) and the administration’s blocking of appointments to the appellate body threatens the functioning of the organisation, whose rules the UK would rely on in the event of a no-deal Brexit. Theresa May should defend the global rules-based trading system, which is vital for the success of a post-Brexit ‘Global Britain’. However, May should also connect with the US president by recognising that the WTO is far from perfect and in need of reform.

In trying to pave the way for a UK-US free trade agreement after Brexit, the prime minister should champion trade in services – which contribute to approximately 80% of UK GDP and 44% of UK exports. While prospects of a swift UK-US free trade deal post-Brexit are remote, May should focus on practical steps that can be taken now to foster closer economic ties with the UK’s largest single country trading partner.