Could America save Britain from an economic disaster?

Theresa May and Donald Trump

A year after the Brexit vote, we are none the wiser. Outside a white paper, there are no negotiation guidelines, no impact assessment on the effect of Brexit on UK’s economy, no independent study on potential effects of not reaching an agreement with the EU.

Liam Fox, Boris Johnson, David Davis and all the other great British patriots reassured the nation of the wonders of trading under World Trade Organization rules.

What they have not told the public is that:

  • Trade can be volatile;
  • Concluding trade deals can taking years;
  • The USA has one of the best negotiating teams in the world in terms of trade deals;
  • UK government is struggling to hire negotiators. Some the hired negotiators hold dual citizenship which can trigger further issues in terms of lobbying and partisan interests;
  • Trade deals with emerging economies of Asia and South-America will be subject to movement of people;
  • Not every trade deal is necessarily a good and fair trade deal for both parties. It takes years to evaluate the outcomes of a poor deal, by the time which further negotiations might reach an impasse. UK relation with EU is a good example on how difficult is to reach an agreement between parties. If Great Britain has difficulties in negotiating with 27 countries, how will it be to negotiate with 163 member states.
  • WTO has 164 member and EU is one of them as so they are all the other member states in their own right.
  • WTO sets the framework for trade between its members with decisions taken on a consensus basis. (If UK couldn’t reach consensus with 27 countries, it is impossible to assume that UK will negotiate its position better with 163 member states).
  • Tariffs (customs duties on merchandise imports are called tariffs. Tariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments.)
    During Uruguay Round WTO members have committed to cut tariffs and to “bind” their customs duty rates to levels which are difficult to raise. The current negotiations under the Doha Agenda continue efforts in that direction in agriculture and non-agricultural market access. By comparison The EU is a single customs union with a single trade policy and tariff.

Britain has run a quarterly trade surplus in goods with the U.S. since 2003. President Trump has put narrowing the U.S. trade deficit at the centre of his economic policy, pledging to increase domestic manufacturing and curb the country’s reliance on imports. The fact that Trump promised to negotiate a trade deal with Britain after it leaves the European Union, is contradicting his own pledge to curb USA’s reliance on imports.

The UK’s deficit on trade in goods and services widened by £1.0 billion to £3.1 billion in May 2017 from an upwardly revised £2.1 billion in April.

“We assembled here today are issuing a new decree to be heard in every city, in every foreign capital, and in every hall of power.

“From this day forward, a new vision will govern our land.

“From this day forward, it’s going to be only America first, America first.

“Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.”

Donald J. Trump, 20 January 2017

Trump wrote in his book the “Art of the deal” that the other side is always screwed.

The European Union accounted for 16.9 percent of the world’s gross domestic product based on purchasing-power-parity (PPP) in 2015, while the United States made up 15.8 percent, according to data from the International Monetary Fund.

Brexit could very well be taking back control from EU and giving it to US.

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