The United Kingdom and the United States are examining how to move ahead with preliminary trade negotiations, according to UK Prime Minister Theresa May, who met with her American counterpart last week.

“We are discussing how we can establish a trade negotiation agreement, take forward immediate, high-level talks, lay the groundwork for a UK-US trade agreement, and identify the practical steps we can take now in order to enable companies in both countries to trade and do business with one another,” said UK Prime Minister Theresa May on Friday 27 January.

May’s visit to Washington marked US President Donald Trump’s first visit from a foreign leader since taking office on 20 January. Along with the potential of providing substantive clues on the future UK-US relationship under these two new leaders, the visit was also looked to as an early test of their broader trade priorities, given the major political shifts being seen on both sides of the Atlantic.

Details from the two officials as to the desired timeframe and mandate for this UK-US trade negotiation agreement were not described at the time.

It was also not clear how this process would operate in parallel with the UK’s Brexit negotiations with the rest of the European Union, which have yet to begin formally.

The UK cannot enter into a formal trade agreement with non-EU countries without having left the European Union first. However, the island nation will be aiming to set the groundwork for a full host of new deals once it is no longer an EU member, according to the prime minister.

Already under consideration are trade agreements with Australia, India, and New Zealand, with various other countries having reportedly expressed interest as well. UK and Australian officials met last week to begin examining what a future bilateral deal could look like. (See Bridges Weekly, 26 January 2017)

Shifting landscape, trade approaches

The UK prime minister is already in the process of navigating the difficult domestic and European context regarding the upcoming negotiations to leave the European Union. So far, this has included fielding domestic legal challenges and dealing with a debate with the heads of the country’s “devolved administrations” – Scotland, Northern Ireland, and Wales – over their own regional priorities and concerns.

May confirmed last month that her government aims to take the United Kingdom out of the European Single Market, given that being part of it requires keeping the “four freedoms” of free movement of people, goods, services, and capital. Her government’s objective instead will be to negotiate a free trade agreement (FTA) with the remaining 27-member EU bloc, along with a new customs arrangement with the existing EU customs union. (See Bridges Weekly, 19 January 2017)

Her government will also need to deal with the response from the remaining 27 EU members, as they work to negotiate a deal that also serves the bloc’s interests, while simultaneously building on the outcomes from their ongoing process of “political reflection” regarding the European Union’s long-term future.

European Commission Vice-President Jyrki Katainen told Bloomberg TV this week that the EU is looking for a “functioning solution to Brexit and our future relationship with the UK,” calling for all sides to ensure a positive “attitude” going forward.

The Brexit negotiations are expected to be formally launched in March, in line with a previous commitment by the prime minister, with the Times reporting this week that the intended date will be 9 March to coincide with a meeting with EU leaders.

The process to pass a “Brexit bill” in the UK parliament got well underway this week, with the House of Commons passing it Wednesday night. That bill will authorize the government to formally notify the EU under the Treaty of Lisbon of the UK’s intention to negotiate a withdrawal, a necessary procedural step to begin official talks.

Trump has been a vocal supporter of Brexit, has openly endorsed the idea while he was still a presidential candidate, even before the 23 June referendum which saw a slim majority of UK voters support leaving the EU. (See Bridges Weekly, 30 June 2016)

“I think Brexit’s going to be a wonderful thing for your country. I think when it irons out, you’re going to have your own identity, and you’re going to have the people you want in your country and you’re going to be able to make free trade deals without having somebody watching you and what you’re doing,” said Trump during a joint press conference with the UK leader.

Trump is now in only his second week as president, having sworn the oath of office on 20 January. He has already been active on other trade topics, issuing last week a presidential memorandum which directed the US Trade Representative to withdraw the US from the Trans-Pacific Partnership (TPP) Agreement and instead “begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.” (See Bridges Weekly, 26 January 2017)

The language of these instructions has not been clear about the fate of another trade initiative, one with potential relevance for a future UK-US deal. Specifically, the Transatlantic Trade and Investment Partnership (TTIP) remains in limbo, after over three years of negotiations.

While the two sides had aimed to complete the talks before former US President Barack Obama left office, that target was later dropped, with TTIP negotiators working instead to capture as much progress as possible should the new US administration choose to pick it up. (See Bridges Weekly, 8 December 2016)

Although Trump has not yet referred publicly to any views he might have on TTIP, one of his main trade advisers suggested this week that the mammoth accord – which is still under negotiation – may also be terminated.

Speaking to the Financial Times, Peter Navarro said that those negotiations are essentially over. Navarro, who is leading Trump’s National Trade Council, said that Germany’s currency policy and its effects on the euro are largely to blame. He also argued Germany is a prime example of the variations across the EU in economic heft – making the TTIP “a multilateral deal in bilateral dress.”

May to Republican lawmakers: high-skilled, high-paid jobs key in FTA

Prior to her meeting with Trump, the UK prime minister traveled to Philadelphia, Pennsylvania, to speak at the Republican Party conference which met there on 26 January. Republicans hold majorities in both chambers of the US Congress, and the legislative branch will need to approve any future trade deal negotiated by the Office of the US Trade Representative.

“We will build a new partnership with our friends in Europe. We are not turning our back on them, or on the interests and the values that we share,” said May in Philadelphia to American lawmakers.

She also gave some initial hints at what her government would be looking to achieve in a bilateral trade pact, especially in light of the deep trade and investment relationship which already exists between the two countries.

“I am delighted that the new administration has made a trade agreement between our countries one of its earliest priorities. A new trade deal between Britain and America must work for both sides and serve both of our national interests,” said the UK leader.

She noted that such an agreement would need to be of mutual economic benefit, particularly in the creation of “high-skilled, high-paid jobs of the future” as well as those who have experienced the downsides of trade deals in the past.

Furthermore, she suggested that this UK-US deal could be a way to support “the rules-based international system” even more than it is today while suggesting that trade talks would get underway “in the coming months.”

ICTSD reporting; “Trump’s top trade adviser accuses Germany of currency exploitation,” FINANCIAL TIMES, 31 January 2017; “May will trigger Brexit on March 9,” THE TIMES, 31 January 2017; “Brexit bill set to pass without amendment as Tory rebels back off,” THE GUARDIAN, 30 January 2017; “Trump Must Reconsider Stance on Trade, EU’s Katainen Says,” BLOOMBERG, 31 January 2017.

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