As a new report sets out the economic impact of Brexit, Jeremy Smith looks at what a US trade deal would mean for Britain.
Our trade with the USA, though far smaller in value than with the EU, is far greater than with any other non-EU country. That means if non-EU trade is to expand to make up for some of the loss of EU trade, a right-wing UK government will look across the Atlantic for support.
Given the likely economic consequences of Brexit, there can be only one real economic agenda for the right-wing Brexit camp – to wrench the UK by political force out of its vast complex network of EU links, and to hardwire it into the US economy, in a way that irrevocably connects the UK politically as well as economically into the American system.
This brings perceived benefits to both the free trade, deregulating business wing, and to the socially conservative, hard right Brexit base, who see Trump as a symbolic figure to admire. This process of wrenching the UK out of the EU and tying it to America is in line with the Trumpian mission.
The Trump-Pence agenda is a dual one – to weaken the European Union economically and politically, and to ‘capture’ the UK, economically and politically. An FTA with the United States is the first goal, and the Conservative government is already looking for this.
But the UK, adrift from the European Union and with only a handful of inherited roll-over FTAs, that represent but a tiny fraction of our trade, will be in a terribly weak position in negotiating an FTA with the United States.
Back in October 2018, the Trump Administration notified Congress of the intention to negotiate a trade agreement with the UK, in accordance with the terms of the US’s Trade Priorities and Accountability Act of 2015.
This Congressional Act sets out the overall negotiating objectives, including those for trade in goods, services, agriculture and investment. As you may imagine, they are quite tough.
The terms in relation to services will be crucial, as we can be sure that access to providing health services in relation to the NHS and other public services will be high on the list.
Here is one major objective set out in the Act:
“…to expand competitive market opportunities for United States services…by reducing or eliminating barriers to international trade in services, such as regulatory and other barriers that deny national treatment and market access or unreasonably restrict the establishment or operations of service suppliers.”
For agriculture, one objective is to secure:
“…more open and equitable market access [through the]…adoption of [lower] international standards, and [to] require a science-based justification be provided for a sanitary or phytosanitary measure if the measure is more restrictive than the applicable international standard”.
You can read this as: make way for chlorinated chickens.
Trump has given some hints that he will employ a “slice and dice” approach to the negotiations, to pick off the UK through sectoral deals. In Augut, Trump interrupted Johnson’s talk of ‘a deal’ to say: “lots of fantastic mini-deals, we’re talking about many different deals but we’re having a good time.”
Mr Johnson has of course said, in his first speech to the House of Commons as Prime Minister on 25th July, that “under no circumstances will we agree to any free trade deal that puts the NHS on the table.”
But that is an easy promise to keep, since not even President Trump is seeking (probably) to buy the NHS as such. What is of interest to US big business, in relation to the NHS, is:
(a) to be able to provide an ever bigger proportion of health services to the residual NHS purchaser, and
(b) to ensure that the NHS pays a much higher price for the drugs it purchases.
Back in 2018, Trump accused other countries of “freeloading” when it came to the cost of drugs for health services. The Daily Telegraph (14 May 2018) reports him as saying:
“America will not be cheated any longer, and especially will not be cheated by foreign countries…In some cases, medicine that costs a few dollars in a foreign country costs hundreds of dollars in America for the same pill, with the same ingredients, in the same package, made in the same plant.
“…It’s ridiculous. It’s not going to happen any longer. It’s time to end the global freeloading once and for all.”
And the Telegraph correspondent pointed out: “The pharmaceutical companies in the US are among the biggest corporate political donors and Democrats accused the US president of looking after the industry rather than patients.
“Lowering drug prices was one of Donald Trump’s key campaign promises and he hopes to achieve this by making other countries pay more.”
As if it couldn’t be clearer – Trump’s Health and Human Services Secretary, Alex Azar, told CNBC:
“Washington will use its muscle to push up drug prices abroad, to lower the cost paid by patients in the United States. On the foreign side, we need to, through our trade negotiations and agreements, pressure them.”
In June this year, the US Ambassador to London emphasized that in a trade negotiation, the whole economy is up for negotiation. And asked if that includes healthcare, he answered “I would think so”.
We can, therefore, begin to see the future if Brexit proceeds, and if Mr Johnson remains in office.
We leave the European Union with no FTA in sight, and few if any allies. The UK is alone. A stream of deregulation policies are brought forward by Prime Minister Johnson. President Trump offers a series of mini-FTAs, as part of his scene setting for the November 2020 Presidential election. Big business on both sides of the Atlantic applauds. A statue of David Ricardo, advocate of free trade and comparative advantage, who made his fortune by speculating on the outcome of the Battle of Waterloo, is placed on a plinth in Trafalgar Square.
Unless, of course, history decides otherwise.
Jeremy Smith is co-director of Policy Research in Macroeconomics (PRIME), and was Secretary General of the Council of European Municipalities and Regions from 2002 to 2010.
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