Thursday, February 25, 2016

US says they are not interested in a bilateral trade deal with the UK

Arguably the worst news for "Leave" since the beginning of the year - and if people voted on evidence rather than their emotions I would have left out the word "arguably" - is that the chief US Trade negotiator says that America is “not in the market” for a free trade deal with Britain alone, as you can read here.

There will be those who say that this is just part of an effort by the Obama administration to persuade us to stay in the EU. They might even be right, though I think there is more to it than that.

There will also be those who point out that to talk of "crippling Chinese-style tariffs" being imposed by the USA in the event of Brexit may be overstating the case. The GATT's most favoured nation rule would limit the ability of the USA or any other nation to raise punitive tariff barriers to our trade and it is not in their interests to try to destabilise an ally.

However, the fact remains that access to a market of half a billion people is much, much more valuable than access to a market of sixty million. The US, Canada and China need access to the whole EU market much more than they need access to that of any one of the present member stares alone.

There are three types of international trade deals. At one end are global deals, like the GATT ones, at the other are bilateral deals between two nations, in the middle are the deals which set up continental free trade areas like NAFTA or the EEA and the deals between those groups of nations.

For the past decade or so, as countries like the USA despaired of getting much out of the Global GATT rounds because there was always someone blocking it, but wanted something bigger and more valuable than hundreds of bilateral deals, the action has been with regional deals.

This is why the argument that we would be better off doing international trade negotiations entirely on our own is, frankly, completely divorced from reality.

It may be possible to make an argument for a "flexcit" deal in which we still have the sort of relationship with Europe which would enable us to take part in such negotiations.

But unless "leave" campaigners can put a positive case for that sort of trade model together before the referendum - and build a few bridges to the US and China - they deserve to lose.

I cannot think of a more effective means of sabotaging the British economy than to simultaneously harm our trading relationships not just with the EU but with the USA and China as well. With Britain's budget deficit and national debt still at dangerous levels, that would be a very dangerous step indeed.


Jim said...

Thats exactly it, Bilateral deals also take a long long time to negotiate and set up. Thats why Flexcit sticks with EEA membership, thus keeping all deals we currently have, we would not need a new deal with the USA, or anyone else really.

Jim said...

Im not a big fan of Hannans "swiss style" bilateral option, this is due to the amount of time they take to negotiate (more than the 2 year article 50 limit), the fragility of them (if one fails they all fail) and also the fact the EU do not really like the current situation with the swiss so I don't think they would be prepared to enter into a new one with the UK

The WTO option (UKIPs favorite as it allows us out of the 4 freedoms) I like to call "the Suicide Option"

I like EEA/EFTA, not because its perfect (as its not), but because its an off the shelf workable, politically do-able, option, that will cause little to no disruption and can easily be done within the time frame.

Some people suggest we could get a "Better deal than Norway" but I think this is unlikely as the EU would see that as encouraging others to follow the UKs lead and leave. I think EFTA EEA is the stepping stone out we need, In fact it was actually meant as a stepping stone from total independence into full EU membership, but any stepping stone in, serves as a stepping stone out.

This pretty much puts the USA "got you over a barrel" position to bed, they don't. We stick to EEA/EFTA and we are good.

Jim said...

Oh, yeah, I also find the whole thing quite ironic.

The USA, a country which celebrates 4th of July each year. A country which was prepared to fight a long and bloody war so it would no longer be ruled by an unaccountable government located off its shores, is doing all it can to "influence" the UK to ........well you get the idea.

Chris Whiteside said...

You are absolutely 100% right about the irony implicit in the US position.

If there is a credible case to be made for "Leave" it has to be along the "Flexcit" lines you suggest - I don't believe a Norway position is worth going for as an end destination but it might be acceptable as a starting point.

But I'm not hearing that case made as yet and time is running out.

If the official leave campaign do not come up with a plausible response to what the US said today well before the referendum their economic credibility will be holed below the waterline.

The SNP managed to get to 45% in their referendum on patriotic emotion despite an economic offering which was certifiably insane but they could not win on that basis and Leave will not be able to do so either.

Jim said...

Very true. We have to reassure people that Brexit is safe. Flexcit does this, but as you say its not being pushed hard enough.

Brexit is safe, so long as we do it correctly, there is too much at stake to get it wrong.

If we get it right (Flexcit) then we have a lot to gain, if we get it wrong (UKIP) then the consequences would be catastrophic, Its for this reason I pretty much share your opinion that if we go for a WTO option then the referendum can not be won.