Have conversations between the United States and the United Kingdom on their future trade agreement over the last two years influenced London’s approach to its future relationship with the EU? Chris Horseman and Iana Dreyer have delved into hundreds of pages of documents and found some of its contents quite troubling.
Much discussed leaks of confidential conversations held under a US-UK Trade and Investment Working Group in 2017 and 2018 give troubling insights into the forces currently shaping the transatlantic relationship.
The meetings were aimed at achieving two goals: provide a framework for negotiations of ‘continuity agreements’ to avoid trade disruption at the date of UK exit from the EU; and serve as a forum to discuss the contours of a future US-UK free trade agreement.
The documents reveal the extent to which Washington has not been an easy partner in agreeing to ‘roll over’ a slew of small EU-US agreements on issues such as veterinary certificates, wines and spirits, conformity assessment, or services trade. “The US reiterated that they didn’t see the sense in replicating everything – it only made sense to replicate what works,” reads a passage on one of the meetings held in 2017.
The documents also contain long passages on the desire by the United Kingdom to establish its independent ‘services schedule’ under the relevant agreement GATS in the World Trade Organization – and the uncooperative US response to it.
On the longer-term issues related to a future UK-US trade agreement, while much of the content of the five sets of notes is mind-numbingly technical, the documents throw a spotlight on potentially explosive issues such as patents for drugs and sanitary and phytosanitary rules in a way which could have significant political ramifications.
There is certainly no longer any excuse for under-estimating the scale of the challenge facing UK officials as they explore options for aligning the UK economy more closely with the US sphere of regulatory influence, as a possible post-Brexit alternative to remaining closely anchored to a European model.
At the very least, in London, the option of hedging bets and steering some kind of illusory middle course between the two is one which can be decisively ruled out.
Has US pressure contributed to changes in Brexit strategy on SPS alignment, climate?
What becomes evident in reading through the documents is that they are all between one and two-and-a-half years old – dating back to a period when the UK’s approach to its future relationship with the EU was even more unsettled than it is at present.
For example, a widely-cited reference to the US delegation being “deflated” at the intended level of UK integration with EU SPS standards was written in the immediate aftermath of the adoption of the ‘Chequers’ plan in summer 2018 – the strategy of ex-prime minister Theresa May to keep the UK closely aligned with the EU single market.
Since Boris Johnson’s installation as prime minister in July this year, the Chequers approach has been comprehensively ditched in favour of a more distant relationship with the EU.
Former UK Ambassador to the EU Ivan Rogers put it clearly in an article on Prospect Magazine this week: “The publicly avowed Johnson intention is to be much more distant from the EU, and to adopt a model on both goods and services which is substantially more divergent from EU rules and standards. He DOES NOT WANT a so-called “high alignment” model. That is, after all, the whole basis of the appeal his redraft of the Political Declaration accompanying the Withdrawal Agreement had to the Conservative Right that Mrs May’s deal did not.”
These latest leaks will inevitably prompt questions as to the extent to which US pressure brought about this change of political strategy.
The same is true about the revelation that the US presented ‘preliminary economic modelling results’ at one meeting analysing the impact on UK welfare and GDP gains from ‘hard’ and ‘soft’ Brexit scenarios – the UK gained more from the softer scenario, but the US benefited more from a hard Brexit.
The documents also reveal that the UK’s desire to include a climate change dimension in its future trade partnership with the US were firmly rebuffed by the United States. The text reads: “UK (Gysin) inquired about the possibility of including reference to climate change in a future UK-US trade agreement given that the UK has a strong historical stance on climate change.”
The minutes continue thus: “US (Stewart) responded emphatically that climate change is the most political (sensitive) question for the US, stating it is a ‘lightning rod issue’, mentioning that as of 2015, USTR are bound by Congress not to include mention of greenhouse gas emission reductions in trade agreements.”
Seen under this light, can one say that the refusal of Boris Johnson not to appear for a televised debate on Thursday (28 November) on climate change ahead of the coming general elections is anodyne and merely coincidental?
EU alignment seen as problem for the US
The leaked accounts of the exchanges between senior officials on either side further throw a spotlight on the differences in approach or emphasis ahead of coming FTA talks.
UK officials reported their American counterparts as saying that harmonisation of UK SPS regulations with the EU’s regime, to take one example, would be “the worst-case scenario for a UK-US FTA.” This harmonisation is precisely the scenario that the UK agriculture and food lobbies have been pleading for. Moreover, in the case of Northern Ireland, such integration has already been signed into the framework of the revised EU-UK Withdrawal Agreement – which a majority Johnson government would undoubtedly ratify immediately after the coming December election.
The same notes are remarkably candid about what the US side sees as the drawbacks of continuing single market integration:
“On transparency and equivalence, the UK not remaining in the EU but subject to the EU rules will be more of an issue for the US than the UK just being in the EU, as we can no longer be a back door for US products and no longer influence EU rules,” the unnamed UK official wrote.
“An example the US shared would be if they (the US) lodged a complaint against the UK under the terms of the FTA, the UK would not have the autonomy to address the said complaint under the Chequers proposal.”
The notes add that the US side were interested in areas “such as [Geographical Indications] and where there might be some room for negotiation.”
The EU’s hazard-based approach on regulating pesticides, veterinary drugs and pathogen reduction treatments would be incompatible with the US’s risk-based approach, officials made clear in the meetings.
So Britain will have to choose.
Services: GATS for TiSA?
The documents reveal how the UK’s ambitions in the area of services trade were resisted – it seems successfully so far.
The documents reveal that the then Secretary of State for international trade Liam Fox asked the United States if there were chances to revive TiSA, the inconclusive plurilateral services negotiations held between 2012 and 2016 in Geneva. USTR Lighthizer’s response was candid. “The difficulty was that the President did not accept we were in a post-industrial period,” he told Fox. “So the main focus would be on bringing back some manufacturing jobs”.
The United Kingdom also asked the US to accept to ‘replicate’ the current EU schedule of commitments under the GATS – for the simple sake of certainty and continuity. This was clearly rebuffed. In November 2017 “the US wanted to re-emphasise their stance on WTO Services commitments. They acknowledged that the UK had already signalled interest in taking updated versions of the EU schedule and undertaking a technical rectification process”.
But the US were pressing for more. “There [are] many exceptions in the EU schedule that clearly do not reflect the more open nature of the UK’s services market…. There would be value in the UK taking these points into account before we put our final proposed schedule on the table.” Other areas in the text suggest that the US appeared to interested in the UK upgrading its GATS schedule to the level envisaged in the TiSA negotiations.
The US are also pressing the UK to commit to a ‘negative list’ approach (i.e. to assume that all services are open to competition unless there is a good reason not to) to services in its future trade agreement with the EU. There are long passages in the text in which the US criticises the preferred EU approach of negotiating a ‘positive list’ of those sectors where there is strategic gain in getting improved market access.
Even assuming this is eventually resolved one way or the other – should there be scope to change the approach taken in the light of changing political sensitivities? The revelation that the US had been “horrified” by the EU’s insistence, in the ill-fated EU-US TTIP negotiations, on reserving the right to introduce new “discriminatory” measures after the FTA was in place indicates the extent to which FTAs have the potential to limit a government’s margin for political manoeuvre.
All in all, the documents are less sensational and revelatory than some of the UK government’s political opponents have attempted to suggest.
But for anyone in Britain who was already concerned about the possible impact of a FTA negotiated in haste with a larger and more powerful economy, by British officials who lack experience in the arcane arts of FTA negotiation, these leaks offer plenty of material to feed the anxiety.