US-UK trade deal 'unlikely' if UK exits EU

Scofflaw

The Obama administration has apparently warned the UK that the US is unlikely to cut the UK a trade deal in the event of a UK exit from the EU:

The Obama administration has warned British officials that if the UK leaves Europe it will exclude itself from a US-EU trade and investment partnership potentially worth hundreds of billions of pounds a year, and that it was very unlikely that Washington would make a separate deal with Britain.

A UK exit would make the deal with the EU a harder sell in Congress:

The threat by Cameron's ministers to back a UK exit in a referendum on the EU raised doubts in Washington on whether Britain would still be part of the deal once it had been negotiated. More immediately, Obama administration officials were concerned that the uncertainty over Britain's future would further complicate what is already a hard sell in Congress, threatening a central pledge in the president's State of the Union address in February.

but if there is an EU-US deal, it's unlikely the US administration would bother to go through the process again for the UK alone:

With formal negotiations expected to start within weeks, the state department already has hundreds of staff working on the partnership. Sources at US-UK meetings in London last week said American officials made it clear that it would take a monumental effort to get TTIP through a suspicious Congress and that "there would very little appetite" in Washington to do it all again with the UK if Britain walked out of Europe.

http://www.guardian.co.uk/business/2013/may/27/eu-exit-risks-us-trade-deal

So there's something of the special relationship there, but the US sees the UK as rather more valuable inside the EU than outside.

cordially,
Scofflaw

KyussBishop

The trouble with US trade treaties, is they are often a backdoor for transferring economic and political power away from countries, towards the US and multinationals, and of eroding democracy within the countries in question, and as a backdoor for neoliberal deregulation/globalization; the US has a long history of trade treaties which do this, such as ACTA, TPP, and older ones like NAFTA, which are notable for attempting to enforce US-style copyright laws on other countries, and destroying local economies to favour the US.

Due to this, I am very wary of any EU-US trade deal; they are almost always negotiated completely in secret, with attempts to steamroll them through at the last minute, before the full content is properly known by populations, and they invariably contain many awful provisions; the UK ruling themselves out from this, I wouldn't view as a bad thing (though they would be silly to exit the EU anyway).

gallag

Its funny how the pro EU argument is never positive, it always seems to be a vague threat of financial doom. Trade with America or the E.U will not cease just because the British people jump first from the sinking ship.

Scofflaw

gallag wrote: »

Its funny how the pro EU argument is never positive, it always seems to be a vague threat of financial doom. Trade with America or the E.U will not cease just because the British people jump first from the sinking ship.

The argument in favour of staying in the EU there is implicitly positive - the benefit of being in a large trading bloc. Indeed, most of the "financial doom" arguments are in fact about benefits that would be foregone by an exit - obviously, staying in retains those benefits, but it's not really possible to make an argument on the basis of the UK gaining them, because the UK already has them.

I think perhaps you just can't see it that way, because it would involve accepting those benefits of membership exist in the first place.

cordially,
Scofflaw

dlouth15

Scofflaw, I think you may have misread the article.

The actual article is mainly about the US-EU trade deal being under threat over Britain's possible leaving the EU. The title is "EU exit would put US trade deal at risk, Britain warned". Note that it is the current EU negotiations that are being referred to in the title.

The US finds a deal with an EU with Britain in it more attractive than a deal with the EU minus Britain.

For example:

Having Britain in the EU … is going to strengthen the possibility that we succeed in a very difficult negotiation, as it involves so many different interests and having Britain as a key player and pushing for this will be important," a senior US official said. "We have expressed our views of Britain's role in the EU and they haven't changed. TTIP negotiations underscore why we think it's important that it continues.

Another example:

If the UK separates from the EU, I think will go a long way to derail the TTIP project entirely," Hufbauer said. "There would be a lot of questions raised. The administration has many battles ahead of it. It will add another layer of confusion on an already confused picture, and there will be lots of commercial concerns in the US [from those who] have had their eye on the UK markets."

Very little of the article is about the difficulty Britain might have should it decide to negotiate separately. I can only find one sentence that suggests that and that sentence is easily interpreted as political pressure rather than factual.

Have another read of the article and see what you think.

Scofflaw

dlouth15 wrote: »

Scofflaw, I think you may have misread the article.

The actual article is mainly about the US-EU trade deal being under threat over Britain's possible leaving the EU. The title is "EU exit would put US trade deal at risk, Britain warned". Note that it is the current EU negotiations that are being referred to in the title.

The US finds a deal with an EU with Britain in it more attractive than a deal with the EU minus Britain.

For example:

Having Britain in the EU … is going to strengthen the possibility that we succeed in a very difficult negotiation, as it involves so many different interests and having Britain as a key player and pushing for this will be important," a senior US official said. "We have expressed our views of Britain's role in the EU and they haven't changed. TTIP negotiations underscore why we think it's important that it continues.

Another example:

If the UK separates from the EU, I think will go a long way to derail the TTIP project entirely," Hufbauer said. "There would be a lot of questions raised. The administration has many battles ahead of it. It will add another layer of confusion on an already confused picture, and there will be lots of commercial concerns in the US [from those who] have had their eye on the UK markets."

Very little of the article is about the difficulty Britain might have should it decide to negotiate separately. I can only find one sentence that suggests that and that sentence is easily interpreted as political pressure rather than factual.

Have another read of the article and see what you think.

No, I did note that:

Scofflaw wrote:

A UK exit would make the deal with the EU a harder sell in Congress:

The threat by Cameron's ministers to back a UK exit in a referendum on the EU raised doubts in Washington on whether Britain would still be part of the deal once it had been negotiated. More immediately, Obama administration officials were concerned that the uncertainty over Britain's future would further complicate what is already a hard sell in Congress, threatening a central pledge in the president's State of the Union address in February.

but the message that the US wouldn't want to go through it again for the UK alone after a UK exit was very clear:

Sources at US-UK meetings in London last week said American officials made it clear that it would take a monumental effort to get TTIP through a suspicious Congress and that "there would very little appetite" in Washington to do it all again with the UK if Britain walked out of Europe.

In short, the US wants a deal with an EU that includes the UK, but in the event of a UK exit, the deal with the EU becomes a "harder sell" to Congress while a deal with the UK is something for which there's "very little appetite" in Washington. Those are rather different levels of reluctance.

On top of that, any EU-US deal that's finalised in the next couple of years - and the planned date is end 2014 - will include the UK, so there's not really a likelihood of a UK exit actually derailing the EU deal. If they exit after that, it's been made clear that there's "little appetite" to begin such negotiations again, as would then be necessary for the UK to have such a deal separately.

This is, of course, the US putting pressure on the UK to remain in the EU, and ideally to avoid even giving the impression of a possible exit. The US has expressed several times (as referenced in the article) the position that it prefers the UK to remain in the EU.

cordially,
Scofflaw

dlouth15

Scofflaw wrote: »

On top of that, any EU-US deal that's finalised in the next couple of years - and the planned date is end 2014 - will include the UK, so there's not really a likelihood of a UK exit actually derailing the EU deal.

However, from the article:

"Having Britain in the EU … is going to strengthen the possibility that we succeed in a very difficult negotiation, as it involves so many different interests and having Britain as a key player and pushing for this will be important," a senior US official said. "We have expressed our views of Britain's role in the EU and they haven't changed. TTIP negotiations underscore why we think it's important that it continues."

What this paragraph is saying, and I think you will agree, is kind of the opposite of what I've quoted you saying above. Negotiations are difficult, the US official says, but Britain being part of it is important.

He doesn't go so far, to be fair, as saying the negotiations will fail without Britain but he does say that Britain's involvement is important for its success.

Most of the paragraphs in the article support this view. It is not that Britain is more important in the EU than out of it, but rather that the EU itself is more important with Britain in it than out of it.

By way of analogy, imagine you are considering buying a ticket to a music festival. There are a couple of headline acts and the rest minor acts. You then find out that one of the headline acts is considering pulling out and this makes you reconsider whether or not you will attend.

In such circumstances you are likely to say that you "have little appetite", as the article puts it, to buy a ticket featuring this headline act alone. This would be your way of putting pressure on the band to remain in the festival.

So basically I think you have misinterpreted the broad thrust of the article by selecting out one or two bits and ignoring the rest. Have another read of it (and I would encourage others to do likewise) and then come back would be my suggestion.

dlouth15

Here's another quote that backs up my point:

"If the UK separates from the EU, I think will go a long way to derail the TTIP project entirely," Hufbauer said.

The main thrust of the article (if you read it in its entirety) is that the EU with regard to this deal is strengthened by Britain's membership.

It is very understandable that US officials would say that there's "little appetite" for separate negotiations with Britain at this point in the negotiations, but it does look like Britain's position, should it leave, is stronger than one might have imagined and that the EU's position weaker.

What I think Cameron should do is privately assure US officials that the referendum is only going to happen with Cameron himself as PM and in the unlikely event of a UK exit that the UK would be willing to extend the same terms already negotiated with the EU. This is what the US appears to want anyway.

Scofflaw

I don't think there's any lack of support for your point in the article, but I think I have covered that aspect of the article, and I think you're in danger of wishing away the other aspect entirely!

dlouth15 wrote:

What I think Cameron should do is privately assure US officials that the referendum is only going to happen with Cameron himself as PM and in the unlikely event of a UK exit that the UK would be willing to extend the same terms already negotiated with the EU. This is what the US appears to want anyway.

Er, no, I don't think it is at all - what the US wants is very clearly stated, which is an EU-US deal with the UK in the EU. They don't want a position where there would have to be two separate deals, and they've been quite clear that there would be little appetite for starting negotiations again with the UK for a separate deal, which is what the stage is set for if there is an EU-US deal in place when the UK holds its putative referendum, as per the proposed timetable (even with the inevitable slippage).

As I said, I think you're at the stage of wishing that away by suggesting it's a tiny difficulty which can be overcome by the UK being "willing to extend the same terms already negotiated with the EU" - they might perhaps be willing to do so, but I don't think that's the point. Nor, I suspect, would Cameron's private assurances be considered of much value - I'm sure Cameron has already given all kinds of assurances, but the US has made the point publicly anyway.

cordially,
Scofflaw

dlouth15

Scofflaw wrote: »

Er, no, I don't think it is at all - what the US wants is very clearly stated, which is an EU-US deal with the UK in the EU. They don't want a position where there would have to be two separate deals, and they've been quite clear that there would be little appetite for starting negotiations again with the UK for a separate deal, which is what the stage is set for if there is an EU-US deal in place when the UK holds its putative referendum, as per the proposed timetable (even with the inevitable slippage).

I agree that the ideal situation for the US would be that they conclude a deal with the EU including Britain as a long term member and that a separate deal with the UK would be less than satisfactory. However my point was that despite the US having "little appetite" at this point (again understandable that they would say this), the difficulties would be less than one might have thought. The reasoning behind this is that access to Britain's markets seems very attractive to the US if the article is to believed and indeed an exit could be a deal breaker. You don't seem to be addressing this point so I'm repeating it.

As I said, I think you're at the stage of wishing that away by suggesting it's a tiny difficulty which can be overcome by the UK being "willing to extend the same terms already negotiated with the EU" - they might perhaps be willing to do so, but I don't think that's the point. Nor, I suspect, would Cameron's private assurances be considered of much value - I'm sure Cameron has already given all kinds of assurances, but the US has made the point publicly anyway.

But it is the point. Trade with Britain seems to be very important to the US and indeed the EU trade deal may hinge on this. Therefore Cameron is in a position to assure the US that should there be an EU exit this trade with Britain can continue.

You make valid points in your posts but I think you chose the wrong article to quote to back them up. If you had managed to find an article that suggested that the Britain's membership was only of minor importance in the EU-US trade talks then you could legitimately argue that Britain would find it very difficult to conclude a bilateral deal with the US since it you could say that the US wasn't interested much in trading with Britain in the first place.

Scofflaw

Heh. I take your point, and don't disagree that the US visibly wants a deal with an EU that contains a UK rather than one that doesn't, but I do think you're approaching this with very rose-tinted spectacles, and the majority of observers seem to agree with my perspective rather than yours. I picked the Telegraph article because it's not open to accusations of having a pro-EU stance, and still the point about a separate US-UK deal is there.

Here's another source which I think can fairly be described, even by eurosceptics, as at least neutral (and would be described by most europhiles as eurosceptical) - Open Europe:

As a member of the EU the UK's foreign trade is governed by the EU's common commercial policy and so has to be done via an EU deal. After the EU the US is the UK's most important trading partner. Some involved in the UK-EU debate - particularly Outers - suggest that if the UK left the EU it could negotiate a deal with the US on better terms than it could potentially gain via the EU. But is that the case? Here are some of the factors that could be important.

A mismatch in negotiating power.
Although the UK exports a lot to the US, as a % of it's total exports, the US sends only 4% to the UK. So although a trade deal should be mutually beneficial, reaching a solution would be disproportionately in the UK's interests. Therefore, there would be an imbalance of negotiating power. For this the EU's weight could help on issues where the UK's interests are aligned with it.

Would the US want to go through the hassle?
Given this asymmetry, and the relative small market the UK is for the US, one question is if the US would go through all the political hurdles - approval in Congress, taking on the unions etc. Indeed, talk to people in Washington and there's some scepticism about this. (However, the US has signed agreements with 23 states, some very small, so perhaps it is more a matter of the terms you would get?)

Fewer protectionist hold ups.
At the same time, the US and the UK are more compatible economies than are the US and EU. The UK negotiating on its own account would not be hindered by protectionist issues emanating largely from France and MEPs, that could hold up US agreement or require concessions, such as the protection of agriculture, genetically modified foods or geographical indicators. However the UK is still unlikely to wish to see the US allowed to subsidise its agricultural exports, so tough negotiations would still be required.

Access for financial services could be a tough negotiation.
The UK negotiating with the US on financial services would come up against a powerful US lobby attempting to protect its banks from what is New York's main rival - London. However, the UK negotiating on its own would arguably have a better chance to strike a deal on 'reciprocity' with US funds, a more generous arrangement than that which currently exists under regulations such as the AIFM Directive or UCITS. Additionally the UK would not bear the burden of having risky eurozone banks getting in on the deal. In recent negotiations with Singapore the US gained a better deal than the EU on financial services, partly because while Singapore was happy with UK banks it was wary of giving access to all eurozone banks (a big untold story in all of this).

If the idea is that an 'independent' UK can automatically join some gigantic Transatlantic free trade zone, in place of its current EU membership, there will be plenty of hurdles and a good deal is by no means guaranteed. Added to that there's also the small matter of negotiating an equivalent free trade deal with the EU....

http://openeuropeblog.blogspot.ie/2013/05/would-independent-uk-get-better-us.html

The problems they point out, and the scepticism from Washington sources, are really there. I agree that the possibility of a UK exit has been stated as making the EU deal itself a harder sell in Congress - but that is not the same as the US administration saying that it would abandon an EU deal in the absence of the UK. Clearly it would go ahead. otherwise it wouldn't be selling it to Congress in the first place - whereas a separate UK deal wouldn't even get to Congress.

The EU without the UK represents nearly a quarter of US exports (23.15%), while the US is only 17% of EU exports. The UK without the EU represents 3.65% of US exports, while the US is 17% of UK exports. There's a strong asymmetry in the US's favour in the UK's case, and a weaker one, but against the US, in the EU's case. To be fair, the imbalance is as bad for the UK in the EU's case, since 47% of UK exports are to the EU, but if the UK were outside the EU, it would represent only 13.6% of EU exports.

cordially,
Scofflaw

the_syco

Scofflaw wrote: »

So there's something of the special relationship there, but the US sees the UK as rather more valuable inside the EU than outside.

I see the UK as a large english speaking country that is part of a much larger EU trade-zone that has land ties to the EU. It's also a country that most Americans would probably see as an ally in the current war.

IMO these are factors why having the UK as part of the EU is beneficial to the USA, and also a large reason why the UK should stay in the EU; but either way the opposition in england will attack the party in power, about losing the trade if they leave the EU, or about not having the balls to leave the EU if they want to keep the trade.