To return US trade to ‘normalcy’ - try a bilateral trade deal with the UK.

President Trump has made his position clear on UK US trade: he would welcome a trade deal and negotiations are progressing. Yet Joe Biden, Democratic candidate for the presidency, and Nancy Pelosi, Speaker of the US House of Representatives, claim that they would prevent a US UK trade deal, emphasising instead the need to preserve an open border between the Republic and Northern Ireland. But is this a wise position to take in an election year?

Biden claims Trump’s trade war with China has harmed US farmers yet rejects a trade deal with the UK which would alleviate that harm. Agriculture is a major export industry in the US. In contrast the UK is a net importer of food and agricultural products. A symbiotic trading agreement could be easily agreed.

For example, the UK imported $1.2billion worth of fresh or chilled pork in 2019 but only a tiny $3.3million of it came from the US. Iowa, North Carolina, and Minnesota could all provide the UK with the pork it presently imports from Denmark and Germany.

Last year the UK also imported just under $1 billion worth of beef but less than half a million dollars’ worth came from the US – the world’s largest fresh beef exporter. Texas, Nebraska, Kansas, Oklahoma, why even Pelosi’s own state of California could supply the UK with the beef that it imports each year from the EU.

The UK imported just under $800 million worth of citrus products last year but only $1.6 million came from the US. Florida, California, even Arizona could supply the UK’s needs.

The UK imported $2.2billion worth of cheese in 2019 but less than half a million dollars’ worth came from the United States. The UK could substitute Munster, Feta, Gouda, Gruyere or Provolone made in Wisconsin for products currently sourced from the EU.

And it is not just farmers who would benefit from a US UK trade deal. The UK imported $75 billion worth of vehicles in 2019 but less than $1 billion came from the US. A trade deal with the UK that reduced the 10% tariff presently applied to US cars or the 8% tariff applied to US motorbikes, could convert some of the EU’s captive UK market share to US products. The EU currently supplies 85% of UK vehicle imports but without an EU UK trade deal, EU car manufacturers will find themselves with an additional 10% tariff added to their UK exports. Overnight the price differential between US and EU vehicles could invert by 20% if the US has a trade deal with the UK but the EU does not.

Iowa, North Carolina, Texas, Florida, Wisconsin, and Michigan are all states that Trump needs to win in 2020 to hold the Presidency and yet Biden and Pelosi are not interested in a US UK trade agreement.

Well maybe that is because Democrat supporters are not farmers or exporters but even so, a UK US trade deal would help US consumers as well.

The US’s Most Favoured Nation tariff (MFN) on UK clothing and textiles can be as high as 32%. US consumers could benefit from a lowering of this tariff on UK clothing brands including Burberry, Macintosh, Aquascutum, Gieves & Hawkes, Pringle, Dunhill, Turnbull & Asser, and Barbour. US MFN footwear tariffs can be as high as 49.14%. Shoes from Clarks, Church’s, Dr. Martens, even John Lobb would be more affordable if this tariff were reduced.

The US is the top destination for UK whisky and gin. Total UK beverage sales to the US totalled ￡1.8bn in 2019. The US is the Scotch Whisky Association’s most valuable customer with sales up 2.8% to ￡1.07 billion in 2019 despite the additional tariffs applied by the US as a remedy for the WTO ruling against the EU for the Airbus subsidies.

Although there is already a lot of financial service trade between the US and the UK there are areas where this could be increased. UK fund managers are well regarded in the US and often manage portfolios for large US pension funds but could build on their reputations to expand into the US mutual fund business.

The US-UK have already agreed a Bilateral Agreement covering insurance and reinsurance. We could make a similar agreement for Banking and Fintech. Maybe, some of the UK’s newest fintech companies: internet banks; peer to peer lending platforms; or internet micro financing companies, could provide US consumers with a valuable service.

But all of these potential benefits are being ignored by the Democrats presumably because Irish Americans mistakenly believe that the Belfast Agreement would be at risk if Northern Ireland leaves the EU’s Customs Union and Single Market with the UK.

However, it is unrealistic to assume the border between the Republic and Northern Ireland must either be completely open or returned to the heavily fortified border that existed during the height of the troubles. This implies that the Irish people have no interest in peace or even in their own prosperity. It also forgets that there are already differences in excise duty and VAT between the Republic and Northern Ireland, and these taxes are handled without inciting violence or the need for border inspections.

There were after all only 758,000 export deliveries, from Northern Ireland to the Republic, worth ￡3.4bn in 2016 and only 410,000 import deliveries, from the Republic to Northern Ireland worth just under ￡2bn. With 275 crossing points, this is an average of less than 12 crossings, per crossing point, per day. Obviously, major routes will get more traffic, but monitoring this trade will not be an insurmountable problem.

Also, both the UK and Ireland are in the Common Travel Area so there are minimal checks on individuals crossing the border. Changes to the UK’s acceptance of the Free Movement of People in January in 2021 will not apply to Irish citizens who will continue to be allowed to enter and live in the UK as they do now.

So, is the Belfast Agreement really an issue that is worth rejecting a US UK trade agreement that would help US farmers, US car manufactures and US consumers?

If US politicians are really worried about Ireland, then maybe they should be encouraging Ireland to join the UK’s internal market. The US and the UK are Irelands biggest trading partners, together we account for over 40% of its trade. Ireland only joined the EU because the UK did, as the UK was such a large part of its trade. Ironically, official documents show that at the time Ireland’s politicians feared a border down the Irish Sea, something that the Northern Ireland Protocol now seems to ensure, so when De Gaulle vetoed Britain’s application to join the EEC in 1963, the Irish withdrew their application to join as well.

Alternatively, now that the UK is leaving the EU – maybe Ireland should too. After all, the Irish have twice voted against the EU’s moves towards federalisation and twice the Irish people have been ignored by Brussels. In the 2021 EU budget, Ireland will become a net contributor. It is also likely that Ireland will be forced to standardise its corporate tax regime with the rest of the EU. Something that would cause the many US companies based in the Republic to move out and thus undermine Ireland’s economy.

Joe Biden claims that he is the ‘Back to Normalcy’ candidate in the upcoming US election. Many US voters may be hoping that this means back to trade with China, re-joining the Trans Pacific Partnership and ending the trade dispute with the EU. But, none of these will be easy: China will want to retain its developing nation status at the WTO; the other TTP countries will be unlikely to want Biden to impose a wage limit on their agreement; while the EU will continue to protect its agriculture from the US’s more efficient producers.

There is, however, an obvious solution to return US trade to ‘normalcy’: a bilateral trade deal with the UK. The UK presently buys from the EU much that the US could supply. Be it pork from Iowa, beef from Texas, orange juice from Florida, cheese from Wisconsin, or cars from Michigan. These are all states that the Democrats are hoping to win in November in either the House, the Senate or in the Presidential race. So why aren’t the Democrats interested in a UK US trade deal?