The UK will get a US free trade deal--but Trump will drive a hard bargain

By Dr. John C. Hulsman and James Frayne

Back in 1783, when Britain signed a trade deal with the fledgling United States as part of the Treaty of Paris which concluded the revolutionary war, the world-class British delegation was infinitely more experienced and better prepared than their novice American counterparts.

Sadly, this is not the case today. Fast forward 234 years and Britain's negotiators will be walking into the room to do a new and even more important trade deal with Washington with even less experience than the Americans had at the end of the eighteenth century.

Given Britain is about to enter into an era-defining commercial agreement with the world's leading power, it is extraordinary that the process is not already a central part of the national conversation. For the agreement will have a major impact not only on the national finances but also on the structure of the economy and the key sectors within it. We believe that an agreement will be for the good for both countries - particularly the UK - but some turbulence is inevitable.

It might be years until pen is put to paper. But the contours of the deal will likely be apparent in the coming year. President Trump will arrive here in October as a recognised deal-maker and as someone with historic affection for these islands. Things might move very quickly, for there is certainly great enthusiasm for such a deal within the ruling Republican Party.  

It is hard from abroad to fathom just how in charge the Republicans presently are—they control the presidency, (soon) the Supreme Court, the House of Representatives and the Senate, the governorships and the localities--and also how keen they are to reach a deal with the UK. The Republican party has long had major elements deeply suspicious of the EU, and closely tied at the same time to the Special Relationship.

As such, the US-UK trade deal is a no brainer geopolitically for much of the party. When the hard commercial fact is added that the US is the largest source of foreign direct investment (FDI) to Britain and vice versa, the deal becomes the easiest of sells, even in a newly protectionist America.

Contrary to the fearmongering nonsense of David Cameron, George Osborne, and the last days of the Obama administration, Britain will not be at the back of the queue for doing trade deals with America. Instead, as the president has heavily implied, it will be at the front. He is backed in this by House Speaker Paul Ryan, and Senate Majority Leader Mitch McConnell, both strong Anglophiles.

But it’ll be the content that defines the agreement, which could have a significant impact on specific parts of the economy. For Britain, the sectors likely to be most affected are those in which US firms are the strongest and where US firms have the most to gain because of the size of the UK market.

Financial services is the most obvious area. The UK finance market is vast and already well known to American firms. Other areas likely to be impacted include healthcare and pharmaceuticals, aerospace, tech, agriculture and food production, and of course consumer goods.

In the case of financial services, there has been speculation in the US media that any deal might require the UK to basically accept the US regulatory structure wholesale. There have also been suggestions that the NHS might need to be opened up to US firms and that food standards might need to be changed to accommodate US practices.

Such reports need to be treated with healthy scepticism: scaremongering by opponents of Brexit and opponents of free trade will deliberately highlight any potential negatives. Equally, major (and positive) changes to the UK economy will surely follow from the deal as British consumers enjoy cheaper goods and firms are better able to compete on their merits in the enormous American market.

The British Government will also soon be formulating its view on the best approach for these key sectors. It will be particularly keen to protect the City and the lobby groups of other key industries will pile on the pressure to ensure the Government does not leave them exposed. It will be mindful too of public opinion, above all on sensitive areas like healthcare. Nobody can mess with the NHS.

But let us be honest: while both will gain economically from the arrangement, Britain needs this deal more than the US. We will go into these negotiations as the closest of friends and we will leave as the closest of friends. Without a deal, however, Britain’s economic viability outside the EU will be questioned. With that in mind, US negotiators will drive a hard bargain. As the adage goes, Americans talk like hippies but act like gangsters.

Dr John C Hulsman is senior columnist at City AM, a life member of the Council on Foreign Relations, and president of John C. Hulsman Enterprises. James Frayne is director of public opinion specialists Public First. They are launching a joint research project to examine the impact of a UK-US trade deal.