UK Government Shifts Trade Priorities to US, Leaving Canada and Mexico Deals in Doubt
Crucial trade talks between the UK and Canada and Mexico have been deprioritized as the UK government focuses on securing a pre-election trade agreement with the US, according to reports. The UK and US are said to be working on a “foundational” trade agreement that aims to be concluded before both the US president and UK prime minister face re-election next year. This shift in priorities threatens to limit the time British negotiators have to secure continued market access to Canada and Mexico, as key elements of post-Brexit agreements with these countries are set to expire.
In June, UK Chancellor Rishi Sunak reportedly requested that negotiations for renewed trade deals with Canada and Mexico be slowed down, due to the full agendas of British negotiators. The expiry of certain parts of the agreements, which were rolled over after the UK left the EU, could potentially impact British businesses’ access to major export markets. Amanda Brooks, the director-general for negotiations at the Department for Business and Trade, expressed concerns in a memo about managing potential “cliff edges” if the deals are not secured.
However, the memo also revealed that there are no plans to add further negotiations to the agenda until at least the latter half of 2024, with a trade deal with India and the ratification of an agreement with the Indo-Pacific CPTPP bloc being the current focus for officials. This decision has raised concerns among some UK government officials, who argue that prioritizing a pared-back deal with the US may not have the same economic benefits without market access or financial services chapters included.
Meanwhile, UK firms are closely monitoring the progress of talks with Canada and Mexico. In April next year, UK manufacturers who sell goods with EU components could be barred from exporting to Canada as the provisions for “cumulation” under the Brexit transition deal come to an end. British cheese makers may also lose access to Canada’s market at the end of this year through a special EU quota, unless an extension is agreed upon.
The potential trade deal with the US has also faced criticism from business groups. While the outline deal discussed in the leaked papers goes beyond public expectations, addressing areas such as agriculture, labor rights, the environment, supply chains, regulation of services, and digital trade documents, it falls short of the market access commitments required for a formal free trade agreement by the World Trade Organization. Some experts question the potential impact of such a deal, with Duncan Edwards, CEO of lobby group BritishAmerican Business, suggesting that without traditional market access liberalization and tariff reduction, its material effect on businesses may be limited.
The proposed US-UK trade agreement may face a jurisdictional battle in the US Congress. Chairman Ron Wyden of the Congressional Senate Finance Committee, which oversees trade policy in the US, criticized President Biden’s administration for pursuing a trade agreement without seeking Congressional approval. Wyden argues that entering into binding agreements without Congressional approval undermines the durability and reliability of any agreement reached.
The UK government has not commented on the leaked memo or the concerns raised by business groups and officials. As negotiations continue with the US, the fate of the UK’s trade relationships with Canada and Mexico remains uncertain, with British businesses anxiously awaiting the outcome.
More detail via POLITICO here… ( Image via POLITICO )