No Wonder Donald Trump Loves Brexit So Much
(Bloomberg Opinion) -- You would usually say with total confidence that if anyone can write the manual on How to Survive a Visit from Donald Trump, it’s the Brits. There is no country better at rolling out the red carpet without picking up any stains. No nation has more experience in deploying pomp to dignify an office, honor an alliance or exude unrivaled soft power status, all without giving up too much dignity or altering the course of British policy in the process.
But these aren’t normal times. The government of Theresa May is on its way out and 13 candidates are vying to replace her as prime minister, most promising a quickie divorce from the European Union and a bright future of better international trade deals. The country’s two main political parties are in disarray and bleeding voter support, while two of the most popular politicians in the land – Conservative front-runner Boris Johnson and Brexit Party founder Nigel Farage – advocate crashing out of the EU with no deal on Oct. 31.
No wonder the Trump deal antennae (or at least those of his chief trade negotiator Robert Lighthizer) are going wild. Britain’s top trade allegiance is for sale and its domestic politics are being dramatically realigned. The U.S. president is emotionally attached to the populist, anti-establishment message of Brexit. But his team also senses a bargain and an unmissable opportunity here. The president is promising a “very large trade deal” to whichever leader can deliver Brexit.
The U.K.’s rupture from Europe holds many attractions from a Trumpian worldview. First, it means luring the U.K. away from the EU system of trade rules and regulations and toward the U.S. one. Second, the absence of Britain will weaken the EU’s geopolitical heft. That’s useful while Trump is waging a tariff war and seeking to contain China and Iran. The bonus: It leaves the Brits more dependent on America’s friendship and goodwill than ever before.
While trade-opening deals should generally be seen as a good thing – and Britain and America are strong trading partners historically – a little realism here is warranted from London. America’s interests are unsentimental. In any U.K.-U.S. deal, it will be primarily the British side that does the bending, substituting one set of rules (the EU’s) for another (the U.S.’s). This was clear from the long and comprehensive list of U.S. trade objectives published in March.
The actual tariff benefits from any free-trade deal with the U.S. would be modest. Duties on imports are already quite low at less than 3% on average, although the EU sets substantially higher tariffs for agriculture and some manufactured products like cars. The U.K. would be expected to take in more U.S. agricultural imports at a time when Britain’s farming sector is losing its EU subsidies, and accept U.S. regulations for plant and animal products, which would put it in conflict with European regulations.
In services, which make up more than 80% of the U.K. economy and 45% of its exports, trade deals don’t tend to cover much ground because barriers largely take the form of regulations and governments prefer to retain the prerogative to change those at will. But the U.S. objectives seek to ensure that the U.K. adopts extensive rules to prohibit “discrimination against foreign services suppliers,” and adopts “rules mirroring existing U.S. government procurement practices,” while keeping in place domestic preferential purchasing programs such as “Buy America” requirements.
There are other factors limiting Britain’s upside here. The interests of individual U.S. states will play a large role too; whatever Trump thinks he can give, Congress will have a say. And, as House Speaker Nancy Pelosi made clear on a recent British tour, any Brexit that ran roughshod over the interests of Ireland and the Good Friday Agreement would result in Congress blocking any trade deal.
An agreement between the U.S. (a nearly $20 trillion economy) and the U.K. (less than $3 trillion) will take time to negotiate too, although the Brits will be under enormous pressure to make concessions, which might speed things along.
Those Brexiters desperate to quit the EU because of its many restrictions and regulations might be surprised at just how demanding a partner the U.S. will be. “The U.S. number one goal for a U.K. trade deal is to move us away from the EU rule set towards the U.S. one,” tweeted David Henig, a former U.K. trade negotiator who worked on the failed Transatlantic Trade and Investment Partnership (TTIP) talks between the U.S. and the EU. Even the U.K.’s hallowed National Health Service is seen as fair game, as U.S. Ambassador Woody Johnson made clear in an interview on Sunday, with American drugmaking giants keen to challenge its pricing decisions.
America is a friend and ally, of course. There’s nothing inherently wrong with the U.K. government and crown hosting the president in honor of that longstanding and important relationship. But any trade arrangements struck by Britain with the U.S. will be one-sided. No wonder Trump loves Brexit.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Therese Raphael writes editorials on European politics and economics for Bloomberg Opinion. She was editorial page editor of the Wall Street Journal Europe.
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