Trump is Right

Trump is right. He is wrong about most things and there is insufficient space to list them all in this article. But he is bang on the money when he says that the deal that Boris Johnson has negotiated with the EU makes a US-UK trade deal less likely—at least the “great deal” that the public has been promised by governments on both sides of the Atlantic.

Boris has dismissed Donald’s claims. His friend the president,he said, is “patently wrong.” The deal that he negotiated with Michel Barnier allowsBritain to do trade deals with whomever they want. Well, yes and no, but in practicalterms mainly no as far as the US is concerned.

The deal is in two parts, the withdrawal agreement which setsout the terms of Britain’s exit from the European Union and is politically binding.That includes such things as the cost of the divorce bill and the rights of EU citizensin the UK and British citizens in the EU.

The second half is the political declaration which is not legallybinding and is meant to set down the parameters for a future UK-EU free trade agreement.Included in the political declaration is a clause which under Theresa May’s dealwas in the legally binding withdrawal agreement. It says that that both sides willkeep the same high standard on state aid, competition, social and employment standards,the environment, climate change and relevant tax matters.

It is this clause that bothers Trump. He does not like the EUrestrictions which he regards as non-tariff barriers that can put a block on controversialAmerican exports such as chlorinated chickens.

Downing Street’s response is to say that the UK negotiators willno longer be legally bound to abide by the EU rules to create what is termed theEU-UK “level playing field.” It can chop and change and play one set of trade talksagainst the other to achieve the best deal for Britain. This is coming from thesame people who said Northern Ireland was not a problem: We could have our cakeand eat it too and Britain was leaving the EU “do or die, dead in a ditch on 31October”.

The fact is that negotiating a complex web of trade deals willbe even more difficult than the three and a half years it has taken to reach thecurrent impasse. Britain will want to maintain as much as possible of the $350 billiona year in exports to the EU. To do that it needs to adopt most of the EU’s regulationsand non-tariff barriers which makes the UK a less attractive trade destination forthe US which currently imports $125.9 billion worth of British goods. PresidentTrump says he can treble or quadruple US-UK trade, but there are no guarantees andit is uncertain if the balance be to the benefit of Britain or America.

Larry Summers, President Clinton’s Treasury Secretary, is certainthat it will be to America’s advantage. The UK, he argues, is desperate, and “whenyou have a desperate partner, that’s when you strike the hardest bargain.”

Certainly history is on the side of Mr Summers. Since World WarI, Britain has been carrying the begging bowl to Washington. America has filledit but then demanded half a dozen bowls back in payment. In 1919 Britain owed theUS a total of $4.3 billion—a staggering amount at that time. London offered to cancelits loans to other Allied countries which totalled $7.8 billion if the US woulddo the same with their British debt. Washington not only refused but insisted thatBritain pay a higher rate of interest than any other debtor nation. Because of thehigh interest, the amount outstanding was still at $4 billion when Britain finallysuspended payments in December 1933 at the height of the Great Depression.

The altruism of Lend Lease during World War II came with a pricetag. The UK had to turn over bases in the Western Hemisphere as well as valuabletechnology and patents involving atomic weapons, jet engines and microwaves. Theabrupt cancellation of American Lend Lease at the end of the war nearly sank theBritish economy. Disaster was narrowly diverted with the $6 billion Anglo-AmericanFinance Agreement which provided cash but tied sterling to the dollar and increasedAmerica’s economic stranglehold on the British economy. This provided the EisenhowerAdministration with the financial weapon needed to force British withdrawal fromSuez.

The United States is not a philanthropic organisation. It isa powerful nation whose elected officials retain office because they strike thebest deals for the people who put them there. Quite simply, the US negotiators willstart any US-UK trade talks from an “America First” position—and stick to it.

Tom Arms is a regular contributor to the WhatandtheWhy. He is currently working on a book on Anglo-American relations entitled “America: Made in Britain.”