The US-UK Trade Deal: More Neoliberalism?

Brexit hasn’t been in the news much since Covid-19, but we’re still leaving the European Union in January 2020, which means we haven’t got long to get some trade-deals in place with several different countries.

The United States is one of the UK’s largest trade partners, with around $250 of trade between the countries every year.

We’ve actually been in trade negotiations with the United States since we knew there would be a Brexit in 2017, and we’ve just started up another round of talks, although a deal is apparently unlikely before the US elections in November 2020.

If we look back at the documents from the trade-talks since 2017, it seems that the US is pushing for the following:

  • The privatisation of the NHS and other public sector companies
  • Higher prices for US drugs companies
  • Protections for digital companies such as Facebook and Google
  • The UK has to accept ‘chlorinated chicken’
  • Oh, and they banned climate change from the talks too.

The above is according to some analysis from Global Justice Now and can be found here.

A trade deal with the US: A shift towards neoliberalism?

For an outline of what neoliberalism is see this post.

The trade talks so far have consisted of the US arguing for a pro free-market pro-Corporation agenda – a trade deal that allows large drug and digital companies more freedom to profit from our public services.

The fact that we haven’t caved into their demands yet suggests there is some resistance to the idea of too much neoliberalism, however, now that Brexit and a recession are looming, it will be interesting to see what kind of deal will be struck.

Especially since the NHS are now our heroes, this kind of deal might get some very negative publicity and mass resistance!

Global politics could get very interesting in the next few years!

If you’re and A-level sociology teacher, it might be a good time to switch to teaching the Global Development option!

Would would falling back on WTO rules mean for Britain?

If the UK leaves the EU with ‘no deal’, it will fall back on World Trade Organisation Rules, but what does this mean?

The WTO and Free Trade 

The WTO was founded in 1995 and sets the rule book by which global trade takes place.

One of the main things it has done over the past two decades is to reduce tariffs (basically taxes) levied by governments on imports and exports, and to promote a free-trade agenda.

In 1947, the average external tariff charged by GATT (the predecessor of the WTO) signatories was 22%, which was a massive disincentive to trade, by 1999 it was down to 5%, and today the weighted average tariff charged by the US and EU is 1.6%.

Over the same period, there has been a massive increase in world trade: In the 1950s international trade accounted for 8% of the world economy, today it accounts for 30% of a much bigger global economy.

The Limitations of the WTO

Recently, the WTO’s trade liberalisation has stalled, and most of the progress countries have made in reducing barriers to trade have been through regional and bilateral trade agreements. The European Union is a principle example of this: UK companies pay no tariffs on exports to Europe or imports from Europe, which makes trade easy.

If we were to fall back on WTO trade rules, there are some economic areas which still have very high tariffs – cars and car parts would face a 10% tariff every time they crossed a boarder (making BMWs a LOT more expensive! given international supply chains) and agricultural tariffs stand at 35%.

The latest Treasury forecast predicts that the UK economy would be 9.3% smaller in 15 years if we exited the EU under WTO rules.

Isn’t this just all part of ‘project fear’?

Of course Brexiteers argue that we could forge new bilateral and multilateral trade agreements once we leave the EU, but most estimates suggest that a no deal WTO fall-back Brexit would be detrimental to the UK economy.

However, what all of the above suggests is maybe that ‘globalisation’ isn’t so good for world trade anymore…. maybe it’s too difficult to sort out genuinely mutually beneficial trade agreements between all 160 odd member states of the WTO.

Instead it seems that regional agreements are much more important for economic growth – it makes sense that it’s easier to get a deal between a dozen local countries rather than ten times that number after all.

To my mind it seems unlikely that we’re going to be able to negotiate dozens of little deals with specific countries that outweigh the benefits of being part of a massive trading block like the EU!

Sources:

The Week, 26 January.