Trade Agreement Depends

It is clear that the prospects for a clean and timely agreement are just as difficult as they were 12 months ago. While we remain of the view that a bilateral trade agreement between the United States and Great Britain is possible, it is unlikely to be profoundly green or useful. The backstop and the need for good navigation of two regulatory systems, parliamentary discord, the US position on negotiations and services, and the reduction in spending by foreign U.S. MNC companies in the United Kingdom, particularly in the major areas of information technology, are huge obstacles. The result is that the art of political possibility on both sides of the Atlantic is likely to be plagued by harsh technical realities. More information can be drawn if we look at recent agreements in the United States. The replacement agreement with NAFTA – the new U.S.-Mexico-Canada (USMCA) agreement – is instructive in this regard. As the main deal negotiated so far by Trump, the USMCA is a signal of the Trump administration`s approach to trade agreements. The process of signing trade agreements was recently stimulated by the United States International Trade Commission (USITC), the quasi-independent government agency responsible for the official economic evaluation of future U.S. trade agreements, which estimated that the USMCA would increase U.S. real GDP by 0.35%. While this figure may seem small, it is actually more important than many observers had anticipated.

The reasons for this are worth thinking about. Note that the removal of tariffs applies only to products originating from a signatory state, i.e. from the contracting parties. Some experts believe that Japan could first seek a minimalist agreement and save further negotiations of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), a replacement pact after the United States withdrew from the Trans-Pacific Partnership (TPP) agreement, with Britain also viewing talks with Japan as a logical step in its accession to the CPTPP. In the meantime, several meetings were held between the representatives of the United States and the United Kingdom within the “working group” which laid the groundwork for formal negotiations when the United Kingdom was able to participate freely in one of them [2].

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