U.K.-U.S. Race for Mini Trade Deal

By: Alberto Nardelli, Jenny Leonard, Eric Martin and Bryce Baschuk | Jan 08 2021 at 09:01 AM | International Trade

The U.S. and the U.K. were racing to reach a limited trade agreement before the political crisis in Washington jeopardized plans to announce a deal within days, according to three people briefed on the negotiations.

With less than two weeks in the Trump administration, the goal is still to resolve parts of a longstanding transatlantic dispute over illegal aid to Boeing Co. and Airbus SE. A so-called mini deal would see the U.S. end tariffs on some U.K. imports, including on Scotch whisky, a month after Britain made a similar gesture to Washington.

But recent events in the U.S., which saw President Donald Trump’s supporters storm both chambers of Congress and spark a crisis that threatens his ability to govern in his final 13 days, appear to have slowed efforts to announce a deal soon, two of the people said.

Prime Minister Boris Johnson told reporters on Thursday that Trump was “completely wrong” to cast doubt on the U.S. election results and unreservedly condemned the president’s actions.

Biden Transition

To be sure, even a limited trade deal with the U.S. would be hailed as a big win for post-Brexit Britain. That’s because the chances of quickly striking a more comprehensive accord with the incoming Biden administration are likely to be hampered by transition delays and U.S. legislative deadlines.

Biden, who takes office Jan. 20, needs the Senate to confirms Katherine Tai, his pick to be U.S. Trade Representative, and also faces the expiration of fast-track trade negotiating power delegated to the president by Congress. That ability, known as Trade Promotion Authority, expires July 1, and Biden would need to be close enough to a deal to notify Congress by April 1.

Trump’s USTR Robert Lighthizer had welcomed the U.K.’s decision last month to unilaterally drop tariffs on U.S. goods in the Boeing-Airbus dispute—though he argued the tariffs were illegitimate in the first place. But he suggested in a BBC interview that the U.K. would need to go further than breaking with the EU’s support of European plane maker Airbus.

Details of the mini deal were still in flux and subject to further negotiation, the people briefed on the matter said.

A spokeswoman for the U.K.’s Department for International Trade didn’t immediately have a response to questions about the talks. A USTR spokesman didn’t immediately respond to a request for comment.

Aircraft Dispute

Britain’s official split from the European Union just over a week ago, capping a divisive 4 1/2-year political fight to go solo on matters including trade relations, helped make the talks for a partial tariff truce with the U.S. possible.

A Brexit trade deal with Brussels was reached in the waning days of 2020, but hopes for a speedy and comprehensive agreement with the U.S. faded as Washington nears the transition to the new administration.

Some of the tariffs levied across the Atlantic were allowable under separate rulings from the World Trade Organization. Many business interests on both sides have been eager to see an end to the tariffs, but none more so than the liquor industry.

In November, the EU announced tariffs targeting $4 billion worth of Boeing planes and U.S. products including spirits, nuts and tractors as part of a tit-for-tat escalation against the U.S.

For its part, America imposed levies on $7.5 billion of EU products starting in 2019. British exports ranging from Scotch whisky to biscuits to clotted cream have suffered from the duties.

In addition to addressing tariffs tied to the aircraft dispute, a mini trade deal might help address other key trade frictions including: U.S. national security tariffs on U.K. steel and aluminum, and the U.K.’s 2% digital services tax on American technology companies.

Now untethered from the EU, the U.K. may now be more willing to accept a U.S. demand to limit exports of British steel and aluminum to the U.S. in return for withdrawing Trump’s metal tariffs.