U.S.-U.K. Free Trade Agreement: Opportunities and Challenges for Washington State



Washington Council on International Trade

In both the leadup to negotiations and the talks surrounding a potential agreement, digital services are a significant issue and a growth opportunity in the evolution of the US-UK relationship. Washington state’s status as a global hub of technology and innovation makes it well suited to benefit from global digital trade growth. E-commerce companies of all shapes and sizes in Washington state are increasingly using technology to connect with new customers worldwide. The tech sector is a significant driver of the state’s economy, promoting job growth, exports, and wealth generation. In 2018, there were roughly 247,700 workers employed in information, communication, and technology (ICT) jobs in Washington state. The opportunities for all Washingtonians of a growing and thriving digital economy brings added importance to the digital chapter of a US-UK FTA. The US and the UK are the world’s leading exporters of digitally delivered services and digital innovation; the United Kingdom takes in 23 percent of US digitally deliverable services exports. They are also each other’s largest e-commerce markets.

Computer software, as well as computer and data services, made up more than $620 million in exports from Washington state to the UK in 2017. 4 These segments have grown substantially in the last few years, and the US and the UK are among each other’s largest e-commerce markets. Current trade negotiations may present an opportunity for the UK to align its privacy standards more closely to those in the US, although the UK government has stated that it will continue to follow the EU General Data Protection Regulation as it stands. 

The leadup to trade negotiations hit a snag when the UK passed a 2% digital services tax in 2018. The tax went into effect in April 2020 and applies to firms with global sales of more than $624 million (£500 million) and over $31.7 million (£25m) in the UK. US officials have criticized the tax as largely targeting American firms. Digital trade is a major focus of the UK’s negotiating objectives, and the US is using current talks to push for the tax’s repeal.

This new flexibility to adopt US standards may also apply to food regulations. This is a difficult issue for the UK government, which must balance reducing tariffs with the interests of domestic farmers and consumers. The EU also has stricter guidelines on genetically modified food products. Changing these restrictions could increase access for Washington farmers. A major question that will be addressed in these negotiations is the extent of the UK’s market reorientation away from the European Union, with the potential of greater alignment and harmonization of standards and regulations between the two nations. The extent to which the United Kingdom retains its current European food standards or makes a decisive shift to acceptance of US standards could impact US and Washington state agriculture trade with the UK.

This longstanding European approach to regulatory issues, including food safety regulations and technical barriers to trade, has impacted agricultural trade between the US and Europe. Many US agriculture interests including farmers and ranchers in Washington state, have historically felt their input has been marginalized in regulatory discussions and decisions with the hope that this will not be the case in the US-UK negotiations.

Trade barriers and transportation costs have also impacted agriculture trade between Europe and the US and efforts to remove barriers and create a level playing field for Washington farmers and ranchers will impact some Washington state commodities more than others.

Washington state fruits and vegetables, including potatoes, apples, cherries and pears, are currently impacted by European tariffs. Removing these barriers through a US-UK FTA can potentially create new opportunities for Washington state exporters. For example, the total value of Washington apple exports to the EU in 2019 was $1,270,864 with the UK accounting for almost all of that. Beyond fruits and vegetables, the US exports over $1 billion worth of fish and seafood products to the EU each year, with Washington state second only to Alaska with $302 million in exports. The UK was the leading market for Washington seafood products last year ($50 million.) The US wine industry, in which Washington state is a leading producer, also faces EU tariffs on imported wine and is another potential growth area with a new trade accord.


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