The next fronts in the US trade war shift to Europe, UK



Thomas Franck | CNBC

Key Points

  • Formal talks between London and Washington cannot begin until after Britain leaves the EU later this month, but some of the sticking points are already clear.
  • Debate rages over whether the U.K. will relax its food safety standards to buy chlorinated chicken from the U.S. and access to Britain’s public health care.
  • U.S. discussions with the EU aren’t rosy, either, as President Trump attempts to quell digital tax fears with the French while threatening auto tariffs on the bloc.

With the China “phase one” deal and the United States-Mexico-Canada Agreement signed, the Trump trade team is now turning its attention to a deal with post-Brexit U.K. and the ongoing stalemate at the World Trade Organization.

Questions also remain over the direction of trade discussions between the U.S. and the European Union as the American trade front shifts to targets across the Atlantic. President Donald Trump highlighted the less-than-rosy relations earlier this week from the World Economic Forum in Davos, Switzerland.

Trump said that the European bloc has been “very tough to deal with” and had “taken advantage” of the U.S., but said the EU has “no choice” but to make a deal.

But separate and apart from the tricky talks between the Office of the United States Trade Representative, the EU and the WTO, many investors expect the U.S. to prioritize bilateral talks with the U.K.

At first, it might be tempting to believe the U.S. and U.K. could whisk through a comprehensive deal in contrast to the months of strenuous debate and tariff tit for tat with China. The two nations have for decades defended each other’s interests, whether across military theaters in the Middle East or through generous trade dialogue.

But trade officials on both sides are starting to warn that there may be a few hurdles preventing London and Washington from sailing straight into a photo op.

United Kingdom

Formal talks between London and Washington cannot begin until after Britain leaves the EU later this month, but some of the sticking points are already clear. And there’s perhaps no greater barrier to an easy deal between London and Washington if U.S. negotiators insist on greater access to Britain’s National Health Service.

Considered a crown jewel of the U.K., the NHS provides free public health care at the point of use and, as such, holds a place of utmost importance to both the Conservative and Labour Parties.

Though Prime Minister Boris Johnson has repeatedly said the NHS “is not for sale,” comments from Trump last year that the program would be part of a “magnificent” deal scared some in the U.K.

Their angst is that granting outside pharmaceutical companies greater access to health-care contracts could lead the private sector to squeeze even more profit out of the already-cash-strapped program.

“If bipartisan translates over to the U.K., there’s at least a rough bipartisan consensus that the NHS is sort of a national treasure of the U.K. even if Tories might think that there is room for improvement,” said Anthony Rapa, a trade attorney at Kirkland & Ellis.

A second hurdle to a U.S.-U.K. deal is Britain’s commitment to EU food safety standards.

Some of the EU rules most popular among U.K. politicians are those pertaining to food safety. The U.K. has promised in particular to resist U.S. calls for London to purchase its exports of certain farm products. For years, the EU has blocked members from importing U.S. hormone-treated beef and chicken washed with chlorinated water to kill bacteria.

And while meat treated with chlorine washes is deemed safe by the U.S. government, many U.K. officials remain unconvinced. London’s Environment Secretary Theresa Villiers, for example, told the BBC earlier this month that “there are legal barriers to the imports and those are going to stay in place.”

That could pose a headache to U.S. Trade Representative Robert Lighthizer, who will represent both one of the world’s largest exporters of agricultural goods as well as a president who’s eager to notch another deal ahead of the 2020 election.

For Lighthizer, Congress, and Trump, striking a comprehensive deal with the U.K. devoid of the “phases” that now mar discussion with China would be welcome relief both as a matter of logistics and of optics. In the aftermath of Johnson’s election victory last month, Trump offered his congratulations and hopes for a “massive” deal.


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