During an April 22 press conference with British Prime Minister David Cameron, President Barack Obama stated that, were Britain to leave the European Union, Britain would end up at the “back of the queue” for a trade deal with the United States.
Observers wrongly understood this to mean that the U.S. would not negotiate with Britain until it had completed negotiations with all other trading partners. In fact, the President meant that negotiations with Britain could not, as a practical matter, be concluded for a number of years.
The President is incorrect: Negotiations with Britain could be completed faster than other pending U.S. negotiations, because the kind of trade treaty the U.S. should seek to negotiate with Britain is different from the controversial, all-encompassing, large-bloc agreements the Administration has pursued in the Pacific and the Atlantic.
The Administration’s Preference for Large-Bloc Agreements
The Obama Administration has argued that the future of U.S. trade diplomacy rests on making agreements with large blocs of nations. In the Pacific, there is the Trans-Pacific Partnership (TPP), signed by 12 Pacific Rim nations in February 2016. In the Atlantic, there is the Transatlantic Trade and Investment Partnership (TTIP), under negotiation between the U.S. and the European Union (EU). Summing up this approach, U.S. Trade Representative Michael Froman said in October 2015 that “we’re not particularly in the market for FTAs [free trade agreements] with individual countries.”1
This position diverges from that of previous post-war U.S. Administrations, which emphasized, first, multilateral negotiations through the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO), and second, the negotiation of FTAs with individual nations, such as the U.S.–Korea agreement signed in 2007.
The move away from the WTO came as a response to the failure of the Doha Round, which was launched in 2001. The end of that effort for a comprehensive deal has led the WTO to focus on smaller measures of trade reform. In response, many nations, including the U.S., have turned to large regional trade agreements, such as the TPP, as the next best thing: These agreements are as comprehensive as Doha, but larger in geographical scope than FTAs with individual nations.
President Obama’s comment at the press conference was thus not substantively new. What made it controversial was his use of his appearance with Prime Minister Cameron to intervene in the domestic British debate over the June 23 referendum on British membership of the EU.
Unwrapping the Administration’s Position
In the United States, trade agreements are negotiated by the U.S. Trade Representative, a politically appointed position nominated by the President and confirmed by the Senate. Now well into his final year in office, President Obama cannot hope to set the U.S. trade agenda for his successor: Serious negotiations between the U.S. and Britain on trade following a U.K. exit from the European Union (Brexit) would not likely occur until 2017.
Moreover, in later remarks, the President acknowledged that his comments at the press conference had been misinterpreted: He did not mean that the U.S. would choose to negotiate with other nations before it negotiated with Britain. Advocates of Britain’s EU membership who claimed this “are wrong to do that.”
The President continued:
My simple point is…that it’s hard to negotiate trade deals…. [T]he UK would not be able to negotiate something with the United States faster than the EU. We wouldn’t abandon our efforts to negotiate a trade deal [TTIP] with our largest trading partner, the European market, but rather it could be five years from now…before we were able to actually get something done [with Britain].2
In short, President Obama’s position is that the U.S. will continue to negotiate with the EU because it seeks to conclude a complex, large-bloc agreement in the Atlantic. The U.S. would also negotiate with Britain if it left the EU, but since Britain could not hope to negotiate with the U.S. faster than the EU, it would be some years before those negotiations concluded. While this position is incorrect, it is more subtle than the headlines generated by the President’s press conference.
The Value of a U.S.–U.K. Free Trade Agreement
The President’s argument that it would take many years to negotiate a U.S.-U.K. FTA rests on the assumption that such an agreement would have to be as complex as the U.S.’s negotiations with the EU over the TTIP. This assumption is wrong for three reasons.
First, the EU is not a unitary negotiating partner: dealing with it is far more complicated than dealing with the U.K. alone. Second, the British and American economies are significantly complimentary: The U.K. imports food and the U.S. exports it, for example. Reaching an agreement between the U.S. and the U.K. in these realms should therefore be easier than reaching an agreement between the U.S. and the entire EU. Third, what is at stake in the TTIP negotiations is, in part, the EU’s regulatory model: If the U.K. was no longer in the EU, it would have no reason to make the defense of that model a matter of principle.
But there is another and much more fundamental consideration: The reason why the TPP’s passage is imperiled in the U.S. and why the TTIP is widely unpopular in Britain and Europe alike is precisely because both are large, all-inclusive trade deals. Such deals are often regarded as easier for corporations, unions, and environmental groups (among others) to manipulate, and regardless of the truth of these allegations, it is certainly true that their complexity makes them harder to understand than simpler agreements.
The way ahead on U.S.–U.K. trade is to focus on sectors in which agreement is likely to be easier and in which major gains are likely. The goal of these negotiations would be to work rapidly to conclude an agreement that could become a basis for additional cooperation as new areas for it emerged. This is precisely the approach that the WTO has now adopted. It is the U.S. and EU’s preference for comprehensive deals that is out of date.
A high-quality but limited agreement between the U.S. and Britain, based clearly on the promotion of economic freedom and respect for national sovereignty, would set a new model for free trade agreements between nations, one that would move away from the big-bang approach that is clearly meeting substantial resistance on both sides of the Atlantic. Such an agreement, which would favor incremental gains over the extended pursuit of unattainable perfection, would help to revivify enthusiasm for free trade by eliminating the complaint that the resulting agreements are too vast to be understood and too easily manipulated by insiders.
What the U.S. Should Do
The U.K.’s prospective exit from the EU does not present risks for the United States. On the contrary: Brexit holds out the prospect of meaningful trade negotiations between the U.S. and the U.K., negotiations that would benefit both nations economically and politically, and set an agenda for trade diplomacy in an era when neither the old approach of the WTO nor the new one of large-bloc agreements are delivering rapid and popular results. The rapid negotiation of a U.S.–U.K. FTA would give a vital lift to the flagging forces of free trade in the West.
This is not an approach that the U.S. should put at the back of the queue: In an era when U.S. free trade diplomacy has never been less popular, it is wrong to reject opportunities to rethink and enliven it. That is particularly true when those opportunities come courtesy of Britain, with which the U.S. has enjoyed the benefits of the 1815 Treaty of Friendship, Commerce and Navigation for over 200 years.
For the President of the United States to ignore those opportunities in the service of keeping Britain in the EU and thus denying it the ability to govern itself and to negotiate its own treaties is a major failure of imagination and American diplomacy. It is also a disservice to American interests. The U.S. should adopt a simple rule: Its trade relations will be based on sound principles of freedom and it should welcome any nation that wants to work together to advance those principles.—Ted R. Bromund, PhD, is Senior Research Fellow in Anglo–American Relations in the Margaret Thatcher Center for Freedom, of the Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy, at The Heritage Foundation.