Britain and US can show the benefits of free trade

It might not be considered the perfect time right now to be thinking of striking a trade deal with the United States, when President Donald Trump has escalated his trade war with China, the world’s second largest economy, by imposing new tariffs on $200bn worth of goods.
And the UK, meanwhile, is deeply involved with the EU in resolving the uncertainty with regard to its future trading relationship with the bloc. Therefore, to be thinking seriously about a possible UK/US free trade agreement may be a little premature, some may think.
In spite of it, that is exactly what policy experts from eleven think-tanks on both sides of the Atlantic have been busy debating this year. As a result of that effort a paper entitled “The ideal US-UK Free Trade Agreement: A Free Trader’s Perspective”, was published last month by the Initiative for Free Trade in London and the Cato Institute in Washington.
This detailed report includes the draft legal text, summaries, and explanations of what the authors consider provisions worthy of the model free trade agreement. Free trade is about the freedom of people to transact as they wish, with whom they wish, and without politicians and bureaucrats as gatekeepers.
Therefore, genuine free traders tend to be sceptical of agreements, which are usually more about managed trade than free trade.
Trade agreements too often contain provisions that protect incumbents from challengers by locking in existing advantages, requiring long tariff phase-out periods, and limiting competition in industries through rules that appear to show as serving socially desirable purposes, rather than make the rules less strict and provide consumers with greater choices.
Too often, the terms are pro-business, pro-labour, or pro-special interest, when they should be pro-market.
Daniel Ikenson, director trade policy studies at the Cato Institute in Washington says, the prospect of a bilateral UK-US agreement affords two of the world’s largest economies the opportunity to break new ground and pioneer the rules of a genuinely easing, modern trade agreement.
By removing tariffs and significantly reducing behind the border barriers that inhibit market integration, such a model will have a transformative effect, on both economies and beyond.
According to Ikenson, despite the current uncertainty in both the UK and the US policy environments, now is the ideal time to be giving serious thought to a bilateral free trade agreement.
In six months, the UK will have repatriated its trade policy decision-making. Striking smart, new trade agreements will be crucial for Britain to maximise economic opportunities post-Brexit.
Meanwhile, before the year’s end, the Trump administration is likely to wrap up its trade renegotiations with South Korea, Canada, and Mexico, clearing the decks for a shift in focus to new, bilateral free trade agreements.
The US ambassador to Britain noted last month that Trump has a “robust appetite” for a bilateral trade deal with the UK, which suggests that commencing negotiations in late March 2019 may very well be within the realm of possibilities.
It is difficult to imagine two countries that are better suited for a state-of-the-art, comprehensive, truly liberalising trade agreement than Britain and the US. So now it’s up to the two governments to work on it.
It’s now just under six months until UK’s exit from the European Union. Negotiations between the two haven’t gone exactly smoothly, and the markets have reacted accordingly. The most notable impact has been the pounds resounding weakness since Britain’s shock vote to leave the EU. The currency says a lot about what the markets think of Brexit — just looking back to sterling tumbling by 10 per cent immediately after the referendum vote to (to hit $1.29), before sinking again a few months later (to $1.20) when the prospect of a ‘hard Brexit’ had started to appear likely.
As it stands, the pound at present sits at around $1.30, and chief investment officer at Canaccord Genuity Wealth management, Michael Perera, says this shows that the market is expecting some kind of deal — a fudge of some sort. Though he also stresses that the markets are not in a position to anticipate the possibility of different scenarios.
However, the statement last week from the President of the European Commission, Jean-Claude Juncker, that certainly by the November summit, he expects a deal to be struck with the UK, should bring about stability.
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com).