Sunak Goes to Washington – but must come back with a free trade agreement

Sunak Goes to Washington – but must come back with a free trade agreement

8 Jun    Finance News, Opinion

Prime Minister Rishi Sunak must discuss a full US-UK free trade deal when he meets President Biden, says the international delivery expert ParcelHero.

One of the key Brexit benefits was supposed to be an agreement with the US but, currently, only trade pacts with Oklahoma, Indiana and North and South Carolina have been signed. Why the continued delay?

One of the main Brexit benefits was always supposed to be the ability of the UK to forge new free trade agreements with non-EU countries. The first fruits are now, finally, in place, with tariffs ending on all UK goods to Australia and New Zealand on 1 June. However, though Prime Minister Rishi Sunak is in the US for talks with President Biden, the international delivery expert ParcelHero says a Free Trade Agreement (FTA) with the US still seems as far away as ever.

ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘So far, the chances of an FTA with President Biden’s administration look bleak. Last month, the UK signed a trade pact with Oklahoma, the fourth such agreement with an individual US State. But it was limited to specific areas, such as carbon capture, utilisation and storage. What we should be negotiating is a full USA-UK deal.

‘Of course, there are various political reasons why that hasn’t happened yet. While former President Donald Trump, a Republican, called himself “Mr Brexit” and promised a “phenomenal” trade deal on his state visit to Britain in June 2019, Biden’s Democrats are a lot less enthusiastic.

‘In fact, Trump’s Democrat predecessor, Barack Obama, once warned the UK that, if it voted for Brexit, Britain would go to the “back of the queue” on trade deals. Biden also prefers the option of negotiating with a united EU when reaching trade agreements.

‘A further hurdle was that President Biden, who is proud of his Irish heritage, consistently voiced concern about the potential impact of Brexit on the Good Friday Agreement. However, PM Sunak’s successful deal with the EU, dubbed “The Windsor Framework”, has been seen in the US as a good compromise.

‘Now, with the chief sticking points on an FTA removed, or at least softened, it’s surely time that a full agreement is back on the table. Memorandum of Understandings with Oklahoma, Indiana, North Carolina and South Carolina are slim pickings compared to a full trade agreement.

‘There’s a lot riding on a potential deal. The US was the UK’s largest trading partner in 2022, accounting for 16.3% of our trade. Total UK exports to the US amounted to £168.3bn last year, an increase of 19%, or £26.9bn, on 2021. It’s a market that flows both ways. Britain’s US imports amounted to £110.8bn. Imagine the potential trade with all tariffs removed.

‘Currently, significant hurdles remain for British businesses selling to the US. Most UK goods exported to the US that are valued at over $800 (the US import tax threshold) are still subject to tariffs of 0% to 37.5%, with the typical rate being 5.63%. ParcelHero’s USA page gives full details on Customs advice, sending food, prohibited items, etc.

‘Whatever Biden’s remaining issues are with UK politics, Britain needs to launch a charm offensive to move the issue of a trade deal back to the top of the agenda. There are rumours a UK-US minerals pact may be discussed, which would allow the UK automotive sector to benefit from some of the tax credits offered to American firms. This could help reduce the impact of the USA’s Inflation Reduction Act, which boosts US green tech at the expense of overseas products. It’s been condemned by the EU as protectionist. The US signed a minerals pact with Japan earlier this year, and a similar UK agreement would certainly help get the ball rolling.

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