The United Kingdom may not be out of the European Union just yet, but that isn’t keeping the country from laying the groundwork for a future bilateral trade deal with the U.S.
That’s the word from Antony Phillipson, the U.K.’s trade commissioner for North America and consul general in New York, who visited Atlanta this week in part to intersect with a British financial technology delegation attending the FinTech South conference.
While it’s still an EU member, the U.K. can’t negotiate its own trade deals, and the prospect of recapturing the reins over its trade policy was one reason many supported the “Brexit” vote in June 2016.
A key priority of both governments after the U.K. leaves the EU by March 29 of next year is a free-trade agreement with the U.S., the world’s largest economy and the U.K.’s No. 1 ex-EU export market.
The timing seems to be right. No longer at the “back of the line” as former President Barack Obama promised, the U.K. will make its exit with during the first term of President Donald Trump in power, who prefers bilateral deals with allies over sweeping multilateral arrangements.
Front of the Line?
Formal negotiations may be impossible, but the conversation is already moving forward, starting with the Trade and Investment Working Group set up by U.S. Trade Representative Robert Lighthizer and Secretary Liam Fox, who leads the U.K. Department for International Trade.
“Now that we are coming out [of the EU], we can have a more precise conversation about the opportunities between the UK and the U.S.,” said Mr. Phillipson, who was privy to the initial meetings in Washington given his previous role in the U.K.’s Brexit ministry.
The working group focuses on four areas: thinking through what a trade deal should cover, finding low-hanging fruit in the trading relationship, looking at how to turn EU/U.S. agreements on issues like aviation and nuclear energy into U.K./U.S. deals after Brexit and figuring out how the two countries can work together in the global arena.
While the partners have a close relationship already — with a bilateral trade volume in goods of more than $100 billion and a stock of about $1 trillion in investment supporting a million jobs in each country — companies often tell government officials that things could be streamlined. That’s enough to make an agreement worth pursuing, said Mr. Phillipson.
“There are always things we can do, and even though it may be that there isn’t a big step-change that we can effect between the U.K. and the U.S., the scale of the relationship is still quite significant,” he said.
In some ways, the argument is the same as it was for the Transatlantic Trade and Investment Partnership, a proposed U.S.-EU trade deal, of which the U.K. was a major backer before the Brexit referendum in June 2016.
Removing already-low tariffs wasn’t so much the driver: It was more about finding ways to smooth out regulations, in part by agreeing to common standards on things like auto safety testing, accounting credentials and much more.
“We start by thinking about an FTA because we felt that there was something meaningful that could be done by TTIP, so we want to be clear about whether we can capture some of those gains in a U.K.-U.S. context,” Mr. Phillipson told Global Atlanta.
One benefit of a bilateral deal is that it can include some aspects left out of the TTIP agreement, chief among them financial services.
For its part, Georgia could be a beneficiary of expanded U.K. trade. The state operates trade office in the country, while the British Consulate General in Atlanta houses a growing Department of International Trade team working here on both trade and investment issues, with specializations in advanced manufacturing and financial services. Nearly 300 British companies operate in Georgia, which has attracted a newfound interest from the British fintech sector over the last two years. An analysis by the British government showed that Georgia goods and services exports to the U.K. supported nearly 25,000 jobs in the state. See our breaking story from June 2016 about Brexit’s potential impact on Georgia
Brexit State of Affairs
Mr. Phillipson also presented an update on the current state of ongoing Brexit talks.
While some of the major sticking points remain, including a final customs agreement and a pact on the movement of people, some significant progress has been made on other issues, he said.
In December, the U.K. agreed on the financial terms of its exit, how the Ireland/Northern Ireland border should be handled broadly, and treatment of U.K. citizens already living in the EU, and vice versa. Then in March, the two sides agreed on an “implementation period,” a transition between March 2019 and the end of 2020 during which the U.K. will still be treated as part of the bloc from an economic and legal perspective.
“Up until that point there was a worry that there would be sort of a cliff edge moment on the 29th of March 2019,” Mr. Phillipson said.
The idea is to give the government time to work out its new agreements and give businesses a buffer to adjust their operations. A key tenet of that deal is that the U.K. will be allowed to negotiate and sign new trade deals even within the transition period.
The Conservative-led government faced another blow to its EU Withdrawal Bill this week, when the House of Lords once again amended its contents. The Lords sent the bill back to the House of Commons having removed the explicit reference to a March 29 departure date and changed language to require the government to negotiate to stay within the European Economic Area.
EU officials have said that preferential customs access would likely come with the price of the U.K. allowing the free movement of EU citizens — one of the core issues that animated many Brits against EU membership in the first place. Mr. Phillipson said that the final outcome will be a “function of the negotiations.”
What’s clear, from his perspective, is that in the U.S., there is political will on both sides of the aisle to move forward with a bilateral deal — if and when the U.K. extricates itself from the EU.