The UK’s international trade committee has launched an inquiry into UK-US trade relations and the possibility of a UK membership of the North Atlantic Free Trade Agreement (Nafta) following Brexit.
The committee says that “key issues are already emerging” at the informal discussion stage, and that it will carry out an examination of the opportunities and challenges posed in negotiating a free trade agreement between the UK and US.
“The visit of the secretary of state Liam Fox to the US in July was overshadowed by questions about chlorinated chicken. While Fox insisted this was not a big issue, fellow cabinet member and environment secretary Michael Gove suggested it could hold up the whole negotiating process. Clearly the government has a lot of work to do before negotiators sit down for formal talks with their US counterparts,” says committee chair Angus MacNeil.
He goes on to say that the committee will explore which sectors can expect to benefit – or not – from a trade deal. “How will any agreement affect industries such as farming, car manufacturing and financial services? Will US pharma look for a deal enabling them to sell their drugs at higher prices than the NHS will currently pay? Should the UK attempt to move its regulations away from those of the EU and towards those of the US?” he says.
Parliamentary committees in the UK are sub-legislative organisations consisting of a select number of appointed members of parliament to deal with particular areas or issues.
The international trade committee will also explore trade relations with Canada and Mexico.
“President Trump has made it clear that he favours bilateral agreements, and the US could walk away from Nafta,” MacNeil says. “But since our first inquiry, voices on this side of the Atlantic have talked up the idea of the UK joining this bloc. So, we would welcome views from stakeholders on whether the UK – as it realigns its relationship with one trading group, the EU – should try to join Nafta or a similar regional agreement with the US.”
The UK-Nafta idea is not new. In fact, it can be dated back to the early 1990s, when some members of congress in the US hoped to convince London to swap the EU for Nafta. With Brexit negotiations now underway, the idea has resurfaced.
However, the suggestion has caused some bewilderment among trade policy experts on both sides of the Atlantic. Talking to GTR on the matter earlier, Michael Camunez, who served as assistant secretary of commerce for market access and compliance as well as US commissioner on security and co-operation in Europe under the Obama administration, said the idea is unrealistic.
Meanwhile, in the UK there are serious doubts to the value a UK-Nafta deal would bring businesses. Experts have highlighted that membership of Nafta is very unlikely to create substantial market opening in areas where the UK’s competitive and comparative advantage is greatest – such as services and financial services – given itsrelatively low level of coverage in these areas. To benefit from preferential market access, UK exporters would, in many cases, have to significantly restructure their production, supply and distribution chains to comply with the North American trading zone’s product standards and rules of origin. In many cases, such as automotive, UK-based firms would have to produce two versions of the same product to export to both EU and Nafta markets.
Separately, the US recently imposed a hefty 220% punitive tariff on Canadian aerospace company Bombardier’s top-end passenger planes. The charge came after US rival Boeing complained that Bombardier had received unfair government subsidies. The move, which could negatively affect jobs in Northern Ireland, has signalled the US will be a tough test for the UK’s trade negotiations team.