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Saturday Jul 14 2018
By
AFP

Stuck between EU and US: Britain’s Brexit dilemma

By
AFP
The allure of a free-trade agreement with Washington has propped up much rhetoric by Brexiteers, but a US-UK trade deal would be easier said than done. Photo: AFP
 

LONDON: US President Donald Trump’s unique brand of disruptive diplomacy appears to have shattered the UK government’s claim that Britain can have it all when it comes to trade once it exits the European Union.

Prime Minister Theresa May probably expected a more helpful stance as she welcomed Trump to Britain this week, given that the populist leader has been outspoken in his support for Brexit.

Instead, Trump scorched her policy towards the EU divorce in an interview with The Sun newspaper that shocked Britain’s political establishment.

May had ignored his own advice on how best to confront Brussels, he said, while praising her departed foreign secretary. The colourful Boris Johnson quit rather than take part in turning Britain into a "colony", after May’s blueprint for Brexit was signed off by her cabinet.

Johnson, one of the most prominent Brexit campaigners ahead of Britain’s June 2016 referendum, had said the country could "have our cake and eat it" by retaining close ties to the EU while also forging ahead with new trade deals with the rest of the world, including the United States.

May’s blueprint, fleshed out in a government white paper this week, argued that it was possible through a deal with the EU that would preclude the return of a hard border between the Republic of Ireland and Northern Ireland, which is part of the UK.

Trump, however, torpedoed such thinking in his interview.

He said May’s plans to bind Britain’s economy closely to its European partners after Brexit would "probably kill" its hopes of a US trade deal.

Hyperbole

Both leaders tried to brush aside Trump’s incendiary language at a news conference Friday, insisting they were determined to pursue a post-Brexit pact.

May stressed London could stay on friendly trade terms with both Brussels and Washington.

"It’s not either or," she said at the press conference.

The allure of a free-trade agreement (FTA) with Washington has propped up much rhetoric by Brexiteers, and kept May determined to go ahead with Trump’s visit despite opposition from thousands of protestors who denounced the trip.

That was why the government’s white paper was "veiled by strategic ambiguity on trade in goods", said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy in Brussels.

"The problem is that FTAs don’t actually go that far," he added.

"There is a great misconception in the Brexit debate about what an FTA can do. Many arguments are hyperbole or even outright false."

The pound slid 0.6 percent against the dollar on Trump’s interview as the rhetoric of Brexit freedom ran into the reality of Britain’s economic relationships.

"The UK can’t afford to alienate either the US or the EU, its two largest foreign trade partners, and will not be able to choose an ‘either-or’ solution," commented Fiona Cincotta, senior market analyst at City Index in London.

But even if Britain can extricate itself from the dense web of regulations and tariffs resulting from its decades of EU membership, a US-UK trade deal would be easier said than done.

Trump has begun a trade war already with the EU, China and others. There is nothing to suggest the hard-nosed dealmaker would go easier on Britain, and he may press hard for lower tariffs and easier access for US industry to Europe’s second-biggest economy.

Chlorinated US chicken has already become totemic of future rows as campaigners line up against the prospect of Britain relaxing its food-safety standards under any US deal.

Defenders of Britain’s cherished National Health Service have mobilised against what they see as a US plot to dismantle the NHS by opening it up to competition from US healthcare providers, and to allow higher prices for US drugs.

Backlash

Free-trade deals that threaten to undermine institutions like the NHS have drawn mass protests elsewhere. A long-negotiated EU-Canada trade pact is staring at political defeat in Europe. A separate US-EU agreement is on ice.

So May faces an unpalatable choice. The United States may be Britain’s single biggest national trading partner, but the EU as a whole is far bigger.

"At first glance, Trump’s disruptive approach may make some sense from a narrow ‘America first’ perspective. In any bilateral negotiation with any other country in the world, the US would be the stronger party," Berenberg Economics said in a report.

But it added: "Trump may be his own worst enemy. By taking on many countries at the same time with behaviour considered unacceptable beyond his own base of fans, Trump may bring others closer together rather than dividing them."

Indeed, British lawmakers from both sides of the aisle seized on Trump’s remarks to warn May against placing too much faith in the volatile president as Britain prepares to exit the EU next March.

"If signing up to the #Trump world view is the price of a deal, it’s not worth paying," tweeted Sarah Woollaston, an MP from May’s own Conservative party.

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