What are trade deals between countries – and why does the UK want one with the US? Business

Britain is in a position to set its own trade policy following its exit from the European Union, and Boris Johnson has hailed a pact with the United States as a key post-Brexit prize. Here’s what you need to know about the agreements and their potential impact on the UK economy.

What is a trade agreement?

Trade agreements are contractual agreements between countries that regulate their trade relations. A free trade agreement generally aims to facilitate trade by reducing or eliminating charges or taxes, called tariffs, on goods crossing national borders. These tariffs may also apply to services, as well as to goods.

Another goal of trade agreements is to remove quotas on the amount of goods that can be traded between countries. Some agreements also aim to align regulations or rules to simplify trade between the countries concerned.

Trade agreements can be bilateral between two countries or multilateral between more than two states.

What impact has Brexit had on UK trade relations?

One of the main outcomes of Brexit is that the UK is now able to negotiate, sign and ratify its own new trade deals. While the UK was a member of the EU, its trade deals were negotiated by the European Commission on behalf of the bloc as a whole.

The government said it was seeking to “replicate the effects of the trade agreements which previously applied to it in order to ensure the continuity of UK activities”.

To this end, the Department for International Trade was set up following the Brexit vote, with the launch of negotiations with the United States, Australia and New Zealand as a priority.

The current Secretary of State for International Trade is Anne-Marie Trevelyan, who replaced Liz Truss after being appointed Minister of Foreign Affairs in a cabinet reshuffle.

Why does the UK want a trade deal with the US?

America is the UK’s largest trading partner, with over £ 200 billion in trade per year already between countries. A trade deal with such an important partner could offer significant economic benefits, although some experts have argued that most elements of US-UK trade are already covered by existing agreements.

However, expectations of a quick deal between the countries have faded, with the Biden administration appearing to be more focused on national priorities and Boris Johnson telling reporters he “would much prefer to get a deal that really works for the UK.” United than to get a quick deal. ”.

British officials have suggested that an alternative to signing an agreement with the United States could be to join the existing free trade agreement between the United States, Mexico and Canada, known as the ‘USMCA. It was signed in 2020 while Donald Trump was still in office following a lengthy renegotiation of the 1994 NAFTA deal between the three countries, and mainly covers specific regional issues related to the three northern nations. American.

However, the USMCA has limited service coverage, an important component of UK-US trade, so membership would likely offer fewer benefits than a direct deal with Washington. It also doesn’t have a built-in membership process for potential applicants, so it’s unclear how the UK would go about joining.

What other trade agreements does the UK want to join?

The UK also formally requested in early 2021 to join a free trade agreement between 11 Pacific Rim countries known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The members of the CPTPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. CPTPP countries accounted for £ 110 billion in trade with the UK in 2019, with the deal covering 500 million people between its member countries.

On June 2, 2021, it was announced that the membership process would begin to allow the UK to join the CPTPP, which would remove tariffs on 95% of goods traded between members.

What trade agreements has the UK already signed?

Since leaving the EU, the UK has signed trade agreements with 69 countries and one with the EU. Almost all of these agreements replicate the arrangements that were in place before Brexit.

The first agreement to contain marked changes to these was the UK-Japan Comprehensive Economic Partnership Agreement (CEPA), which was signed in October 2020 and included expanded provisions on digital services. The government has claimed the increase in trade between the UK and Japan will be over £ 15 billion, but has not provided a timeline for that estimate.

The UK also concluded a free trade “agreement in principle” with Australia in June 2021, which laid the groundwork for an agreement that has yet to be formally agreed. The government said this would mean more than £ 4 billion in UK exports would no longer be subject to tariffs. Full access for beef and lamb imports from Australia will not happen for 15 years, but the announcement of the deal has raised concerns that farmers could be underestimated by good imports Marlet.