As we read it, the House of Commons debate on March 12 was more about the steel and aluminum tariffs than anything else. That was more than understandable, especially given that, under the proclamation, these tariffs are set to go into effect at 12:01 a.m. this coming Friday, March 23, 2018. In fact, however, given the processes of applying for exemptions etc., that deadline is likely to slip. Just as importantly, the issues involved may render the origin question at issue - is this UK or EU steel ? - less relevant than other factors, such as the availability of the product in the United States and its importance to the U.S. buyer. We expect to return to the issues surrounding the 232 tariffs on steel and aluminum later this week.
But what of U.S.-UK trade more broadly? In his opening remarks in the House of Commons last Monday, Dr. Fox note that:
The US is our [the UK's] largest single-nation trading partner and accounts for a fifth of all exports, worth more than £100 billion a year.
That figure and the enormous bilateral investment relationship are likely to take on a magnified importance in light of the events of the last few days. In the joint statement that Dr. Fox and Ambassador Lighthizer issued after their meeting last Wednesday, they talked about "deepening our present and defining our future trading relationship."
BREAKTHROUGH IN BRUSSELS. When that statement was issued, the quoted phrase seemed like boilerplate - welcome boilerplate - but boilerplate nonetheless. In light of today's announcement, however, it looks like much more. That announcement was made in Brussels by two of the leading figures in the Brexit drama,
David Davis, the UK's Secretary of State for Exiting the European Union, and
Michel Barnier, the EU Chief Negotiator for Brexit. What they revealed was a draft agreement on the terms of a transition deal. Some of it will be hard to swallow for the Brexit purists, such as the fact that the UK will be subject to EU regulations through December 2020.
On the trade side, however, the agreement is, in a sense, liberating. One press report put it this way:
In what will be received as a victory for Brexiteers - particularly Trade Secretary Liam Fox - Britain will be able to negotiate and sign new free trade deals during the transition period.
The catch is that no agreement can go into effect until January 2021. At the moment, however, that is a purely theoretical constraint since no new UK free trade agreements exist yet. And logically, of course, one would assume that the UK will continue to benefit from its participation in the EU's FTAs until then. But these are not exercises in geometry. We're going to have to follow this closely and double check all of the assumptions. Still, at the very least, there is a new spin on all of the UK's bilateral trading arrangements and a world of possibilities opening.