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“How many legal structures will this offer have?” An eminent business lawyer asked me yesterday, making a gesture to the detritus of a meeting on the conference table before him. “Above the same as this towel.”
Even architects of the trade agreement announced between the United States and the United Kingdom would not call it an economic or legal thing. Apparently without even signed document – and designed only to escape the prices that Donald Trump imposed on steel and cars – the pact is closer to a protection payment on a mafia boss than a liberalizing agreement between sovereign countries.
That the agreement was worth politically, it is a calculation, only the British government of Sir Keir Starmer can do. Admittedly, this did not give American exporters an enormous amount more access to the British market. But whatever the short-term profit he brought to the United Kingdom, he has not done much for the integrity of the global trade system.
The United Kingdom is not even one of the most affected savings by Trump’s prices. Its automotive industry is widely oriented towards export, but mainly towards the EU: the United States takes Less than a fifth British exports. He has a relatively small steel industry, less than 10% of exports from which Cross the Atlantic. And since it has practically no trade surplus with the United States, the United Kingdom was also not threatened by the so-called “reciprocal” prices greater than the basic rights of 10% announced on April 2, then suspended a week later. The EU, for example, faces 10 other pricing percentage points, if Trump never finds the courage to bring it in and risk another collapse of the financial market.
This new agreement presents risks for the United Kingdom, even before considering the broader implications. Given how much the United Kingdom was impatient to conclude an agreement, there is no guarantee that Trump will not come back for more. According to the poet Rudyard Kipling, the thing about Dane-Geld-the protective money with which the kings in medieval Anglo-Saxon bought Viking invaders-is that once you paid him the Dane-Geld, you never get rid of the Dane “.
During his first mandate, business partners could conclude ad hoc agreements with Trump, such as the American “phase” agreement with China, and be reasonably sure that they would stick. But as Canada and Mexico can testify, Trump in the second term is more capricious and required to modify an agreement after being agreed. The promises of these countries to repress the smuggling of fentanyl were first accepted, then briefly rejected by Trump, despite the absolute lack of evidence in the case of Canada that such a smuggling existed on a notable scale.
This agreement with the United Kingdom is supposed to be followed by a complete trade agreement over the next year, but the country has also put itself in a low negotiation position on this subject. Trump can withdraw these concessions at any time if these talks do not take place.
Meanwhile, the most important risk is not for the United Kingdom itself, but the world trading system. Part of the agreement consists in reducing the protection of imports, in particular ethanol and beef in the United States, but not other countries, although this is not an official legal trade agreement. The United Kingdom has thus undermined the principle of the “most favored nation” which underpins the multilateral trade system. Officials write credibility by affirming that it is compatible with the rules of the World Trade Organization within the framework of a wider set. If other countries want to launch a noise, an audience for settled disputes of the WTO may soon settle it. By accepting that it will continue to cope with the reference rate of 10%, the United Kingdom has also standardized a deeply regressive decision.
When Great Britain left the EU, part of the field was that it would be a vigorous and active defender of freer commerce and multilateral rules. He would play a creative and catalytic role in the WTO, freed from the amazing protectionism of the EU. And by joining the CPTPP Asia-Pacific agreement, it would be linked to the region of world power for trade.
By capitulating American pressure and rushing to a quick agreement, the United Kingdom has encouraged others to do the same. In recent weeks, the EU and the CPTP have made provisional movements to cooperation to protect the rules based on rules. China, Japan and the EU have all resisted being rebounded in rapid agreements by the United States. China insisted that it returns to the negotiating table according to its own conditions. The EU today revealed its latest list of reprisals against the United States. These efforts have now been undermined.
The United Kingdom can make a political choice, certainly. He can choose to pay the Danes. He has managed to escape Trump’s worst prices at the moment. But the promise that Post-Brexit Great Britain would prove to be an unshakable anchor of the international trade-based trade system seems lower today than before.
alan.beattie@ft.com
