A trade deal between the UK and America could undermine Sir Keir Starmer’s attempts to reset relations with the EU, the government’s former top trade official has warned.
The Prime Minister is pursuing closer ties on trade and security with Brussels but there is also speculation that Donald Trump will offer the UK a free trade agreement to avoid punishing global tariffs of up to 20 per cent.
Peter Mandelson, who has emerged as the frontrunner to be the next UK ambassador to Washington, insisted this week that it was possible for Britain to navigate both a free trade deal with the US and the Brexit reset.
But John Alty, who was permanent secretary at the Department for International Trade, said a deal with Trump “may be seen by the EU as a signal that the UK is limiting its reset ambitions”.
Mandelson told Times Radio this week that it was “wrong” to say that the UK had to choose between closer collaboration with the EU and a special free trade arrangement with the US.
The Labour peer added: “We have got to navigate our way through this and have, I’m afraid, the best of both worlds. We have got to find a way to have our cake and eat it.”
But Alty, a senior adviser on trade at the communications consultancy Pagefield, told i: “Whilst negotiations with the US do not inherently prevent us from improving the current trade deal with the EU, one could expect tensions to emerge, for instance in relation to food safety standards, and more widely it may be seen by the EU as a signal that the UK is limiting its reset ambitions.
“In short, it will be tough both in terms of substance and presentation for the UK to get into negotiations with the US on a full free-trade agreement.
“It may, however, be possible to reach some less far-reaching agreement, for example, like the digital trade agreement we have with Singapore, where issues may be less sensitive.”
Alty added that “any reset with the EU on trade will be limited whilst the UK stays outside the customs union and single market, which I think it will for the next four years”.
He said it was also “quite likely” Trump would offer to negotiate a trade deal with the UK, “though he will know how difficult it would be for the UK to accept some US demands, for example, on agriculture”.
He added: “If the UK decides not to engage on a free trade agreement, that will put us on the back foot, at least diplomatically, in resisting application of tariffs.
“If we do engage, there will be a very negative reaction from UK stakeholders who find the idea of a deal with Trump unpalatable, as well as sectors like agriculture which will worry about the terms of a deal.
“Last time at least as much concern was expressed about ‘selling out the NHS’ to US companies, even though trade agreements normally contain provisions giving the Government control over how public services are provided.”
The UK could attempt to avoid additional US tariffs, and is in a “less exposed position than some other countries, including the EU, because in goods at least our US trade is pretty balanced and the majority of the UK’s exports to the US – perhaps as much as 70 per cent – are services”, Alty said.
He added: “So our pitch should be a positive trade agenda involving a standstill in tariffs (to the benefit of both countries) and offers to negotiate on some less sensitive issues like digital.
“There may be other things we can do to show we are encouraging US exports and investments into the UK, or possibly that we want to enhance collaboration with the US on other issues such as defence. Some of this could be wrapped up in an ‘economic security’ agreement.”
However Alty said the US would come with its own wish list, some of which would be “difficult” for the UK.
“These could include trade measures such as a derogation from the planned UK carbon tax on imported products, or following US tariffs on China; or non related asks, for example, on regulation of tech companies.”
Britain should be co-ordinating its thinking with allies not only in the EU but with Japan, Australia, and Canada, but also be “hard-headed” about them having their own positions, Alty said.
The PM’s official spokesperson, asked whether the UK was seeking a free trade agreement with the US, said: “The UK-US trade relationship is a significant one, it’s very important, it supports more than a million Americans working for UK businesses and vice versa, it’s worth £304bn.
“It is obviously something we want to build on and we look forward to working with president-elect Trump in office on a range of issues including improving UK-US trading relations.”
Asked whether this could curb the attempts to reset with the EU, the spokesperson said: “No, the Prime Minister is clear that he wants to improve trade and investment relations with the EU, with the US and indeed with other partners around the world.
“The Government’s number one mission is to improve economic growth – in doing so, it is important we strengthen our trading relationships around the world.”
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