Brexit Leave campaigners, including Boris Johnson, promised that a free trade agreement between the US and the UK would be one of the greatest advantages of leaving the European Union. However, the post-Brexit transition period ends on 31 December and as things stand there will be no formal trade agreement between the UK and EU member states. With less than a month to go, the promise of a transatlantic trade agreement between the UK and the US has never been more important to the “Global Britain” agenda. Instead of reinforcing the “special relationship” between the US and the UK, the imminent appointment of Joe Biden as America’s newest President-elect will bring a host of new challenges, as well as opportunities, to British businesses and US companies trading in the UK.
One of the greatest challenges for the UK and Boris Johnson is the fact that Biden is famously not a supporter of Brexit. He has publically reinforced his ties to his ancestral homeland, Ireland, and has specifically warned that a transatlantic trade deal would be off the table if the Good Friday Agreement was ever undermined or peace in Ireland ever threatened. Vaccines aside, this will be the most important piece of negotiation and planning that Boris Johnson will need to navigate over the coming weeks. In 2019 Boris Johnson drafted a new protocol for dealing with Ireland which would mean that Northern Ireland would be included in the UK as a single customs territory, but there would be no tariffs or restrictions on goods crossing the Irish border. This would essentially create a customs border between Ireland and Great Britain. Time will tell if this protocol will be sufficient to diffuse tensions both within the UK and with Biden’s administration in the US.
Donald Trump publically supported the UK leaving the EU throughout his tenure as President, describing the 2016 referendum as a “great victory”. However, the details of any future transatlantic trade deal or relationship between the US and the UK is likely to be very different under Biden’s administration. President-elect Biden is more likely to prioritise relations with the EU member states, collectively the world’s second largest economy, rather than focusing on brokering a UK-US trade deal. The concern for the UK government is that if the UK is unable to influence EU policies then the importance of the UK-US “special relationship” could well be downgraded. Consequently, the UK will not have the bargaining strength to negotiate a trade deal that doesn’t require significant compromises or concessions from the UK and British businesses.
Throughout his presidential campaign, Biden has talked extensively about passing a stimulus package to galvanise the US domestic economy and support businesses and individuals to recover from the financial impact of Covid-19. The “Buy-American” economic plan will involve billions of dollars being pumped into the US economy, raising corporate taxes, taxes on investment and a 30.8% tax on profits generated by overseas production of goods that are sold back to the US market. The current economic climate means that despite all the talk about international trade deals or special relationships, ultimately the Biden administration will be prioritising boosting and supporting the US economy. To that end, Biden is not taking a markedly different approach to Trump’s “America First” agenda.
A stronger US domestic economy means that exports would become cheaper for the US, which could benefit British businesses looking to import from the US and multinational corporations that have a large number of sales in the US and earn income in dollars. The global stock markets immediately rallied with the news of Biden’s appointment as President-elect and also by the promising news of Covid-19 vaccinations being made widely available before the end of the year. Confidence in the global market will in turn bolster the UK economy and encourage British businesses to continue investing domestically and with the US.
What Biden will really bring to the new administration is a diplomatic and pragmatic approach to international trade and relations. This stability will benefit companies who require more consistency, including British businesses trading internationally or importing goods from abroad. Despite levying taxes against multinational corporations who rely on overseas manufacturing, Biden is keen to be seen as a collaborative partner and supporter of international organisations and alliances, as evidenced by already committing to re-join the Paris Climate Accord and the World Health Organisation. This creates opportunities for a successful UK and US collaboration and paves the way for a mutually beneficial trade agreement in due course.
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