The arrival of a more protectionist Donald Trump in the White House, and an apparent fraying of the rules-based international order more broadly, has forced the UK to once again rethink its place in the world.
“To act in the national interest for our economy, for our business and the British people.”
There is now a broadening consensus that smaller “mini” arrangements, which could include deals on the trading of digital commodities such as ebooks and music streaming, might be more realistic.
Having delivered Brexit, the former Conservative administration failed in its bid to secure favourable terms with its closest trading partner in the EU and to deliver a much sought-after free trade agreement with the US.
Reeves said the Labour Government wanted to “build on our special relationship with the United States under President Trump” in order to “deepen our economic relationship in the months and the years ahead”.
To give context, the total value of UK trade is £1.699trn, with £836.5bn made up from exporting goods and services across the globe and £862.6bn from imports.
While a “full-fat” free trade agreement with the US, such as the one sought by Theresa May and Boris Johnson in the wake of Brexit, has not been completely ruled out, the Government’s own red lines on agriculture and the NHS appear to make such a deal unlikely.
“It’s also incredibly difficult to see how you could reconcile the kind of deal that Nick Thomas Symonds has said that he wants with the EU on agriculture with the ambitions of American cattlemen.”
Whitehall officials have said the full benefits of a US trade deal would not be known until full scoping works had taken place ahead of any trade talks, but they are adamant there are major gains to be won from gaining greater access to the world’s biggest economy.
Digital deals
“Business mobility is another big factor, making it easier for businesses to operate in those countries,” one official said. “Trade deals generally focus on making it easier to export services, so helping architects, lawyers to work more easily over there.”
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Read MoreDigital trade deals, such as those signed with Singapore and Ukraine, allow for the free flow of data across borders, such as e-books or music streaming, without incurring any customs duties. They also allow countries to physically locate data centres in the partner country to make it easier to enter an international market, which in the case of the enormous e-commerce market in the US would be of serious benefit to UK companies.
But there are also the diplomatic benefits of forging closer economic ties with the US. “Our trade is so huge with the US there will be gains,” the Government official said, before adding: “But there is also a clear appetite between the two countries to trade with one another as a preference because our relationship is so close.”
US may prefer ‘quick and dirty’ deal
There have been suggestions that the US could look to do a “sectoral” trade deal, which carves out smaller agreements in particular sectors, but such practices are prohibited under World Trade Organisation rules. Trump has made his dislike for the WTO clear, but Alty said it would put the UK in an invidious position.
Allie Renison, another former DIT trade official, agreed. “They [the US] may want a quick and dirty trade deal, such as the one they agreed with China when Trump was last in office. China basically just agreed to buy more good agricultural goods. Now you can’t really do that when you’re a market economy. You can’t pledge to kind of get companies to send more goods.”
Byrne said he was “not optimistic” that the Government would secure a free trade agreement with the US, but he added: “Nor am I concerned about that. When we talk to businesses, they say US/UK trade is pretty friction-free today. There are some issues around commercial aircraft, which are important for Airbus.
“But what both American and UK businesses plead is: ‘Please don’t mess it up, because it’s pretty good as it is today’.”
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