February 5, 2021

On May 5, 2020, the United States and United Kingdom began negotiating the much-anticipated US-UK Free Trade Agreement (“US-UK FTA”). Since then, the two counties have engaged in five formal rounds of negotiations and a total of 170 individual sessions. If the US-UK FTA is successfully negotiated, the impact on US businesses – both large and small – could be substantial. The US-UK FTA would be the largest bilateral trade deal in US history, and could add an estimated $10 billion to the US economy. It will likely address critical industries and policies, such as e-commerce, digital media, clean energy, data protection, foreign direct investment, pharmaceuticals, agricultural policy, and tariff burdens. But more than half a year in, where do the US-UK FTA negotiations stand?

On the heels of the US 2020 Presidential Election, the US-UK FTA negotiations are in hiatus. The negotiations could resume once the US Senate confirms President Biden’s nominee for US Trade Representative – Katherine Tai. Prior to her nomination, Ms. Tai served as the chief trade lawyer for the House Ways & Means Committee. Many credit her key role in finalizing the revamped pact with Canada and Mexico, known as USMCA. But given current geopolitical priorities, as well as Ms. Tai’s experience with China and fluency in Mandarin, it is reasonable to assume that Chinese trade policy will be at the top of the US Trade Representative’s agenda.

Some of the signals emanating from the Biden Administration seem to indicate that bilateral support for the US-UK FTA is strong. Before President Biden was sworn in, he and UK Prime Minister Boris Johnson held an introductory discussion in which they reportedly affirmed their support for the Agreement.

Other signals are less certain. President Biden has indicated that domestic priorities will be paramount in the early days of his presidency. He recently stated “I’m not going to enter any new trade agreement with anybody until we have made major investments here at home and in our workers.” In addition, several allies of the President have tempered expectations of quick action with the UK. White House press secretary Jen Psaki recently noted that the administration had no timeline for forging the Agreement, as the President’s attention is largely focused on combatting the COVID-19 pandemic at home. And at her confirmation hearing for Secretary of the Treasury, Janet Yellen said that “President Biden has been clear that he will not sign any new free trade agreements before the US makes major investments in American workers and our infrastructure.”

In a recent discussion with the National Foreign Trade Council (her first public remarks since being nominated), Ms. Tai stated that the Biden Administration’s goal is to “implement a worker-centered trade policy.” In practice, she said, this means “U.S. trade policy must benefit regular Americans, communities and workers. And that starts with recognizing that people are not just consumers – they are also workers, and wage earners.” How these goals will factor into the US-UK FTA negotiations remains to be seen.

Once domestic priorities are addressed, there is optimism that a US-UK FTA will eventually come together. Despite several contentious issues (agricultural exports, food safety, digital services taxes, and Northern Ireland), the parties’ interests are largely aligned. For example, Prime Minister Johnson has emphasized that climate change considerations will play a significant role in shaping the Agreement. The Biden administration will almost certainly be receptive to these considerations, which could be a fresh catalyst to reinvigorate the negotiations. Another area of alignment is cooperation against China. In that sense, shared geopolitical commitments could advance the economic relationship between the two long-time allies.

Looming over the US-UK FTA negotiations is the July 2021 expiration of President Biden’s Trade Promotion Authority (“TPA”). This Congressional legislation gives the White House authority to fast-track foreign trade agreements. If the TPA is not renewed, the US-UK FTA may face an uphill battle in Congress.

Act I of the US-UK FTA negotiations has drawn to a close. During intermission, the new administration must chart a course for Act II. But until the curtain is drawn, US businesses must be prepared to contend with the full range of outcomes.

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