Why a sensible deadline for US-UK trade talks is next April

Hello from Washington, where the US Senate has reconvened and is holding virtual hearings. First up was top White House health adviser Dr Anthony Fauci, who warned that relaxing lockdown restrictions too soon could lead to “suffering and death”. In DC, the lockdown continues, although there remain plenty of people on the streets. 

Our main piece today is about a political hurdle facing US and UK trade negotiators that hasn’t been given much attention — and it’s not November’s presidential election. Our person in the news is Australian trade minister Simon Birmingham, who is facing off with China in escalating trade tensions between the two nations, while our chart of the day looks at US headphone imports that are increasingly coming from outside China.

Forget the election: focus on April 2021

Google Hangouts, Zoom and FaceTime have become staples of work and social life in coronavirus time, and things are no different for UK trade secretary Liz Truss and US trade representative Bob Lighthizer.

When Washington and London launched talks aimed at agreeing a comprehensive trade deal on Tuesday last week, journalists were sent videos of Truss and Lighthizer sitting in huge, empty panelled rooms, distantly flanked by aides, and solemnly reading statements of intent into their webcams. 

It was an odd sight — and there’s been much chatter in Washington about the speed with which fully online trade negotiations can take place. Will it slow things down, or speed things up? And what can be done before November? Donald Trump is likely to want to make some grand sweeping claim of success as he runs the gamut of a presidential election.

Trade Secrets has encountered nobody (in the virtual sense) in Washington who thinks a full trade agreement, which both sides say is the goal, can be struck before November. But an announcement on some easy wins is possible. For example, the first chapters of the recent USMCA agreement between the US, Mexico and Canada included promises to stop corruption and have good regulatory practices.

There is another option to increase the speed of the deal, and that is to forgo a full trade deal and bypass Congress altogether by settling for a “mini deal”. Any deal that does not substantially alter tariffs does not have to be put before lawmakers. Both sides publicly reject this option at the moment.

So if the two countries remain committed to a full agreement, that’s unlikely to take place before November. But the trade deal then hits another potential deadline. In July 2021, an important piece of legislation that governs the way trade deals pass through Congress, effectively setting out a fast-track process for their passage, expires. Among other things, the legislation — known as a Trade Promotion Authority (TPA) — bars lawmakers from adding amendments to trade deals agreed between US negotiators and their partners. “The pay-off for the administration is that their trade deal does not get niggled to death with amendments,” said Edward Alden, a trade policy expert at the Council on Foreign Relations. Aides on Capitol Hill agree that talks between the US trade representative and the Hill become more complicated without the fast-track system and rules provided by an active TPA. Congress needs 90 days’ notice of a trade deal, so the negotiators must put their agreed text before lawmakers in April 2021, effectively setting a deadline for the fast-track procedure.

If they miss it? Everything will take a lot longer. Come July next year, lawmakers will get an opportunity to renew the TPA through a long and likely ideological debate on the future of US trade policy. By all accounts, these debates drag on. The British would risk having key US lawmakers distracted by debating the TPA bill, and not having the protection of the fast-track procedures available when the TPA is active.

That April deadline doesn’t just benefit the UK, which wants these talks wrapped up as swiftly as humanly possible. One senior Democratic congressional aide argues that the TPA has always helped US governments hold a stronger position in trade negotiations, allowing them to assure their partners that they can get any agreements smoothly and expeditiously through the rabble of potentially dissenting lawmakers. Without it, partners may be less willing to make concessions, knowing that negotiators would have to return having failed to persuade lawmakers.

Men chopping agave pits in Tequila, Mexico. Ahead of the USMCA deal, Democrats sent back US negotiators time and again to strengthen labour provisions for Mexican workers © Mauricio Palos/Bloomberg

But a counterargument to the importance of TPA would be the recent USMCA agreement, which was negotiated with the TPA in place. Although congressional Democrats could not add amendments to the bill, because it was protected by TPA, they could still dig in their heels and send negotiators back to strengthen labour provisions for Mexican workers time and time again. Alden said that while the “old wisdom” was that the fast-track or TPA was critical for trade deals, that was now a “a dated way of thinking about a trade negotiation”. “They’ve basically become like any other vote: you have to build your passing coalition in advance,” he said. “Every major trade agreement of the last 20 years has been renegotiated with the Congress.”

Despite this point, very few people argue that losing the protections of TPA will do anything other than slow down the US-UK trade deal. British officials are very aware of the April deadline, and insist that they want to make “swift progress on all fronts”. But there will be plenty of sticking points. Coronavirus will only have made any perceived threat to the UK’s NHS from rapacious US corporations even more unpalatable to the British public, while on agriculture the famous fight over “chlorinated chicken” will need to be had out. The UK will have to push hard to get things wrapped up by April. If it cannot, it can expect things to take a good while longer.

Charted waters

Apple is reportedly shifting some production of its AirPod wireless earphones to Vietnam this quarter in the latest sign that companies are diversifying their supply chains due to the coronavirus pandemic. The US had already been importing more headphones from outside China this year, with Vietnam a clear winner.

Person in the news

Who is it?
Simon Birmingham, Australia’s trade minister.

Australia’s trade minister Simon Birmingham has hit back at Chinese restrictions on meat imports © Lukas Coch/EPA/Shutterstock

Why is he in the news?
Birmingham fought back this week after China slapped restrictions on meat imports from Australia amid escalating tension between the two nations over the pandemic, saying he was “concerned that the suspensions appear to be based on highly technical issues, which in some cases date back more than a year”. Canberra’s call last month for an inquiry into the origins of coronavirus provoked threats from Beijing, with China’s ambassador to Australia, Cheng Jingye, warning that Chinese consumers might wonder “why they should drink Australian wine or eat Australian beef”.

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