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Brexit and US trade deals

On 13th August 2019, The Times newspaper reported John Bolton, the White House aide, who was visiting the UK, as saying that the UK would be at "the front of the trade queue, or line as we say" for trade deals with the USA post-Brexit.

He was reported as offering rolling trade deals, on a sector by sector basis, following Brexit, which he felt would be easier to complete  rather than a comprehensive trade deal which could take years to complete. He was suggesting that a deal on manufacturing, including car manufacturing, could for instance be  completed more quickly than one on financial services, which might take much longer.

Some commentators have cast doubt on the ability for the US and UK to reach individual sector deals quickly and felt that it was more likely that deals could be reached across a range of sectors and tariffs in return for the UK giving something in return  , such as supporting the US over Iran or Huawei or not introducing a digital services tax.

Whatever the shape of a deal, however, it may encounter problems under World Trade Organisation (WTO) rules which seek to uphold the Most Favoured Nation (MFN) principle on trade in goods. Under this principle, member countries granting tariff waivers or reductions in respect of exports or imports of goods must extend those preferences to all WTO member countries, subject to exceptions. These exceptions include "customs unions" and "free-trade areas" to which the MFN principle may not apply by virtue of Article XXIV of the General Agreement on Tariffs and Trade (GATT) 1994.

Whether or not any US-UK trade deals would be covered by Article XXIV of GATT is a point of legal contention and arguments on this issue could yet threaten the integrity of the WTO system.

The MFN principle generally applies to tariff barriers rather than non -tariff barriers ( such as  product origin certificates and technical standards) and it is possible that any UK trade deals with the USA could focus more on non- tariff barriers than on tariff barriers. Whether such trade deals are worth having is a matter for close analysis.

This area of international trade law has been rumbling on for many decades through various international trade rounds and it seems that Brexit will produce further tests for  the international trading system.

It will be fascinating to see how the US-UK trade debate develops over the coming months and whether or not it will be at the expense of the UK's trade relationship with the EU.

The UK's prospective trade relationship with the EU is currently encapsulated in the non-legally binding  Political Declaration, which accompanied the Withdrawal Agreement of 25th November 2018, both of which documents the new UK Government appear to regard as dead in the water.

Care may need to be taken by the UK to ensure that it is not trapped between the competing economic and political attitudes of the US and the EU but has its own supportable position on the way forward.