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Tag: U.K. trade

  • Biden quietly shelves trade pact with UK before 2024 elections

    Biden quietly shelves trade pact with UK before 2024 elections

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    LONDON — President Joe Biden has quietly shelved plans for a “foundational” trade agreement with the U.K. ahead of the 2024 election — following Senate opposition and disagreements over the scope of the deal.

    A draft outline of the pact and its 11 proposed chapters, prepared by the United States Trade Representative’s (USTR) office earlier this year, indicated negotiations would begin before the end of 2023.

    But after facing multiple headwinds, the deal is not expected to go ahead, two people briefed by the British and U.S. governments respectively told POLITICO. Both were granted anonymity to speak on a sensitive matter.

    “I don’t think we’re going to see that re-emerge,” said one of the people briefed on the proposed negotiations. 

    The proposal’s timeline for talks — which would not consider market access or meet the World Trade Organization’s definition of a free trade agreement — set out that negotiations would wrap up ahead of elections in Britain and the U.S. next year.

    The deal was closer in substance to the U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) — which tackles regulation and non-tariff barriers — than a full trade agreement.

    But last month IPEF talks fell apart after senior Democrats criticized the Biden administration’s negotiation of trade provisions that did not contain enforceable labor standards.

    The British government has long coveted a trade agreement with the U.S. as a significant post-Brexit prize.

    The draft was considered a road map to eventually securing a full-fledged, comprehensive deal. Business and Trade Secretary Kemi Badenoch pitched the IPEF-style deal in April during Biden’s visit to Belfast, Bloomberg reported, to reinvigorate talks first started under the Trump administration.

    Congressional oversight

    Key voices in the U.S. have expressed concern about the nature of a pact with the U.K.

    “Trade negotiations should be driven by substance,” said a spokesperson for Democratic Senator Ron Wyden, chairman of the powerful Senate Finance Committee, which provides congressional oversight for trade.

    “It is Senator Wyden’s view that the United States and United Kingdom should not make announcements until a deal that benefits Americans is achievable,” the spokesperson added.

    When POLITICO first reported on proposed talks in October, Wyden said it was “extremely disappointing” the Biden administration was attempting to proceed “with a ‘trade agreement’ that will neither benefit the American public, nor respect the role of Congress in international trade.”

    Wyden’s spokesperson said Congress “must have a clear role in approving any future trade agreements” and that the senior Democrat “believes it is important for USTR to be significantly more engaged with Congress on any future negotiations.”

    ‘The vibes were quite tough’

    USTR has gone back to Congress to ask for its input on a potential U.K. trade deal. But major outstanding issues between the U.S. and U.K. remain, including agriculture and whether any agreement would benefit American workers.

    In a recent meeting with U.S. diplomats “the vibes were quite tough,” said the second person briefed on the proposed negotiations cited earlier. “They just doubled down on ‘you guys really need to lean into the worker-centric trade policy’ and ‘put yourself in the shoes of somebody in Pennsylvania.’”

    The message, the person added, was “does this improve the lot of the farmers in Iowa? Does this help the U.S. economy? And if it doesn’t, they’re not going to do it.”

    The U.S. approach “seems to be very focused on labor standards, on environmental issues on these very worthy things,” said the first person briefed on the proposed negotiations quoted at the top of this story.

    Prime Minister Rishi Sunak’s Cabinet also pushed back on a chapter dealing with agriculture regulations in the draft after the British leader told a food summit earlier this year that he would not allow chemical washes or hormone-injected beef imports like those from the U.S. into Britain.

    Scottish ministers meanwhile complained they hadn’t been consulted. Agriculture regulations are a devolved issue in Scotland.

    In the meantime, the focus of the U.K.-U.S. trade relationship is predominantly on securing a critical minerals agreement that would allow British automotive firms to tap into electric vehicle rebates offered in the Biden administration’s Inflation Reduction Act.

    “The U.K. and U.S. are rapidly expanding co-operation on a range of vital economic and trade issues building on the Atlantic Declaration announced earlier this year,” said a U.K. government spokesperson.

    Some in the U.K. are taking a philosophical view on whether a wider ranging trade deal with the U.S. is really needed. Michael Mainelli, who, as lord mayor of the City of London, opened a new outpost for the U.K.’s powerhouse financial district in New York City on Monday said: “The trade has been going on fine without it. It might go a bit better with it.”

    The latest numbers show total two-way trade between the nations grew 23.8 percent in the year to the end of Q2 2023.

    But in the U.S. a trade deal with the U.K. is just “not that high on the list,” Mainelli said.

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    Graham Lanktree

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  • The Great British Walkout: Rishi Sunak braces for biggest UK strike in 12 years

    The Great British Walkout: Rishi Sunak braces for biggest UK strike in 12 years

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    LONDON — Public sector workers on strike, the cost-of-living climbing, and a government on the ropes.

    “It’s hard to miss the parallels” between the infamous ‘Winter of Discontent’ of 1978-79 and Britain in 2023, says Robert Saunders, historian of modern Britain at Queen Mary, University of London.

    Admittedly, the comparison only goes so far. In the 1970s it was a Labour government facing down staunchly socialist trade unions in a wave of strikes affecting everything from food deliveries to grave-digging, while Margaret Thatcher’s Conservatives sat in opposition and awaited their chance. 

    But a mass walkout fixed for Wednesday could yet mark a staging post in the downward trajectory of Rishi Sunak’s Conservatives, just as it did for Callaghan’s Labour. 

    Britain is braced for widespread strike action Wednesday, as an estimated 100,000 civil servants from government departments, ports, airports and driving test centers walk out alongside hundreds of thousands of teachers across England and Wales, train drivers from 14 national operators and staff at 150 U.K. universities.

    It follows rolling action by train and postal workers, ambulance drivers, paramedics, and nurses in recent months. In a further headache for Sunak, firefighters on Monday night voted to walk out for the first time in two decades.

    While each sector has its own reasons for taking action, many of those on strike are united by the common cause of stagnant pay, with inflation still stubbornly high. And that makes it harder for Sunak to pin the blame on the usual suspects within the trade union movement.

    Mr Reasonable

    Industrial action has in the past been wielded as a political weapon by the Conservative Party, which could count on a significant number of ordinary voters being infuriated by the withdrawal of public services.

    Tories have consequently often used strikes as a stick with which to beat their Labour opponents, branding the left-wing party as beholden to its trade union donors.

    But public sympathies have shifted this time round, and it’s no longer so simple to blame the union bogeymen.

    Sunak has so far attempted to cast himself as Mr Reasonable, stressing that his “door is always open” to workers but warning that the right to strike must be “balanced” with the provision of services. To this end, he is pressing ahead with long-promised legislation to enforce minimum service standards in sectors hit by industrial action.

    Sunak has made tackling inflation the raison d’etre of his government, and his backbenchers are reasonably content to rally behind that banner | POOL photo by Oli Scarff/Getty Images

    Unions are enraged by the anti-strike legislation, yet Sunak’s soft-ish rhetoric is still in sharp relief to the famously bellicose Thatcher, who pledged during the 1979 strikes that “if someone is confronting our essential liberties … then, by God, I will confront them.”

    Sunak’s careful approach is chosen at least in part because the political ground has shifted beneath him since the coronavirus pandemic struck in 2020.

    Public sympathy for frontline medical staff, consistently high in the U.K., has been further embedded by the extreme demands placed upon nurses and other hospital staff during the pandemic. And inflation is hitting workers across the economy — not just in the public sector — helping to create a broader reservoir of sympathy for strikers than has often been found in the past. 

    James Frayne, a former government adviser who co-founded polling consultancy Public First, observes: “Because of the cost-of-living crisis, what you [as prime minister] can’t do, as you might be able to do in the past, is just portray this as being an ideologically-driven strike.”

    Starmer’s sleight of hand

    At the same time, strikes are not the political headache for the opposition Labour Party they once were. 

    Thatcher was able to portray Callaghan as weak when he resisted the use of emergency powers against the unions. David Cameron was never happier than when inviting then-Labour leader Ed Miliband to disown his “union paymasters,” particularly during the last mass public sector strike in 2011.

    Crucially, trade union votes had played a key role in Miliband’s election as party leader — something the Tories would never let him forget. But when Sunak attempts to reprise Cameron’s refrains against Miliband, few seem convinced.

    QMUL’s Saunders argues that the Conservatives are trying to rerun “a 1980s-style campaign” depicting Labour MPs as being in the pocket of the unions. But “I just don’t think this resonates with the public,” he added.

    Labour’s current leader, Keir Starmer, has actively sought to weaken the left’s influence in the party, attracting criticism from senior trade unionists. Most eye-catchingly, Starmer sacked one of his own shadow ministers, Sam Tarry, after he defied an order last summer that the Labour front bench should not appear on picket lines.

    Starmer has been “given cover,” as one shadow minister put it, by Sunak’s decision to push ahead with the minimum-service legislation. It means Labour MPs can please trade unionists by fighting the new restrictions in parliament — without having to actually stand on the picket line. 

    So far it seems to be working. Paul Nowak, general secretary of the Trades Union Congress, an umbrella group representing millions of U.K. trade unionists, told POLITICO: “Frankly, I’m less concerned about Labour frontbenchers standing up on picket lines for selfies than I am about the stuff that really matters to our union” — namely the government’s intention to “further restrict the right to strike.”

    The TUC is planning a day of action against the new legislation on Wednesday, coinciding with the latest wave of strikes.

    Sticking to their guns

    For now, Sunak’s approach appears to be hitting the right notes with his famously restless pack of Conservative MPs.

    Sunak has made tackling inflation the raison d’etre of his government, and his backbenchers are reasonably content to rally behind that banner.

    As one Tory MP for an economically-deprived marginal seat put it: “We have to hold our nerve. There’s a strong sense of the corner (just about) being turned on inflation rising, so we need to be as tough as possible … We can’t now enable wage increases that feed inflation.”

    Another agreed: “Rishi should hold his ground. My guess is that eventually people will get fed up with the strikers — especially rail workers.”

    Furthermore, Public First’s Frayne says his polling has picked up the first signs of an erosion of support for strikes since they kicked off last summer, particularly among working-class voters.

    “We’re at the point now where people are feeling like ‘well, I haven’t had a pay rise, and I’m not going to get a pay rise, and can we all just accept that it’s tough for everybody and we’ve got to get on with it,’” he said.

    More than half (59 percent) of people back strike action by nurses, according to new research by Public First, while for teachers the figure is 43 percent, postal workers 41 percent and rail workers 36 percent.

    ‘Everything is broken’

    But the broader concern for Sunak’s Conservatives is that, regardless of whatever individual pay deals are eventually hammered out, the wave of strikes could tap into a deeper sense of malaise in the U.K.

    Inflation remains high, and the government’s independent forecaster predicted in December that the U.K. will fall into a recession lasting more than a year.

    More than half (59 percent) of people back strike action by nurses, according to new research by Public First, while for teachers the figure is 43 percent, postal workers 41 percent and rail workers 36 percent | Joseph Prezioso/AFP via Getty Images

    Strikes by ambulance workers only drew more attention to an ongoing crisis in the National Health Service, with patients suffering heart attacks and strokes already facing waits of more than 90 minutes at the end of 2022.

    Moving around the country has been made difficult not only by strikes, but by multiple failures by rail providers on key routes.

    One long-serving Conservative MP said they feared a sense of fatalism was setting in among the public — “the idea that everything is broken and there’s no point asking this government to fix it.”

    A former Cabinet minister said the most pressing issue in their constituency is the state of public services, and strike action signaled political danger for the government. They cautioned that the public are not blaming striking workers, but ministers, for the disruption.

    Those at the top of government are aware of the risk of such a narrative taking hold, with the chancellor, Jeremy Hunt, taking aim at “declinism about Britain” in a keynote speech Friday.

    Whether the government can do much to change the story, however, is less clear.

    Saunders harks back to Callaghan’s example, noting that public sector workers were initially willing to give the Labour government the benefit of the doubt, but that by 1979 the mood had fatally hardened.

    This is because strikes are not only about falling living standards, he argues. “It’s also driven by a loss of faith in government that things are going to get better.”

    With an election looming next year, Rishi Sunak is running out of time to turn the public mood around.

    Annabelle Dickson and Graham Lanktree contributed reporting.

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    Esther Webber

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  • Brexit Britain trapped in the middle as US and EU go to war on trade

    Brexit Britain trapped in the middle as US and EU go to war on trade

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    LONDON — Three years after leaving the EU to chart its own course, Britain finds itself caught between two economic behemoths in a brewing transatlantic trade war.

    In one corner sits the United States, whose Congress in August passed the Biden administration’s much-vaunted $369 billion program of green subsidies, part of the Inflation Reduction Act (IRA).

    In the opposing corner is the European Union, which fears Washington’s subsidy splurge will pull investment — particularly in electric vehicles — away from Europe, hitting carmakers hard.

    The EU is preparing its own retaliatory package of subsidies; Washington shows little sign of changing course. Fears of a trade war are growing fast.

    Now sitting squarely outside the ring, the U.K. can only look on with horror, and quietly ask Washington to soften the blow. But there are few signs the softly-softly approach is bearing fruit. Britain now risks being clobbered by both sides.

    “It’s not in the U.K.’s interest for the U.S. and EU to go down this route,” said Sam Lowe, a partner at Flint Global and expert in U.K. and EU trade policy. “Given the U.K.’s current economic position, it can’t really afford to engage in a subsidy war with both.” The British government has just unleashed a round of fiscal belt-tightening after a market rout, following months of political turmoil.

    For iconic British motor brands, the row over the Biden administration’s IRA comes with real costs.

    The U.S. is the second-largest destination for British-made vehicles after the EU, and the automotive sector is one of Britain’s top goods exporters.

    Manufacturers like Jaguar Land Rover have warned publicly about the “very serious challenges” posed by the new U.S. law and its plan for electric vehicle tax credits aimed at boosting American industry.

    Kemi on the case

    U.K. Trade Secretary Kemi Badenoch has for months been privately urging top U.S. officials to soften the impact of the electric vehicle subsidies on Britain by carving out exemptions, U.K. officials said.

    When Commerce Secretary Gina Raimondo visited London in early October, Badenoch pushed her to rethink the strategy. The U.K. trade chief brought that same message to Washington in a series of private meetings earlier this month, including at a sit-down with Deputy Treasury Secretary Wally Adeyemo.

    Badenoch has “raised this issue on many levels,” an official from the U.K.’s Department for International Trade said, citing conversations with U.S. Ambassador to Britain Jane Hartley, with Secretary Raimondo, “and with members of the Biden administration and senior representatives of both parties.”

    The Cabinet minister has also spoken out in public, telling the pro-free market Cato Institute in Washington earlier this month that “the substantial new tax credits for electric cars not only bar vehicles made in the U.K. from the U.S. market, but also affect vehicles made in the U.S. by U.K. manufacturers.”

    U.S. Secretary of Commerce Gina Raimondo | Mandel Ngan/AFP via Getty Images

    Badenoch’s comments echo concerns raised by both British automotive lobby group the Society of Motor Manufacturers and Traders (SMMT), and by Jaguar Land Rover, in comments filed with the U.S. Treasury Department.

    The SMMT warned that Biden’s green vehicle package has several “elements of concern that risk creating an uneven competitive environment, with U.K.-based manufacturers and suppliers potentially penalised.” The lobby group is taking aim at the credit scheme’s requirement for green vehicles to be built in North America, with significant subsidies available only if critical minerals are sourced from the U.S. or a U.S. ally.

    In response to Washington’s plans, the EU is preparing what could amount to billions in subsidies for its own industries hit by the U.S. law, which also offers tax breaks to boost American green businesses such as solar panel manufacturers. Britain faces being squeezed in both markets, while lacking any say in whatever response Brussels decides.

    Protectionism that impacts like-minded allies “isn’t the answer to the geopolitical challenges we face,” the British trade department official warned, adding “there is a serious risk” the law disrupts “vital” global supply chains of batteries and electric vehicles.

    The conversations Badenoch had this month in Washington were “reassuring,” the official added. “But it’s for them to address and find solutions.”

    ‘Ton of work to do’

    Yet others believe Badenoch will have a hard time getting her colleagues in the U.S. — now cooling on a much-touted bilateral trade deal — to take action. “The U.S. is minimally focused on how any of their policies are going to impact the U.K.,” admitted a U.S.-based representative of a major business group.

    While Britain and the U.S. are “very close allies”, they added, those in Washington “just don’t really view the U.K. as an interesting trade partner and market right now.” The U.S. is more focused, they noted, on pushing back against China, meaning Badenoch has “a ton of work to do” getting the administration to soften the IRA.

    Nevertheless the U.S. is still working out how its law will actually be implemented, the business figure said, and is assembling a working group on how the IRA impacts trade allies. This has the potential, they added, to “alleviate a lot of the concerns coming out of the U.K.”

    Late Tuesday evening, the SMMT called on the British government to provide greater domestic support for the sector as it prepares to ramp up its own electric vehicle production. The group wants an extension past April on domestic support for firms’ energy costs; a boost to government investment in green energy sources; and a speedier national rollout of charging infrastructure and staff training.

    In the meantime, Britain’s options appear limited.

    Newly manufactured Land Rover and Range Rover vehicles parked and waiting to be loaded for export | Paul Ellis/AFP via Getty Images

    The U.K. “could consider legal action” and haul the U.S. before the World Trade Organization or challenge the EU through provisions in the post-Brexit Trade and Cooperation Agreement, said Lowe of consultancy Flint. “But — to be blunt — neither of them care what we have to say.”

    Anna Jerzewska, a trade advisor and associate fellow at the UK Trade Policy Observatory, suggested pressing ahead “with your own domestic policy and efforts to support strategic industries is perhaps more important” than complaining about foreign subsidy schemes. But she noted that after a “chaotic” political period, Britain is “likely to take longer to respond to external changes and challenges.”

    And in truth, Britain “can’t afford to out-subsidize the U.S. and EU,” said David Henig, a trade expert with the European Centre For International Political Economy think tank.

    Outside the EU, Britain could work to rally allies such as Japan and South Korea who are also unhappy with the Biden administration’s protectionist measures, he noted. “But I don’t think we’re in that position,” Henig said, as it would take a concerted diplomatic effort, and the U.K.’s automotive sector would “have to be well positioned” in the first place, not struggling as it is. He predicted London’s lobbying in Washington and Brussels is “not going to get anywhere.”

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    Graham Lanktree

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  • Almost everyone’s a loser: EU-UK trade sharply lower than in a world without Brexit

    Almost everyone’s a loser: EU-UK trade sharply lower than in a world without Brexit

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    DUBLIN — Brexit has inflicted deeper opportunity costs on U.K.-EU trade than previously estimated, according to a new Irish study that compares the weakness of actual post-2020 goods flows to a parallel universe where Britain stayed within the single market.

    The Economic and Social Research Institute (ESRI) in Dublin found that Britain’s exit has cut the potential value of goods exports to Europe by 16 percent, while EU exports to the U.K. were even more sharply lower, representing a 20 percent loss in potential sales.

    The ESRI authors from Trinity College Dublin used a hybrid model that combined U.K. and EU data. They made a central assumption that, had Brexit not happened, U.K. import and export levels with European partners would have closely mirrored the EU’s relatively stronger internal trade performance last year.

    The ESRI found that, instead, trade suffered in both directions — but in significantly different ways.

    While many U.K. firms producing goods on low profit margins have stopped shipping entirely to the EU, goods flows into the U.K. largely have continued but at reduced volumes. The ESRI said this reflected the contrast in post-Brexit border regimes. While the U.K. has imposed few if any post-Brexit regulatory constraints on EU imports, British exports now face full EU customs and sanitary checks that increase costs and delays, making low-margin products unprofitable.

    The ESRI found that U.K. exporters were losing opportunities and market share in most EU countries, most strikingly in their closest trading partner, Ireland, where the value of British goods last year slumped by 40 percent versus the no-Brexit model. Other sharp fallers included Spain (32 percent), Sweden (25) and Germany (24).

    The lone EU member to record any U.K. import gains in the ESRI’s model was Luxembourg, up an eye-popping 76 percent. While the ESRI didn’t detail any reason why, the U.K. government pinpointed power generators as its top 2021 goods export to the diminutive duchy.

    In the other direction of trade, only two EU nations managed above-expectations gains in exports to Britain: Latvia (38 percent) and Cyprus (33). Several others noted no discernible post-Brexit decline, including food and drink powerhouse Ireland.

    But exporters in most EU states last year pruned shipments in line with what the report identified as the reduced appeal and certainty of the U.K. market.

    The estimated 2021 value of those exports, compared to the report’s scenario where Britain stayed an EU member, was down most sharply in Malta (46 percent), followed by Finland (33), France and Greece (29), the Netherlands (27), Belgium (26), Poland (21), Portugal (20), Spain and Sweden (19), Germany (14) and Italy (12).

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    Shawn Pogatchnik

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