LONDON — Crucial talks on Britain’s future trade with Canada and Mexico have been deprioritized as Rishi Sunak’s government pursues a pre-election agreement with Joe Biden’s U.S. administration.
POLITICO reported this week that the U.K. and U.S. are preparing a “foundational” trade agreement designed to be wrapped up before both the U.S. president and U.K. prime minister face re-election next year.
But the drive threatens to further squeeze the time that already-pressed British negotiators can commit to securing continued market access to Canada and Mexico as key elements of post-Brexit deals with each of those two countries expire.
British negotiators’ agendas were so full in June that Sunak personally asked for renewed Canadian and Mexican deals to “be taken forward on a slower timeline than previously planned,” according to a memo circulated within the Department for Business and Trade (DBT) and obtained by POLITICO.
Expiry of parts of the Canada and Mexico agreements — which were rolled over after Britain left the EU — threatens British businesses’ access to major export markets. That means “thinking through how we manage the shorter-term cliff edges,” wrote Amanda Brooks, DBT’s director-general for negotiations, in the June memo.
But there were “no plans to add anything further to the programme until at least the latter half of 2024,” Brooks added. A trade deal with India and ratifying an agreement with the Indo-Pacific CPTPP bloc are officials’ “focus,” she wrote.
Kicking full trade negotiations with Canada and Mexico into the long grass “doesn’t seem fair or add up” economically, said a U.K. government official granted anonymity as they were not permitted to speak to the media.
They said that the more pared-back deal being sought with the U.S. won’t be as economically consequential without market access or financial services chapters included.
A spokesperson for DBT said “we don’t comment on leaks.”
Economic benefits scrutinized
Firms are closely watching the Canada and Mexico talks.
Next April, U.K. manufacturers who sell goods with EU components in could be barred from Canada as provisions in the Brexit transition deal allowing “cumulation” end. “Supply chains for goods that are exported to Canada might well have to be altered for the spring of next year,” said a British business representative familiar with the issue.
Unless the U.K. can strike an extension, British cheese makers will also lose access to Canada’s market at the end of this year through a special EU quota.
Negotiations with Mexico “are going very slow,” the business representative said, adding Mexico has agreed with the U.K. on “continuation of cumulation until the negotiations are complete.”
Meanwhile, business groups have questioned the economic benefits of the U.K. / U.S. deal under discussion.
The outline deal set out in the papers seen by POLITICO does not contain the market access commitments required for a formal free trade agreement in the eyes of the World Trade Organization. But it would go much further than anything considered in public so far, touching on agriculture, labor rights, the environment, supply chains, regulation of services, digital trade documents and others.
“With traditional market access liberalization and tariff reduction apparently not included there is a real question about whether such an agreement would have any material effect in the real world for businesses,” said Duncan Edwards, CEO of lobby group BritishAmerican Business.
It is “very hard to see this adding up to much,” said Peter Holmes, a fellow at the University of Sussex’s U.K. Trade Policy Observatory (UKTPO), of the trade talks with the U.S. Although “structuring dialogue can’t be bad,” he said.
The head of the Congressional Senate Finance Committee, which oversees trade policy in the U.S., slammed Biden over the potential pact with the U.K.
“It is extremely disappointing that this administration is once again proposing proceeding with a ‘trade agreement’ that will neither benefit the American public, nor respect the role of Congress in international trade,” said Chairman Ron Wyden (D-Ore.). Wyden was recently briefed on the broad contours of the proposed deal with Britain.
The pact may face a jurisdictional battle in the U.S. Congress. Since the start of the Biden administration, the White House has resisted submitting its new-look trade agreements to Congress for approval, arguing they are solely “executive agreements.”
“Entering into binding agreements that regulate international trade is impermissible without Congressional approval and threatens the durability and reliability of any agreement reached,” said Wyden. “Despite the plain language of the Constitution, this Administration continues to plow forward on half-baked trade negotiations that lack proven benefits and undermine the United States’ credibility on the global stage.”
Gavin Bade contributed reporting.