Reuters / John MacDougall
- On paper, negotiating a UK-USA trade agreement should be easy.
- The reality is likely to be much more complex.
- "A trade deal more likely than not, but it's going to be more complicated than people think," said Ambassador Charles Ries, a US diplomat who helped negotiate NAFTA, the world's largest trade deal.
LONDON — On paper, negotiating a UK-USA trade agreement after Brexit should be easy.
Both Donald Trump and Theresa May have indicated they favour a deal, and free trade agreements between two developed countries with liberal market economies should be relatively straightforward.
The reality is likely to be much more complex, and an analogy about cheese from the US state of Vermont helps to explain why.
Charles Ries is vice president at the RAND Corporation, and a former US diplomat whose career included posts overseeing the US-European Union relationship and working as a member of the North American Free Trade Agreement (NAFTA) negotiating team, which created the world's largest free trade agreement between Canada, Mexico, and the United States.
"If the British were free of the EU and able to negotiate a free-trade agreement, Washington would be hard pressed to say no," said Ries in an interview with Business Insider.
"I think Washington would be willing to sit down and discuss the terms and conditions, but that doesn't guarantee an agreement could be done quickly — you would quickly see there would be some issues that arose in the context of TTIP negotiations that would be very difficult for the British," he said.
One of these issues is so-called "geographical indications," the EU system which dictates that products associated with a certain region of Europe must be made there. Feta cheese must be made in Greece, Parmigiano-Reggiano cheese has to be made in Italy, Melton Mowbray pork pies must be made in England, and champagne must be produced in the Champagne region of France.
When the EU and US tried — so far unsuccessfully — to negotiate a mammoth free-trade deal known as TTIP in 2014, both sides refused to budge on the issue of geographical indications.
The US refused to recognise them, insisting it would not ban the sale of American products labelled things like Feta, Gorgonzola, or Champagne. Countries including France and Greece threatened to veto any deal unless the US backed down.
That same problem would arise in any negotiation when the UK tried to negotiate with the US and EU, Ries said.
"If the UK didn't protect Europe's geographical indications when it negotiated a deal with the US, it would be very difficult for the UK to negotiate with the EU, which is a far bigger trading partner for the UK," Ries said.
"Just imagine it in practical terms," Ries said. "If the US insisted in a bilateral US-UK negotiation that we be allowed to cheese from Vermont that was called Feta cheese, and if the British accepted that — and allowed for the sale of Vermont feta in the UK — that would put them in contradiction to whatever obligations they may have to obtain to protect feta in the UK as a result of a free trade agreement with the EU."
Ries said the issue covered "a fairly small amount of trade, but it's actually fairly significant politically, on both sides of the Atlantic."
"It was something we were unwilling to consider negotiating and it was something that was a must-have for the EU in the TTIP negotiations," he said. Those kinds of conflicts between the interests of the sides would make it hard for the UK-US agreement to manage it."
Ries predicted there was a 60-70% likelihood of a US-UK free-trade deal within two or three years, although it would be unlikely to include financial services.
"It's not impossible," he said. "We are two large developed economies and the British do not pose the kind the kind of low wage export threat [Trump's] administration is concerned about. A trade deal more likely than not, but it's going to be more complicated than people think."