The Trump administration is at war with itself about trade policy. As the FT’s Shawn Donnan has reported, the battle pits those close to the president, who want a much tougher policy with trade partners recording a surplus with the US, and those in the administration arguing for a more pro-trade line. Prominent among the economic nationalists are Stephen Bannon, the White House strategy chief, and Robert Navarro, the president’s trade adviser. Leading the open trade faction is Gary Cohn, who heads the National Economic Council.
This is a fight that Theresa May’s government badly needs Mr Cohn to win. As senior Conservatives talk openly of the possibility of Britain falling out of the EU after a failure of Brexit negotiations, the focus is sharpening on putative trade deals with third country partners. Ministers have made much of Mr Trump’s apparent openness to an early deal with the UK. But if Messrs Bannon and Navarro prevail, this is a deal that no British government would be keen to make.
Mr Navarro in particular is arguing that America’s bilateral trade relationships should be classified according to whether they show a surplus or deficit. A sizeable trade deficit provides prima facie evidence that the US is the victim of unfair trade or regulatory practices and measures should be taken to bring exchanges closer to balance.
Unfortunately for the UK, the US is one of the few places in the world where it records a very large surplus — about £40bn a year in 2014 and 2015. According to the Office for National Statistics that makes the US Britain’s largest export partner. It also makes it a prime target for the protectionists around Mr Trump. The signs for now are that Mr Cohn may have the upper hand in the argument, but the president’s instincts are with the economic nationalists.
Ministers have also been told there are other reasons why they might want to downplay the prospects of an early deal. Top of the US list of demands in any such arrangement would be much greater access for cheap American farm products, imports that would undercut farmers in Conservative-held constituencies and enrage environmental and food safety lobbies because of US output of products such as hormone-treated beef and chlorine-treated poultry. US companies are also pressing for much greater access to UK public services, including the NHS, something unlikely to win the government votes at the 2020 general election.
If an American trade deal is slipping down the list of post-Brexit priorities, the prospects elsewhere have not been greatly encouraging. Preliminary soundings with Commonwealth partners such as Australia and India have indicated that they have all put liberalisation of UK immigration policy near the top of their wishlists. Not something Mrs May will be keen to offer.
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Mouthpiece needed In response to Tuesday’s Brexit Briefing, The lone challenger to a hard Brexit, came a plea from Peter Williams, founder and chief executive of Jack Wills, for a mouthpiece where businesses can voice their concerns over Brexit:
“The impact of Brexit-related currency movements on businesses across the UK is much more profound in my view than is realised. In my industry alone, it will largely wipe out 100 per cent of many companies’ profits. However, there is no mainstream forum that is willing to champion their cause.”
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No back door after Brexit Christian Noyer, former chairman of the Bank for International Settlements and former governor of the Bank of France, has generated lively debate by warning that there will be no back door into the EU for financial institutions in the City after the UK leaves the EU.
The idea that the EU is behoven to the UK for access to London’s financial markets is pure nonsense. It is the EU which decides if it will allow access to London, on what terms and for how long.
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Irish eyes are smiling Irish people will have British citizenship rights after Brexit to protect the free movement of people between the two countries, the UK government has confirmed. (Times)
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Punk FT: defusing the Brexit time-bomb The EU and UK are squaring up for a tough battle as Brexit negotiations get under way. FT Brussels bureau chief Alex Barker, with a little help from the folks at Punk Economics, looks at a separation process that’s shaping up to be mission impossible. (FT)