May recently announced London's plans to leave the European Union's single market. This enables the United Kingdom to pursue bilateral free trade agreements with the European Union and other economic powerhouses such as the United States, India, Australia and Brazil. The Trump administration has already expressed interest in such a deal — a policy reversal from Barack Obama's government, which promised to send the United Kingdom "to the back of the queue" in trade negotiations if it chose to leave the European Union. In fact, Trump has said he wants to help make the Brexit "a success."
For the United Kingdom, a free trade agreement with the United States makes sense not just from an economic standpoint but also from a political one. The United States is Britain's largest export partner and second-largest import partner of goods and services, accounting for about 20 percent of exports and 10 percent of imports. In addition, U.S. investors hold the largest share of foreign direct investment in the United Kingdom — a total of 253 billion pounds' ($316.9 billion) worth of FDI stock in 2014, according to Britain's Office for National Statistics. The value of FDI in the United States by British investors likewise reached 239.8 billion pounds that year, making them the largest pool of foreign investment for U.S. companies. Seeking a free trade agreement with the United States also would enable the government in London to demonstrate to voters and EU negotiators that the United Kingdom has options outside the Continental bloc.
A Tricky Situation
Negotiating a free trade deal with the world's largest economy will be no easy feat, however. The United Kingdom cannot sign any such agreements until it has completed its departure from the European Union. Considering that London does not plan to formally trigger the Brexit until March — and EU treaties stipulate that the process should take at least two years — the earliest London could sign a free trade deal with Washington is mid-2019. Even negotiating a free trade deal before then would be illegal according to EU rules, though a spokesman for the European Commission recently admitted that there is nothing in the treaties to prohibit countries from discussing trade with nonmember states. The United Kingdom's prospects for a free trade deal with the United States, moreover, will depend on how London and Brussels settle their split. The British economy on its own is attractive enough for American investors, but its access to EU markets is certainly part of the appeal. U.S. free trade negotiators may wait to commit to a trade agreement with London until they have a firmer picture of the United Kingdom's future relationship with the European Union.
Negotiating a way to reduce, or even eliminate, tariffs between the United Kingdom and the United States should not be particularly onerous, considering that tariffs are already low, averaging 3 percent. But specific economic sectors could complicate matters. For example, the United Kingdom's farmers may oppose a deal that would put them in competition with large U.S. agricultural producers, since the Brexit will cost them access to EU subsidies as it is. Many in the United Kingdom also fear that a free trade agreement could open the country's National Health Service to competition from U.S. firms. Washington, meanwhile, may be reluctant to open the U.S. economy to cars made in the United Kingdom as it threatens to impose high tariffs on vehicles exported from Mexico. Nontariff barriers to trade could prove even more difficult to hammer out because the countries vary in their regulations and standards on a range of sectors, including food and banking. The British and U.S. governments would also have to agree on a mutually accepted mechanism to solve trade disputes. This was one of the thorniest issues for negotiators working on the free trade deal between the European Union and the United States.
Even if trade discussions between the United Kingdom and United States make quick progress, ratifying a final deal could be a lengthy undertaking. Though U.S. and South Korean negotiators managed to wrap up their free trade talks in just 13 months, the deal then languished for four years before the U.S. Congress approved it. It finally took effect in early 2012, about six years after the discussions began.
Determining NATO's Future
Beyond trade, the British government wants to discuss security and defense issues with the new U.S. administration. May has said in recent interviews that she plans to emphasize NATO's importance in her meeting with Trump, who has called the military alliance obsolete. During his campaign for the presidency, Trump caused alarm in Europe with his suggestion that the United States may not defend its fellow NATO members, especially since most spend less than the target 2 percent of their gross domestic product on defense. To try to close that gap, May said she would offer to support the United States in pressuring members of the alliance to increase their military spending. (Germany recently announced plans to increase its defense spending over the next four years, apparently heeding the United States' wishes.) British and U.S. officials have already begun discussing these subjects: On Jan. 23, U.S. Secretary of Defense James Mattis emphasized the United States' "unshakable commitment to NATO" in a telephone discussion with his British counterpart, Michael Fallon.
The war in Syria and the West's relations with Russia are also high on May's list of topics to address with the U.S. president. The British government supports maintaining sanctions against Moscow for its actions in Ukraine, and members of May's government have even proposed imposing additional sanctions for Russia's role in the Syrian conflict. May will want to hear the Trump administration's position on both issues.
The Broader British Strategy
Regardless of the subjects the British prime minister broaches during her meeting with the U.S. president, May's visit to the United States should be viewed in the context of the United Kingdom's postwar strategy. As both a European and Atlantic power, the United Kingdom strives for balance in its ties with Europe and the United States. After World War II, as its empire was crumbling and its economy was exhausted, London worked to cultivate a strong relationship with the United States. The United Kingdom aligned itself with the U.S.-dominated military alliance structure and the Bretton Woods monetary system. Unable to match the United States militarily, the United Kingdom instead tried to outstrip other U.S. allies in the quantity of its military resources and in its willingness to use them at Washington's behest. London used its loyalty to exact concessions and considerations from the United States that other allies did not receive and to exert influence on U.S. policy in ways that others could not.
At the same time, the United Kingdom has a stake in European affairs. The United States is the United Kingdom's largest customer for exports, but Europe as a whole is a bigger trading partner. Although the United Kingdom chose not to join the European Economic Community (the European Union's predecessor) when it was created in 1957, it was the first country to join when its membership expanded in 1973. But even as it joined in the process of EU integration, London opted out of the Schengen Agreement, which eliminated border controls among member states, and the eurozone. Since British voters chose to leave the European Union, the British government has continued its efforts at achieving balance between the Continental bloc and the United States. Now that its relations with Brussels are entering a turbulent phase, it is not surprising that London is looking to preserve, if not enhance, its relationship with Washington.
