What Does Biden’s Victory Mean For The UK And Bilateral Trade

Summary

• President-elect Joe Biden has expressed his displeasure over Brexit and would not want Britain to leave the EU without a trade deal
• Department for International Trade had suggested that the US-UK trade deal would enhance Britain’s economy by only 0.16 per cent
• Trump’s ‘America First Policy’ is likely to be replaced by the one that sees the US's position in a multilateral, international system from which the UK can benefit.

US President-elect Joe Biden’s historic win in the presidential elections will open a new chapter for the US-UK relations. Prime Minister Boris Johnson, while congratulating the 77-year leader, said both the countries have “common global perspective” and “would like to work with President Biden and his team on a lot of crucial stuff in the weeks and months ahead”.

Experts feel both the sides would have to work on the diplomatic ties as Biden and Johnson’s policies vary on a lot of grounds. Like Biden and his team think Brexit isn’t the right move and may ask Britain not to leave the EU with a lucrative trade deal.

Sources in the US said Biden's team is wary of Johnson due to his closeness with outgoing President Donald Trump and his 2016 infamous quote about Obama's "part-Kenyan" heritage.

Let’s discuss how a change of guard in the White House would affect the US-UK relations and also pave the way for bilateral trade.

Brexit Deal

Biden has shared great working relationships with all British prime ministers since the times of Magaret Thatcher but has not met Johnson, who has been compared to Trump for his policies and views.

One of the first things Biden would see under his presidency will be Brexit and the following trade deal with the EU which would come after the end of this year. Biden has made this clear during the election campaign that he is not keen on the UK leaving the EU. Biden had said that his team would not accept any deal that imperilled the 1998 Good Friday Agreement, a peace accord between Northern Ireland and the Republic of Ireland.

The agreement is said to be in risk after the UK government tabled the Internal Markets Bill. The Johnson government had introduced the bill in September as Johnson insisted, he wanted to ensure smooth trade across the UK in case there is no-deal Brexit. Experts say if the law is passed in the parliament, it will enable the Johnson government to violate parts of the Brexit withdrawal agreement reached with Brussels.

Biden’s outright support was welcomed by EU officials and is likely to put pressure on the UK government ahead of the 31 December deadline.

Geopolitical Relations

If one goes by Biden’s political records, it can be said that Biden is perceived to be a pragmatist and the relation between the US and the UK could prove stable and predictable than the previous Trump administration.

Trump’s ‘America First Policy’ is likely to be replaced by the one that sees the US's position in a multilateral, international system from which the UK can benefit. It is expected that under Biden’s government, the support for Nato, the World Health Organisation and the World Trade Organisation will be accelerated. All these world organisations are priorities for Britain.

The UK could also see support from the newly-elected Biden’s government on issues like keeping Russia and China out of the business arena. Also, both countries want to revamp the Iran nuclear deal and agree upon a new carbon emission cut.

Other crucial issues of common interests are climate change. Britain wants to use its chairmanship of the United Nations COP26 climate change summit in 2021 to establish a tie with the Biden government hoping to act as a negotiator for a further deal.

Future Free Trade Agreement

A trade deal with the newly elected US government will be the top priority of the Johnson government. Liz Truss, the secretary of international trade, suggested that the trade negotiations between the US and the UK, which started in May, are in its fifth stage at present. Truss said that Britain was in a good position to move ahead with the deal after the US elections and her department had agreed on a considerable part of the legal structure for a future agreement.

In March, the Department for International Trade had suggested that the trade deal between the US and the US would enhance Britain’s economy by only 0.16 per cent, or £3.4 billion, 15 years on from any deal.

Analysts say the above numbers merely make up for the loss of trade and other impacts on the businesses by Britain’s decision to divorce the European Union’s single market and customs union.

Below is a table that shows the trade value between the US and the UK

(Source: United States Trade Representative)

The UK is also already doing a fair amount of trade with the US, but it's not at the same level as with the EU. At present, the US is Britain's largest trading partner outside of the EU. In 2019, the UK-US trade deal volume was worth £220 billion, according to the Department for International Trade. Britain constitutes 4 per cent of the US exports with goods such as fossil fuels, gold, machinery and aircraft, while the UK is the fourth-largest provider of imported goods that accounts for 2.5 per cent of US imports.

A UK-based think tank Policy Exchange said in July that the trade deal with the US might not have translated into a bigger volume in terms of GBP, but it would present significant prospects in specific sectors. On average, the US tariffs are low, which could help the UK to boost its exports.

According to the Department for International Trade, the US collects around £451 million a year in tariffs on imports from UK goods.

Also read: How is the US presidential election result going to impact UK stock markets?

Conclusion:

The trade relations between the US and the UK could enhance their ties further, but it may not be a game-changer for Britain in the wake of Brexit. In some areas, the UK may be benefited. Like a trade deal could boost the UK agricultural prospects by cutting down taxes up to 17.6 per cent on cheese and British red meat and beef. This will enable British farmers to produce more goods and export to the US.

For the UK, the newly-elected US government could prove to be a good ally, but it will not make much difference to Britain's trade volumes, perhaps the country needs to rethink its trade deal with the EU to ensure its growth.