Thursday, April 20, 2017

U.S.-UK Free Trade Agreement

Prospects for a bilateral free trade agreement (FTA) between the United States and the United Kingdom (UK) are of increasing interest for both sides. In a national referendum held on June 23, 2016, a majority of British voters supported the UK exiting the European Union (EU), a process known as “Brexit.” The Brexit referendum has prompted calls from some Members of Congress and the Trump Administration to launch U.S.-UK FTA negotiations, though some Members have moderated their support with calls to ensure that such negotiations do not constrain the promotion of broader transatlantic trade relations. On January 27, 2017, President Trump and UK Prime Minister Theresa May discussed how the two sides could launch high-level talks and “lay the groundwork” for a future U.S.-UK FTA. Negotiations on a bilateral FTA between the United States and UK would represent a change in U.S. transatlantic trade policy, which has recently focused on negotiating a U.S.-EU Transatlantic Trade and Investment Partnership (T-TIP) FTA.

Formal U.S.-UK FTA negotiations cannot start immediately. On March 29, 2017, Prime Minister May sent a letter to the European Council notifying it of the UK’s intention to leave the EU, triggering the two-year Article 50 exit process under the Treaty of the European Union. Until the UK formally exits, it remains a member of the EU, which retains exclusive competence over trade negotiations. During this time, and in the absence of any preferential trade agreement between the United States and the EU, World Trade Organization (WTO) parameters continue to govern U.S.-UK trade, as they do for U.S. trade with all other EU member states. In the meantime, the United States and the UK could pursue preliminary “informal” discussions on a potential bilateral FTA.

The prospects for a future U.S.-UK FTA depend on a number of variables, including the terms of the UK’s negotiated withdrawal from, and future trade relationship with, the EU, as well as the UK’s redefined terms of trade within the WTO. A U.S.-UK FTA could include reciprocal provisions to expand access to goods, services, agriculture, and government procurement markets; enhance and develop new bilateral trade-related rules and disciplines in areas such as intellectual property rights (IPR), investment, and digital trade; and cooperate on regulatory issues such as transparency and sector-specific concerns.

Congress has important legislative, oversight, and advisory responsibilities with respect to any potential U.S.-UK FTA. The U.S. Constitution grants Congress the power to regulate commerce with foreign nations. Congress also establishes overall U.S. trade negotiating objectives, which it updated in the 2015 Trade Promotion Authority (TPA) legislation (P.L. 114-26). In addition, Congress would need to approve future implementing legislation for a final U.S.-UK FTA to enter into force. Under TPA, an FTA could be eligible to receive expedited legislative consideration if Congress determines that the FTA advances trade negotiating objectives and satisfies TPA’s various other requirements, including notification to and consultations with Congress on the status of the negotiations.

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