By Nancy Rosen, first-year law student at William & Mary Law School, Cameron Krause, first-year law student at William & Mary Law School, and Jenik Radon, adjunct Professor at the School of International and Public Affairs, Columbia University (see full bios at the end of the article).
With the Brexit withdrawal agreement concluded, the United States has an opportunity to finish what it started with the United Kingdom and create a strong free trade agreement—but questions abound. First, is it really an opportunity? Specifically, should it be a focus of US efforts? And should it be a priority before a free trade agreement is entered into with the EU, a much larger, and therefore more important trade partner of the US?
The US-UK trade agreement negotiations began, under the Trump administration, on May 5, 2020. The goal was ambitious: to complete the trade negotiations under the Trade Promotion Authority (TPA), an authority that allows the President “to enter into reciprocal trade agreements on reducing tariff and nontariff barriers,” which is set to lapse on July 1, 2021. Despite the TPA deadline looming, the negotiations seem to have lost priority under the Biden Administration. This is actually a welcomed policy shift for the simple reason that the US-UK agreement appears to follow the same old formula of other free trade agreements (FTAs), namely prioritizing and focusing on commercial issues over common good matters. For example, notwithstanding the present health challenges caused by the worldwide pandemic, the US has pressured the UK to change its medical system by having it effectively negate its drug pricing policy as established under its national health system. The result would be having the UK convert to a more Americanized, less restrictive pricing policy, and would give American pharmaceutical companies the ability to charge considerably higher prices for drugs in the UK than they can currently. One should question whether any trade agreement should be so encompassing as to effectively cancel or negate a system — in this case a national health system — and thereby impose a new, one can almost say alien, structure. This question takes on particular importance at a time when the world struggles, with particularly devastating effects in both the US and UK, to fight a pandemic.
As Brexit agreements take effect, the UK will find itself between a rock and hard place, trying to balance its economic relations, and governing regulations, with the EU and US. The UK needs to resolve a conflicting choice: maintain the stricter regulations of the EU or change its regulatory standards to be more similar to those of the US. This would have the most noticeable effect on pharmaceuticals and also on agriculture.
For the Trump administration, establishing higher profit margins for “Big Pharma” appeared to be a major goal of the US-UK trade agreement. Kim Darroch, former British Ambassador to the US, mentioned that a trade agreement with the US would likely have to include a loosening of pricing regulations on American pharmaceuticals. Pharmaceutical prices are heavily regulated in the UK via a two-pronged system. The first prong is the Voluntary Scheme for Branded Medicines Pricing and Access, an agreement between the UK Department of Health and Social Care (DHSC), the National Health Service Commissioning Board (NHS England), and the Association of the British Pharmaceutical Industry (ABPI); the agreement was signed in 2019 in order to implement price controls and spending caps on pharmaceuticals. As this prong is voluntary, the agreement is not binding, and constitutes a system that the US seeks to change through pressure. The second prong consists of statutory regulations on pharmaceutical prices, and applies to pharmaceutical companies that are not members of the aforementioned voluntary scheme. Changing this two-prong system would significantly, and negatively, impact the UK’s national healthcare system and increase the UK’s cost of health care. A study in the Journal of the Royal Society of Medicine estimated that the UK would have paid approximately £5.03 ($6.056) billion more for prescription drugs in 2018 had it paid the same amount as the US paid via Medicare. In the UK Department for International Trade’s report on its objectives for a US-UK trade agreement, the department notes its desire to avoid increased medicine prices for the NHS. Secretary of State for International Trade, Elizabeth Truss, even stated in a press release that “the NHS is not for sale,” indicating that the UK is likely to remain firmly opposed to this concession. The US pressure raises a host of questions, including ethical questions. Does the US really want to press a national health agency to radically change its structure? Specifically, does the US really want to force a country to give up its national public health system, which provides a public benefit of lower drug prices? And does the US really want to do so during a pandemic?
The US and UK are perhaps even further apart in their goals for a free trade agreement as it would relate to agricultural regulations. Food regulations in the US are much less stringent than those in the UK and EU. These differences are most noticeable in relation to the regulation of chlorinated chicken, nitrate-cured meats, pesticides, and GMOs. Using chlorine or similar chemicals to wash chicken before it is sold is a commonality in the US. Meats such as bacon and ham are cured with vegetable-derived nitrates, compounds that have been documented to create harmful carcinogens upon consumption. As they relate to pesticides, US regulations allow for the use of over seventy chemicals that are banned in the EU. And the widespread use and acceptance of GMOs in the US is a stark contrast to the still negative public opinion of the GMOs in the EU and UK, despite the possible cost savings that such crops could provide to UK farmers and consumers. The concern is that if allowed, these products will inundate UK markets and create health risks for UK citizens. Moreover, because US regulations on labeling and marketing are less strict, there is an increased chance that unassuming UK consumers will fall victim to inaccurate and misleading US packaging. The UK government has stated that products such as chlorinated chicken and nitrate-cured meat will not be allowed in a FTA with the US. However, such statements are words with teeth as the UK government “has refused to sign those pledges into law,” leaving the door wide-open for these products to be allowed into the country after future negotiations.
The disparity and conflict in regulations is concerning, in fact quite so. However, as President Biden has already made clear, his initial focus — rightly so — is going to be domestic, and on the pressing issue of COVID-19. This will give the Biden administration time to rethink the nature and real purpose of trade agreements, not just the UK agreement. The US can also take the time to learn from French President Macron’s approach. Macron adamantly advocated for climate change standards in the European Union–Mercosur free trade agreement. The Biden administration would do well to continue the vision of President Obama who wanted to have the Trans-Pacific Partnership set “‘a high-standard . . . trade deal that puts American workers first and makes sure we [the United States] write the rules of the road for trade in the 21st century.’”
To achieve this vision, the US needs to first focus on countering the COVID-19 pandemic. When the pandemic is under control, the US should prioritize trade talks with its important trade partner, the EU, and create a revitalized Transatlantic Trade and Investment Partnership (TTIP) in order to “confirm that America again wants to be an integral part of and active participant in the international community.” Such a prioritized focus could avert potential problems. For example, if the UK changed its agricultural standards to correspond to US standards, this would invariably clash with the agricultural standards the EU mandates and would conflict with what has been agreed to in the EU-UK agreement. With the EU being the UK’s biggest trading partner — in 2019 the “UK exports to the EU were £294 [$403.5] billion (43% of all UK exports); UK imports from the EU were £374 ($513.3) billion (52% of all UK imports)” — the UK is in effect between a rock and a hard place regarding how it should proceed with the US’s demand to change the UK’s more rigorous regulations. To avoid this conflict, the US should focus on first concluding a FTA with the EU.
The EU is a much larger exporter for the US, with the US exporting $336.73 billion of goods and services to the EU as compared to $69.08 billion to the UK. The EU is also a much more significant importer for the US compared to the UK, with the US importing $515.21 billion from the EU and only $63.22 billion from the UK. While it is important to note that the EU is a “union” of many countries, the overall economic impact of the EU clearly overshadows that of the UK and makes, or should make, entering a FTA with the EU a higher priority. Moreover, with President Biden having recommitted to the Paris Agreement on January 20, 2021, which will help restore US-EU relations, there is now an opportunity for a revitalized US-EU FTA to incorporate climate change as a condition in that agreement. The re-envisioned TTIP should also include robust support for other international obligations and stand as an example for future US agreements with the UK and other countries.
In refocusing on a US-EU FTA, and subsequently a US-UK FTA, the negotiations could stand to benefit from using the EU-Canada Comprehensive Economic and Trade Agreement (CETA) as a template of a functioning agreement emphasizing issues of public or common concern. For example, if the US agreed to accept the “precautionary principle” established in CETA, there would be no need to change a host of regulations in the EU or the UK. Moreover as noted by one of the authors of this article, the US’s acceptance of the precautionary principle would also be a sign of cultural respect. Resistance to agreeing to this will likely stem from US businesses which disfavor the different standards placed on their products, in particular by the precautionary principle, in order for them to be exported; this is a challenge that even President Obama faced. However, following in the precedential footsteps of CETA would likely have the benefit of resulting in a trade agreement being reached sooner as the parties use it as a reference point.
The transition of the US presidency and the concurring shift in international trade policy may well work in favor for both the US and the UK. President Biden’s delaying of negotiations on a US-UK FTA will allow both countries to focus on the more pressing matter of COVID-19. Prioritizing a US-EU FTA will then permit the US to establish a strong precedent and make the US-EU-UK a more uniform market which will result in more trade. As much as the “waiting game” may be disappointing, it offers the best chance to craft a better and good US-UK FTA. Therefore our recommendation is “not so fast!”
About the Authors
Nancy Rosen is a 1L at William & Mary Law School. She graduated summa cum laude and Phi Beta Kappa from Goucher College with degrees in International Relations and French. While at Goucher, Nancy studied abroad in Brussels, Belgium where she interned as a terrorism analyst at the European Strategic Intelligence and Security Center. Through these opportunities, Nancy became interested in international law and hopes to practice in international law with a focus on human rights, security, or terrorism.
Cameron Krause is a 1L at William & Mary Law School. He recently graduated from Rutgers University, where he studied Accounting and Political Science. At Rutgers, Cameron was heavily involved with the Institute for Domestic & International Affairs, a nonprofit organization aimed at educating students about international relations in a simulation format. He also took part in the European Summer Institute located in Kassel, Germany, where he learned about the dynamics of the European Union and the trend of euroscepticism. Cameron is currently interested in international law and business law, as well as the intersect between the two.
Jenik Radon, adjunct Professor at the School of International and Public Affairs (SIPA), Columbia University, is an international lawyer who has lectured and worked in over 70 countries, and has advised public authorities and civil society around the world on sustainable natural resource development, investment agreements, governance and business and human rights. He has been awarded the Cross Terra Mariana and the Cross of Service by Estonia and the Order of Honor by the republic of Georgia for his work.
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 Supply chains should develop uniform standards that are based on the “highest common denominator.” By establishing uniform standards, by nations integrating supply chains with uniform standards, all agreeing nations stand to build a proficient, common source of manufacturing and production built on the resources and processes of all. Not only would this streamline import and export processes, but the shared network would also prevent any country’s stockpile of goods from becoming isolated and depleted due to unforeseen circumstances, such as vaccines during a pandemic.
Citation for Cover Image
Adobe Stock; Parliament Magazine at https://www.theparliamentmagazine.eu/news/article/meps-debunk-postbrexit-usuk-trade-deal.