With Brexit Done, Trump Sets Himself Up to Be Disruptor Again

LONDON (Capital Markets in Africa)- Donald Trump has spent the past four years lobbying unsolicited advice at British prime ministers on the best path forward for an exit from the European Union and holding out promises of a grand new trans-Atlantic trade alliance. Now that Brexit is official, though, Trump gets to really double down on a role he relishes: that of the geopolitical disruptor.

Just as Prime Minister Boris Johnson wants to use talks with the U.S. as a way to increase his leverage in trade discussions with the EU, Trump has made clear he sees a deal with the U.K. as an irresistible opportunity to poke a finger in the eye of an EU he has labeled “worse than China.”

“This deal has the potential to be far bigger and more lucrative than any deal that could be made with the EU,” the American president tweeted about the prospects for a U.S.-U.K. trade pact the night Johnson sealed his December election win and the fate of Brexit.

For people in Trump’s orbit, a deal with the U.K. represents an opportunity to strengthen commercial bonds with a country that U.S. administrations and businesses have long seen as a like-minded gateway to Europe.

It’s also a chance to respond to an aggressive expansion of its trade agreements in recent years by the EU that has broadened its influence on the rules governing the flows of everything from cars, wine and cheese to data into new frontiers in Japan, south-east Asia, and South America.

Both Trump and Johnson have signaled their desire to do a deal quickly. But there are also significant unanswered questions that appear to make that unlikely.

A plan for Johnson to visit Washington, and potentially launch negotiations as soon as this month, has not been finalized yet. Its timing hinges in part on an expected cabinet reshuffle by Johnson that could see him appoint a new trade minister.

Trump administration officials in recent months have signaled they would like to adopt a phased approach to negotiations, much as they have done with Japan and China. That might allow for quick wins in areas like digital trade, experts say. But the U.K. negotiation also marks the first chance the president and his team have to build a full trade deal from scratch and officials told members of Congress last week that their goal was to seal an all-encompassing agreement with the U.K. rather than a phased one, according to people familiar with the discussion.

Those may be Trump’s intentions, but there are also more immediate questions about the limits of his power over the U.K.

That was evident when Johnson’s government last week announced that it would use equipment provided by China’s Huawei Technologies Co. in its new 5G telecommunications network despite aggressive lobbying against such a move by the U.S., which accuses Huawei of being a conduit for Chinese espionage.

Some in the U.S. Congress immediately seized on that decision as a disastrous blow to the relationship. By allowing Huawei into the U.K.’s 5G network, Boris Johnson “has chosen the surveillance state over the special relationship,” Republican Liz Cheney, a backer of legislation that would block intelligence sharing with the U.K. if it went with Huawei, tweeted on Jan. 28.

Members of the Trump administration, however, quickly abandoned their threats to isolate the U.K. and stop sharing intelligence and turned to praise the strength of the relationship and the possibilities of a new trade deal.

“We intend to continue to take the relationship, which we think is in a fantastic place today and put it in an even better place in the weeks, months and years ahead,” Secretary of State Mike Pompeo, one of Trump’s leading Huawei hawks, said in London the day after the decision was announced, adding that the U.K. would be at the “front of the line” for a trade deal.

To some in Washington, that gentle reaction was a sign of what is already the Trump administration’s diminishing leverage.

“It feels like there was a lot of bark and not a lot of bite,” said Heather Conley, a former American diplomat who helped oversee policy toward Europe during the administration of George W. Bush.

DST Test
The next test is likely to be over the U.K.’s plans for a digital-services tax, which American policymakers believe would unfairly target U.S. tech giants.

“If the Trump administration cares at all about protecting American jobs in innovation and technology, it must precondition the launch of formal trade talks with assurances that the U.K. will not move forward with digital-services taxes that put a bull’s-eye on American employers,” said Ron Wyden, the top Democrat on the Senate Finance Committee, which oversees trade negotiations. “Any trade agreement must lock-in that pledge.”

For all the talk about a rapid U.S.-U.K. trade deal, it’s likely that a comprehensive agreement between the two allies will have to wait for Britain to sort out the questions still hanging over its future trade relationship with the EU and particularly how entwined it will remain with the European regulatory system.

Trump may be recognizing that. On the same day that Pompeo was promising the U.K. that it would be front of the line for trade negotiations, the president was telling a rally in Iowa that his own plan was to negotiate with the EU first. “Europe is next,” Trump told his supporters. “I wanted to finish China before I started in Europe. I like to do them one at a time.”

The amount of market access the U.K. is able to offer to U.S. agricultural and manufactured goods will depend on its relationship with the EU, said Stephen Vaughn, a former senior advisor to Robert Lighthizer, Trump’s trade czar and the man who will be leading talks with the U.K.

“Until everybody gets to the table and you see what each party is offering, I think it would be really premature to guess how everything is going to go,” he said.

The U.S. business community’s short-term interest appears to be focused on the U.K. and EU reaching their own agreement.

In a statement Friday, the U.S. Chamber of Commerce’s U.S.-U.K. Business Council urged the EU and Britain “to move quickly so that U.S. investors and exporters have the necessary clarity” and to extend a transition period due to expire at the end of 2020 as needed. The group wants “Washington and London to swiftly begin talks” at the same time.

Facing Opposition
Even when they get started, the negotiations with the U.K. are likely to be hard.

Johnson already faces public opposition in Britain to key U.S. demands, such as a dismantling of EU regulations that now block or slow sales of genetically modified crops, poultry washed in a chlorine solution and beef raised with hormones. There’s also suspicion in Britain that Washington may seek concessions in another sensitive area — foreign access to the National Health Service.

Trump also will face his own pressure from Congress and the business community to secure wins. Especially with the U.K. seen to be in a vulnerable position post-Brexit.

“The Trump administration will try to extract everything they can,” said Philip Levy, a former member of President George W. Bush’s council of economic advisers now at Flexport, a logistics company. That will include pushing for the U.K. to line up with the U.S. rather than EU regulation. “The U.S. is going to push and say, ‘you’ll eat your GMOs and you’ll like it’.”

Source: Bloomberg Business News