British economy 'to grow 0.16% at best under US trade deal'
Admission lays bare limited benefits of ‘ambitious’ agreement with Donald Trump
The British economy would be at most 0.16% larger by the middle of the next decade under a comprehensive trade deal with the US, the government has admitted, laying bare the limited benefits from striking an agreement with Donald Trump.
In a Department for International Trade (DIT) document, designed to kick-start post-Brexit trade talks with the White House, the government said the British economy stood to benefit from an “ambitious and comprehensive” trade deal worth a fraction of GDP, equivalent to £3.4bn after 15 years.
Prompting warnings from economists that the benefits would be far outstripped by the losses from crashing out of the EU, the official analysis also showed that a more limited trade deal with the US would deliver benefits to the UK economy worth just 0.07% by the middle of the 2030s, or about £1.4bn.
The government had previously estimated the economy would be as much as 7.6% smaller should Britain leave the EU without a deal, and about 4.9% smaller under Boris Johnson’s preferred Canada-style agreement.
Dr Peter Holmes, an academic at the UK Trade Policy Observatory at Sussex University, said: “The numbers are very small. It just goes to show how tiny the gains are from an free trade agreement with the US compared to losing our present arrangements with the EU.”
Outlining the start of deeper talks with Washington, the UK government insisted it would not water down animal welfare standards or put the NHS up for sale to secure a trade deal with Trump.
However, the US trade representative Robert Lighthizer, speaking at an event in Oxford, immediately poured cold water on several aspects of the UK’s negotiating position.
He said he hoped the UK “doesn’t just adopt European standards” that ban the practice of washing chicken in chlorine or acid, and claimed the practice was a “labelling question” not a food health question.
“The US and the UK are not going to go separate ways based on chicken,” he told the Oxford Union.
He accepted that the UK was sensitive about access to the NHS but said it should be open to it. “We would expect that we should have access in the healthcare area to the respect that there’s private section competition,” he said.
He also dismissed the estimates of low economic growth in the UK negotiation paper, saying: “You can be fairly certain that whatever numbers people come up with they are not going to be accurate.”
The DIT document says the government is aiming to reduce tariffs and other barriers to trade, but without compromising standards.
Fears have been expressed that the UK is preparing to water down standards in areas including food production – for example on allowing imports of chlorinated chicken. But the document reiterates the Conservatives’ manifesto commitment that “in all of our trade negotiations, we will not compromise on our high environmental protection, animal welfare and food standards”.
Ending the ban on genetically modified (GM) food in the UK, which could lead to cheaper produce on supermarket shelves, was not explicitly ruled out in the document. Officials are said to be expecting to go into talks with the US backing up the pre-existing UK ban and the government noted GM food was not popular with some of those they consulted with.
It also insists that NHS drugs prices will not be up for negotiation, saying explicitly: “The price the NHS pays for drugs will not be on the table. The services the NHS provides will not be on the table.”
However the US negotiating mandate, published last year, pointed to public services as one area for potential liberalisation.
Talks around securing a new trade deal are expected to take several years, which may see conversations going beyond the president’s “fast track authority” period, which runs until June 2021. This means he can avoid Congress filibustering or amending a treaty struck with another country.
The document is being published on the same day that negotiations with the EU27 in Brussels over the future relationship kick off. Truss had argued the two processes should run simultaneously, believing that would maximise the UK’s leverage.
The government stresses the potential advantages of a deal, including potentially boosting exports of salmon, cheddar cheese and cars, claiming that “removing trade barriers with the US could deliver huge gains”.
In a Department for International Trade (DIT) document, designed to kick-start post-Brexit trade talks with the White House, the government said the British economy stood to benefit from an “ambitious and comprehensive” trade deal worth a fraction of GDP, equivalent to £3.4bn after 15 years.
Prompting warnings from economists that the benefits would be far outstripped by the losses from crashing out of the EU, the official analysis also showed that a more limited trade deal with the US would deliver benefits to the UK economy worth just 0.07% by the middle of the 2030s, or about £1.4bn.
The government had previously estimated the economy would be as much as 7.6% smaller should Britain leave the EU without a deal, and about 4.9% smaller under Boris Johnson’s preferred Canada-style agreement.
Dr Peter Holmes, an academic at the UK Trade Policy Observatory at Sussex University, said: “The numbers are very small. It just goes to show how tiny the gains are from an free trade agreement with the US compared to losing our present arrangements with the EU.”
Outlining the start of deeper talks with Washington, the UK government insisted it would not water down animal welfare standards or put the NHS up for sale to secure a trade deal with Trump.
However, the US trade representative Robert Lighthizer, speaking at an event in Oxford, immediately poured cold water on several aspects of the UK’s negotiating position.
He said he hoped the UK “doesn’t just adopt European standards” that ban the practice of washing chicken in chlorine or acid, and claimed the practice was a “labelling question” not a food health question.
“The US and the UK are not going to go separate ways based on chicken,” he told the Oxford Union.
He accepted that the UK was sensitive about access to the NHS but said it should be open to it. “We would expect that we should have access in the healthcare area to the respect that there’s private section competition,” he said.
He also dismissed the estimates of low economic growth in the UK negotiation paper, saying: “You can be fairly certain that whatever numbers people come up with they are not going to be accurate.”
The DIT document says the government is aiming to reduce tariffs and other barriers to trade, but without compromising standards.
Fears have been expressed that the UK is preparing to water down standards in areas including food production – for example on allowing imports of chlorinated chicken. But the document reiterates the Conservatives’ manifesto commitment that “in all of our trade negotiations, we will not compromise on our high environmental protection, animal welfare and food standards”.
Ending the ban on genetically modified (GM) food in the UK, which could lead to cheaper produce on supermarket shelves, was not explicitly ruled out in the document. Officials are said to be expecting to go into talks with the US backing up the pre-existing UK ban and the government noted GM food was not popular with some of those they consulted with.
It also insists that NHS drugs prices will not be up for negotiation, saying explicitly: “The price the NHS pays for drugs will not be on the table. The services the NHS provides will not be on the table.”
However the US negotiating mandate, published last year, pointed to public services as one area for potential liberalisation.
Talks around securing a new trade deal are expected to take several years, which may see conversations going beyond the president’s “fast track authority” period, which runs until June 2021. This means he can avoid Congress filibustering or amending a treaty struck with another country.
The document is being published on the same day that negotiations with the EU27 in Brussels over the future relationship kick off. Truss had argued the two processes should run simultaneously, believing that would maximise the UK’s leverage.
The government stresses the potential advantages of a deal, including potentially boosting exports of salmon, cheddar cheese and cars, claiming that “removing trade barriers with the US could deliver huge gains”.