British PM could struggle to negotiate good trade deal with president who has pledged to put America first

Appetite for a US trade deal with Britain appears as high in Washington as it is in London, according to interviews with politicians, with both governments anxious to demonstrate there is more to economic populism than simply a desire for protectionism.

But despite the political convergence indicated by Donald Trump’s election and the Brexit vote, Theresa May will discover the special relationship still has plenty of cracks and contradictions when she visits the White House on Friday.

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No amount of goodwill can disguise the blunt message of Trump’s inauguration speech, in which he promised: “From this day forward, it’s going to be only America first.” Instead, a challenging set of issues is likely to remain on the agenda as Britain seeks to outline the shape of any future trade agreement.

Economics

A major reason Trump favours bilateral trade negotiations over regional deals with Asia or Europe is that he views them as a better way for the US to leverage its economic clout. Despite Europe’s larger combined status, the US remains Britain’s largest single trading partner. The UK, by contrast, is only the seventh largest trading partner of the US and unlikely to be able to call the shots when it comes to the all-important harmonisation of regulations.

Washington wants a deal too though, especially after Trump abandoned the Trans-Pacific Partnership talks with Asian allies. Bob Corker, Republican chairman of the Senate foreign relations committee, believes a British trade agreement could serve as an alternative template. “If we set a high standard in this free trade agreement, it will be really helpful to as we try to negotiate other free trade agreements,” he said.

“It’s all about the symbolism,” said Edward Alden, a trade expert at the Council on Foreign Relations in Washington. “Trump has a very strong interest in treating the visit as positively as he can. He needs to demonstrate he is not purely anti-trade.”

British business lobbyists are also upbeat about the balance of power. The CBI notes that the UK is twice as big as the next largest inward investor to the US, with some £400bn of business investment and 1m jobs at stake in either direction. Unusually both countries have maintained rough parity in annual exports of good and services too.

Nonetheless, the political mood remains hostile to anything that looks like outsourcing, whatever the name of the country. “England is a lifelong ally,” said congressman Ruben Gallego, a Democrat from Arizona. “Our great and special relationship doesn’t extend to the point where I think we would allow the working class to be exploited or exported to keep that relationship with England.”

Immigration

Trickier negotiations are likely over immigration, where both governments are committed to taking back control over their borders and limiting the impact of overseas workers on domestic wage levels.

There is, of course, countervailing pressure from employers in both countries to make sure the supply of skilled labour does not dry up.

Downing Street has hinted that it would like to see an increase in high-skill visas in both directions as part of any US trade deal – working on the assumption that many of those willing to cross the Atlantic are relatively highly-paid professionals.

But both governments also leave themselves open to the charge that they seek a racially biased immigration policy if relaxation of US/UK rules comes at a time when the door is slammed shut to other countries.

Given Trump’s intransigence, May could find herself forced to make concessions simply to maintain current US visa access – making her domestic target of bringing down net migration to the UK even harder.

Finance

Hopes have risen in the City of London in recent days that an ambitious US trade deal involving financial services could help compensate for the expected loss of “passporting” rights with Europe.

Barack Obama kept financial services out of recent US-EU talks due to fears of undermining the Dodd Frank regulation he instituted after the banking crash. But Trump has committed to relaxing some of these rules anyway, possibly paving the way for both a degree of deregulation and closer links between Wall Street and the City.

The problem is both markets are already highly interdependent and experts are sceptical it will make that much difference. “I don’t think a US trade deal begins to offset the damage from losing European market access,” said Alden. “Proximity still matters and most trade is still regional.”

Both governments have also dropped hints of future cuts in corporation tax cuts – retaliation in Britain’s case if it gets a bad deal with Europe, but something that could become a race to the bottom if combined with tax cuts in the US.

Regulation

With tariffs on goods exports already low, the toughest of all trade challenges for UK-US negotiators will be so-called non-tariff barriers.

On the UK side, there are mounting worries that reducing barriers for US exporters inevitably means lowering British standards on environmental rules, food safety and drug regulation: allowing GM crops, hormone treated beef or bleach-washed chicken. The US pharmaceutical industry has also sought greater access to the NHS and more protection from cheap generic rivals.

But Trump has also pledged to curb US drug prices and the power of the pharma lobby. Industry sources argue there is little appetite within corporate America for challenging rules in what is still perceived as a relatively open UK market.

A growing fear in other direction is that Trump’s proposals for new “buy American” rules on federal procurement will bar UK companies from bidding on lucrative US contracts.

Campaigners on both sides of the Atlantic worry that dispute resolution provisions in the trade deals unfairly favour big business over consumer safety rights.

Either way, experts and politicians agree this is where the rub lies. “The biggest trade issue for me is not so much wages but the tax and regulatory compliance that goes into every good and consumable that we have,” said Mark Meadows a Republican congressman from North Carolina. “Sometimes we focus so much just on traded barriers and tariffs that we miss the majority of what makes up robust trade and we seem to leave those out of any agreement.”