"How much legal structure will this deal have?" A trade lawyer at a famous company asked me yesterday, gesturing at a meeting at the conference table in front of him. “Same as this napkin.”
Even architects of a trade deal announced between the United States and the United Kingdom will not call it economic or legal aesthetics. There seems to be no even signed documents - purely to avoid the tariffs imposed by Donald Trump on steel and cars, the agreement is closer to a liberalization agreement between sovereign states than the protection payments to mob bosses.
Whether the deal is politically worth it is a calculation that only Sir Kyle Stemmer's British government can achieve. Of course, this has not given us more exporters to the UK market. But no matter the short-term benefits it brings to the UK, it does not do much for the integrity of the global trading system.
The UK is not even one of the economies most affected by Trump’s tariffs. Its automotive industry is largely export-oriented, but is primarily aimed at the EU: the United States is less than one-fifth of the UK's exports. It has a relatively small steel industry, less than 10% of transatlantic exports. And because it has little trade surplus with the United States, the UK is not threatened by so-called "countdown" tariffs, higher than the 10% baseline responsibility announced on April 2, and then suspended a week later. For example, the EU will face another 10 percentage points of tariff points if Trump has the courage to introduce it and risk another financial market collapse.
The new agreement poses a risk to the UK until a broader impact is considered. Given how eager Britain is to reach a deal, there is no guarantee that Trump will not come back. According to the poet Rudyard Kipling, things about Dane-Geld - the Middle Ages Anglo-Saxon England purchased the Viking invaders in the Medieval Kings - "Once you pay him the Dane, you will never get rid of the Danes".
During his first term, trading partners could make temporary deals with Trump, such as the "Phase One" agreement between the United States and China, and reasonably make sure they will stick with it. But, as Canada and Mexico can prove, second-year Trump is more capricious and has the responsibility to change the deal after it is said to have reached a deal. Although there is absolutely a lack of evidence in Canadian cases that there is a clear scale of this smuggling, these countries’ commitments are first rejected by Trump and then publicly rejected by Trump.
The deal with the UK should follow a full trade deal next year, but the country will now also have its own bargaining position. If these conversations don't go, Trump can withdraw these concessions at any time.
At the same time, the most important risk is not the UK itself, but the global trading system. Part of the deal involves reducing protections for imports including ethanol and beef, which, although not a formal legal trade agreement, has not been provided from other countries. Therefore, the UK undermined the principle of "most popular country" based on the multilateral trading system. Officials claim it is compatible with World Trade Organization rules, part of a wider package. If other countries want to make a fuss, the WTO dispute settlement hearing will be resolved soon. By accepting that it will continue to face a 10% benchmark tariff, the UK also puts it one-to-one recovery move.
When Britain leaves the EU, part of the ball is that it will be a strong and active advocate for free trade and multilateral rules. It will play a creative and catalytic role in the WTO to get rid of EU trade protectionism. When joining the Asia-Pacific CPTPP agreement, it will connect with the world's strong trade areas.
By putting pressure on us and rushing to trade quickly, the UK encourages others to do the same. In recent weeks, the EU and CPTPP have taken tentative actions to protect rules-based trading systems. China, Japan and the EU all boycott the US's rapid deal. China insists on negotiating the statement in its own way. The EU today revealed its latest list of retaliation targets against the United States. These efforts are now undermined.
Of course, Britain can make political choices. It has the option to pay. Currently, it has managed to escape the worst Trump tariffs. But the post-Brexit UK commitment will prove to be an unshakable anchor of the rules-based international trading system, which is weaker now than before.
alan.beattie@ft.com