Brexit: in the hands of Congress

11/01/2020

It doesn't take a lot to work out that an early trade deal with the United States is not really on the cards. That much I took from Jeremy Warner and delved further in my own piece.

However, a core issue – according to Warner is that Trump , even if he was inclined to expend the political capital on talks with the UK, his mandate to negotiate, by virtue of the Trade Priorities and Accountability (TPA) Act of 2015 is about to expire. It certainly looks that way if you misread the date on this article, which tells us that the mandate expires on 1 July, unless the TPA is extended by Congress.

However, the Act refers to 1 July 2018, on the tail end of a convoluted procedure when President Trump had submit a report to Congress by 1 April, formally requesting an extension. The report had to contain a description of the trade agreements that have been negotiated so far under the current TPA and the schedule for submitting those agreements to Congress.

It had also to include a description of the progress in achieving Congress's negotiating objectives described in TPA and a statement that such progress justifies continuing negotiations. Additionally, there had to be a statement of the reasons why extension is needed to complete negotiations.

There were two other reports to Congress required, which had to be lodged by 1 June last year. The Advisory Committee for Trade Policy and Negotiations (an advisory committee to the president on trade issues) had submit a report giving its views on the progress in achieving Congress's negotiating objectives described in  the TPA and on whether the TPA should be extended. Then, the US International Trade Commission had to submit a report reviewing and analysing the economic impact of the agreements implemented so far under the current TPA.

Anyhow, just over a year ago, the President managed to tear himself away from Twitter long enough to make his extension request. The additional reports were lodged and the TPA was extended to 1 July 2021. That is just as well because the extension could have been blocked if either house of Congress has passed an extension disapproval resolution. As it stands, any Member of Congress may introduce such a disapproval resolution which meant that last year's April deadline came and went without much drama, despite being cited as one of the most significant dates this year for US trade policy.

Had it not been extended, this would effectively put on hold the United States' ability to enter into any new trade agreements until Congress passed a new authorisation for TPA - a politically challenging task. And this would likely have shelved any potential trade agreements with the United Kingdom.

However, Trump is not out of the woods yet. Even if a deal is concluded under this procedure, Congress must approve an implementing bill, bringing it into force. That is not a foregone conclusion when the Democrats have a majority in the House of Representatives and, in any case, this is an election year, which slows down the progress of the US government.

From a UK perspective, Johnson has a clear run to negotiate with the United States, although there is no certainty that a deal can be concluded as the end of the year approaches. Given that ratification can require 90 days in congress, the deal would need to be wrapped up by September.

It looks, therefore, that "team Johnson" could be in a position, if it so decides, of playing the US against the EU without knowing for certain that a US trade deal awaits at the end of the process. If he chooses to throw his weight behind a US deal, keeping to his truncated programme for the EU talks, he could find himself on 1 July, committed to that path, as after that date he will be unable to extend the transition period with the EU, in order to secure a better deal there.

The conundrum, though, is somewhat moot, if Johnson is maintaining his position that there will be no extension of the transition period. Nevertheless, before he burns his bridges completely, it would be helpful if he had some idea of where he stood with the US - and especially Congress - even if there can be no guarantees that the talks will be a success.

And, given that the negotiating objectives are substantial in effect, and talks can only start once the UK has left the EU, both parties will have their work cut out.

And that might explain the headline in the fanboy gazette which has Trump's ambassador to the UK, calling for the parties to work "day and night" to secure a trade deal.

This comes from a man who also, coincidentally, bears the surname Johnson, although he rejoices in the full name of Woody Johnson. He claims that an early deal will strengthen the UK's hand against the EU, which is unlikely to be the case. If anything, the more comprehensive the putative deal with the US, the less likely it is that we will get any concessions from the EU. The balance of advantage on an early deal is entirely in the US favour.

Unsurprisingly, therefore, "Woody" is describing Trump as "bullish" about the UK's post-Brexit chances, declaring that the President wanted a trade deal and that UK negotiators should "take him at his word". He adds: "Having a trade deal with the US and maybe the five eyes… will strengthen your hand when you are negotiating with your, you know, your closest geographically trading partner, which is the EU".

The Ambassador was also at pains to quash the claims made by Labour during the general election campaign that the US wanted to "buy" the NHS, asserting in a radio broadcast, "No, no and double no".

But any idea that this strengthens the UK position or, as prime minister Johnson appears to believe, applies pressure on Brussels, is strictly for the birds. As I recorded yesterday, Michel Barnier is entirely clear as to what he expects from the EU-UK negotiations, and is not likely to entertain a "bidding war" with the US.

Yet this is exactly how the situation is coming over. It is almost as if prime minister Johnson feels he can use a deal with the US as leverage, to extract better terms from the EU. But, if that is his perception, he could not be more wrong.

EU negotiators will themselves be fully aware of the constraints affecting the US and they will also be aware that they are able to offer a much firmer position than can the Americans, as a straight trade deal will not require ratification by the Member States. This actually gives the EU considerable leverage, perhaps even enough to force Johnson's hand on extending the transition period.

The thing here is that the EU is able to be far more flexible than the United States, trimming its ambitions to the time available, with a view to starting up fresh negotiations once the transition period has ended.

On the other hand, the United States is locked into seeking a comprehensive settlement, which is hardly attainable by September.

All of this hardly adds clarity to a complex field, where disinformation from the commentariat is rife, and the ignorance of some of the high-profile pundits is profound. Ironically, though, for all of the much-vaunted idea of taking back control, we are now at risk of being caught by competing priorities on different sides of the Atlantic.

Even with the best possible construction, the fate of a US deal lies entirely in the hands of the US Congress, with the House of Commons a mere spectator. No wonder Rees Mogg is giving MPs an extra four weeks off this year. The real power lies elsewhere.

Corrected text to account for the wrong date being used in the original.