U.S.-U.K. Think Tanks Collaborate to Produce the...

This week, a collaborative project spearheaded by the Initiative for Free Trade in London and the Cato Institute in Washington, D.C. presents its first fruit. With contributions from policy experts affiliated with 11 U.S. and U.K. think tanks, The Ideal U.S.-U.K. Free Trade Agreement: A Free Trader’s Perspective explains why real free-traders are often skeptical of free trade agreements and includes the proposed text of an agreement that would overcome those concerns.

The objective of the project culminating in the publication of this collaborative paper is to persuade policymakers and the public in both countries that a comprehensive bilateral trade and investment agreement removing all barriers to trade across all sectors of both economies without exception is in their best interests and to provide the blueprint of an agreement that would be the most liberalizing FTA in the world.

One of the best reasons is that it affords two of the world’s largest economies — both deeply committed to the institutions of free-market capitalism and the rule of law — the opportunity to break new ground and pioneer the rules of a genuinely liberalizing 21st-century trade agreement.

As the Trump Administration wraps up renegotiations of agreements with Korea, Canada, and Mexico, the focus of its trade policy should turn toward achieving freer trade and greater economic integration with the United Kingdom. As the U.K. government prepares to repatriate its authority over trade policymaking for the first time in 45 years, concluding and implementing a free trade agreement with the United States should be among its highest priorities.

In many respects, the U.S. and U.K. economies already benefit from a high level of economic integration. U.S. entities are the largest foreign direct investors in the United Kingdom, and U.K. entities account for the largest share of foreign direct investment in the United States. The value of the cumulative cross-border investment stands at nearly $1.3 trillion today with more than 1.1 million Americans working for British companies in the U.S. and nearly 1.5 million Britons working for U.S. companies in the U.K.

The agreement includes provisions that foreclose governments’ access to discriminatory protectionism and obligate the parties to refrain from backsliding. It achieves maximum market barrier reduction and enables the fullest expressions of market integration, while simultaneously preserving national sovereignty to legislate and regulate in ways that do not discriminate against imported goods, services, or capital.

Among the agreement’s many liberalizing features are provisions that:

Enshrine the “negative list” approach to liberalization across goods, services, investment, and government procurement, which is conducive to faster, broader, and deeper economic integration
Eliminate tariffs on nearly all goods upon entry into force
Permit free movement of British and American workers, conditioned on an offer of employment
Commit the parties to expedited customs clearance and administrative procedures
Mutually recognize professional qualifications and licenses
Mutually recognize the efficacy of conformity assessment, and equivalence provisions, which would allow companies to sell and operate in both markets by satisfying either Parties’ regulations in areas where there is agreement as to the objectives of the regulations
Are less restrictive on the use of inputs from third countries by lowering “rules of origin” thresholds that must be met to qualify for the agreement’s preferential terms
Preclude application of anti-dumping measures between the Parties
Preclude the use of investor-state dispute settlement
Provide for the accessions to the agreement of other Parties that can demonstrate willingness and capability to meet its market-liberalizing standards

The Cato Institute