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By Len Bracken
July 14 — The prospective trans-Atlantic trade deal could be less attractive without the U.K. in the European Union, a senior U.S. trade official said.
U.S. Trade Representative Michael Froman said July 14 that the U.S. certainly wants to continue to pursue Transatlantic Trade and Investment Partnership (TTIP) negotiations with the EU, but the June 23 vote by the U.K. to leave the EU (known as Brexit) could lead to “adjustments of offers and expectations” by the U.S. for it to be able to close the negotiations.
“What we're wrestling with is that the U.K. is a very significant part of the EU,” and Brexit could make TTIP “less attractive,” Froman said in a briefing with reporters hosted by the Christian Science Monitor.
He noted that the U.K. is the fifth largest economy in the world and the third largest in the EU, representing 25 percent of government procurement opportunities in the EU, which will be “taken off the table” by Brexit. This would have an effect on what the U.S. offers and what the EU would have to offer in the negotiations, he said without going into specifics of the confidential talks. Froman's office would not elaborate on his comments.
The U.K. also accounts for 45 percent of U.S. exports to the EU, he said: 20 percent of goods; 30 percent of services; 40 percent of aerospace; 26 percent of auto parts; and 48 percent of consumer goods, Froman said.
EU trade officials could not be reached for comment on Froman's statements.
“We do want to maintain and deepen our relationship with the U.K.,” he said in response to a question on a recently introduced congressional resolution for a U.S.-U.K. bilateral trade agreement (135 ITD, 7/14/16).
Froman said he was in discussions with his British counterparts as recently as July 13. The U.K. is permitted to have trade discussions while being a member of the EU, but the U.K. is not yet permitted to sign new trade agreements, he said, adding: “where discussions end and negotiations begin is, I think, a gray area.”
The top U.S. trade official said it is still unclear whether the U.K. will have sovereignty over tariffs once it leaves the EU, depending on the model the two sides agree to follow. In addition to a bilateral trade pact with the U.S., Froman said it is possible that the U.K. could rejoin the TTIP at some point in the future, or even the Trans-Pacific Partnership (TPP) agreement among the U.S. and 11 other Pacific Rim countries.
Froman was optimistic the TPP would be ratified by Congress in 2016, noting, in a reference to the presidential election, “if it’s not done this year, it’s quite unclear when it would get done, given the broader political developments.”
To that end, his office, working with lawmakers and stakeholders, has ironed out concerns voiced by the dairy, pork and financial services industries, which now support the pact. He said intellectual property rights protections for biologic drugs remain an outstanding issue and work continues with Congress and stakeholders to resolve the issue.
Froman said a key factor in the debate is that U.S. lawmakers do not want to cede the high ground on trade policy to China by foregoing passage of the TPP. This outcome that would “give the keys to the castle” to China by not executing the U.S. strategy of rebalancing toward Asia and allowing Beijing to execute its multi-pronged strategy. The TPP trade agreement is the “most concrete manifestation” of U.S. strategy, Froman said of the agreement that is pending congressional ratification.
Lawmakers are aware that U.S. allies and trading partners are afraid the U.S. won't be able to deliver, he said, saying China is moving ahead with its strategy. Beijing is in talks for its 16-nation regional trade agreement, the Regional Comprehensive Economic Partnership. It also is pursuing infrastructure development initiatives with some of its neighbors and making territorial claims in the South and East China seas.
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