28 April 2020

LSE's Ryan: A Joe Biden Presidency and Congress May Block US-UK Post-Brexit Trade Deal

A No Deal Brexit scenario complicates the economic and political consequences for Ireland causing repercussions for trade negotiations between the UK and the US because of the historic commitment by the US to the peace process in Northern Ireland and the Irish-American vote in US national politics.

A Ticking Clock

The phenomenon of British exceptionalism towards the European Union has taken a new and dramatic turn. With the right-wing populist Boris Johnson taking the country’s premiership, Britain’s Trumpian moment has arrived. Having left the EU, the UK is now in the transition period that will last until the end of 2020 and negotiations on a trade agreement with the EU-27 are underway.

Brussels put the border on the island of Ireland, the only land border between the EU and UK, at the very heart of the exit negotiations with the UK government. Across the Atlantic, key political leaders were quick to raise their concerns over the potential negative impact of Brexit on the Good Friday Agreement. While Prime Minister Boris Johnson and US President Donald Trump have made bold statements about their ambitions of a US-UK free trade agreement, those plans may get hampered by the House of Representatives which has expressed its determination to preserve peace on the island of Ireland.

Starting in early March 2020, the talks about the future UK-EU relationship are taking place to the beat of a ticking clock. The deadline for Britain to request an extension to its post-Brexit transition period beyond the end of 2020 is on July 1, 2020 (to as late as the end of 2022). Johnson has indicated on various occasions that he will not extend the transition period and he has so far held that line even in light of COVID-19 disruptions to talks with the EU. As it stands, this means that when the UK’s post-Brexit transition period expires at the end of 2020, it will either have a future relationship deal in place or it will crash out with No Deal and trade with the EU on basic World Trade Organization terms. These are the same rules under which Britain currently operates much of its global trade, including with China, Russia and the United States, and is therefore a feasible default position.

No Deal?

A No Deal Brexit would mean a hard border between the Republic of Ireland and Northern Ireland and the ensuing economic and political upheaval could lead to calls for Northern Ireland to leave the UK. The Good Friday Agreement that brought peace to Northern Ireland states that the UK’s Northern Ireland secretary must enable a border poll if at any time it appears likely that the majority of voters would express a desire to form part of a united Ireland. With this in mind—the disintegration of the United Kingdom—the consequences of a No Deal Brexit would be stark with Northern Ireland leaving the UK.

A No Deal Brexit is an unpredictable outcome that poses a risk to global financial stability. Regardless of how EU leaders choose to answer the questions posed by Brexit, the instability and uncertainty will not end anytime soon. Britain became the first country ever to leave the 28-nation European Union. This heralds a transition period for Britain and the EU, during which their future relationship will be negotiated, particularly in trade.

If no satisfactory agreement between the UK and EU is found, the UK will leave the EU without a deal in place. While this would leave the UK free to pursue a domestic and international agenda without hindrance by EU rules, the immediate disruption, including an unavoidable hard border between Northern Ireland and Ireland, will make for a very uncomfortable position economically and politically for Prime Minister Boris Johnson and president Donald Trump. In any case the negotiations on a UK-US free trade deal have been postponed indefinitely due to the COVID-19 crisis and President Trump faces an election campaign. 

Democrats Turn Up the Heat

Speaking at a campaign event in South Carolina on 21 November 2019, Democratic Presidential candidate Joe Biden voiced his support for protecting the Good Friday Agreement and avoiding a return to a hard border after Brexit. Earlier, on 3 November 2019, the US House of Representatives voted in favour of a resolution which calls for strict adherence to the Good Friday Agreement during Brexit negotiations, and was passed by unanimous voice vote following a debate. The legislation urges the UK and the EU to ensure that Brexit does not threaten peace on the island of Ireland and strongly opposes the reintroduction of a hard border. The bill emphasises that any trade agreements between the US and the UK are contingent on meeting the Good Friday Agreement's obligations.

Trade negotiations with the US post-Brexit under any administration will be far more complex than the Johnson government has outlined to date. The added complexity over the border issue on the island of Ireland is something that the UK government may have chosen to downplay, but would be propelled into the limelight if a No Deal Brexit scenario came true.

 

Professor John Ryan is a Visiting Fellow at LSE IDEAS -London School of Economics and Political Science and a Network Research Fellow at CESifo, Munich, Germany.

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