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Efforts to drop regulations in a bid to land a quick Free Trade Agreement (FTA) with the US could result in the erection of fresh trade barriers between the UK and the EU, the report claimed.
An in-depth 50 page examination of UK-US trade relations has highlighted the likely trade offs for the UK in securing an US FTA. Trying to build a closer relationship with the UK’s largest single-country trade partner could increase the size of the UK economy by 0.35pc of GDP but like all deal it would require "trade offs", the report warned.
UK exports to the US were worth £100bn in 2016, compared with £234bn to the EU in 2016, making any such trade off a difficult economic balancing act.
A range of experts told MPs there was a “binary choice” to either stay aligned with EU standards or shift to secure a trade deal with the US by aligning the UK with the US’s regulatory model, according to the report.
Committee chairman Angus MacNeil MP said: "Will the UK align its regulations with the US, and risk erecting impenetrable trade barriers with our other global partners, particularly the EU? If there is a clash between the regulatory regimes of the EU and the US, which does the Government plan to prioritise?
"These issues need to be worked out, not just before negotiating a deal with the US, but also before we finalise our future trading relationship with the EU."
However, Shanker Singham of the Institute for Economic Affairs, said that it was possible to find a way forward that did not restrict the UK to a binary choice.
It was a matter of “finding a way of having regulatory recognition inter-operationally with the European system while they are also able to inter-operate with the rest of the world”, Mr Singham said.
Prior to all negotiations, the Government should publish a trade policy strategy "which articulates its vision for how the UK will operate as an independent trading nation", the committee said. [...]
Data, a major concern for all UK firms rushing to comply with the EU’s General Data Protection Regulation (GDPR), could also present headaches for US-UK trade negotiations. Once the UK leaves the EU it will require a so-called adequacy agreement from the EU on data. Otherwise data flows between the EU and the UK would have to halt.
This is also a concern for the future UK-US trade relationship. Currently data is allowed to move between the US and EU, under the Privacy Shield agreement. Any deal with the UK would require a separate bilateral agreement.
Lessons from the failed negotiations on the Transatlantic Trade and Investment Partnership (TTIP) must also be heeded prior to new steps towards UK-US deal, the report warned.
TTIP included an Investor-State Dispute Settlement (ISDS). This aspect of the deal “killed TTIP” according to one expert Samuel Lowe.
An ISDS often includes protections for investors that are embedded within trade agreements, such as the Canadian trade deal with the EU. They allow each country to bring a case against the other directly, via international law, rather than through one or the other’s domestic courts. [...]