UK Seeking Lower Tariffs on Cashmere, Clothing, Cars, Cheddar, Machinery, End of Section 232/Airbus Tariffs

The United Kingdom government emphasized that its National Health Service will not pay more for drugs as a result of a U.S.-United Kingdom free trade deal, and that Britain “will not compromise on our high environmental protection, animal welfare and food standards.” The latter seems to be a reference to sanitary standards that frustrate U.S. exporters, such as a ban on anti-bacterial washes of chicken. The government issued its negotiating objectives and an analysis of the economic benefit to the U.K. of a free trade deal in the March 2 document.

British exports to America over the past year were 19.8% of U.K. exports, at a value of £220.9 billion. The analysis projected that bilateral trade could increase £15.3 billion in the long run.

U.S. Trade Representative Robert Lighthizer, in a speech the Oxford Union March 2, said the chlorine wash on U.S. chicken is not going to cause a breakdown in talks, according to Bloomberg coverage of the speech. “Science-based standards, and then consumer preference -- that’s what’s going to sort out this problem, and the United States and the U.K. are not going to go separate ways based on chicken,” he said.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters on a conference call March 3 that advances on agriculture are required to get a trade deal through the Senate. If pork, beef and poultry do not have more friendly treatment in the U.K. after it exits the European Union, that would be a problem for him. “Now I know that Lighthizer’s kind of taken a view different than mine, that we will negotiate and this issue would not sink a deal, but I’m sure he’s not implying there that ... he doesn’t have to make some progress on agriculture products,” he said. He also questioned why the U.K. would say that it needs to protect animal welfare and food safety when it comes to U.S. agriculture. “We have the highest quality products with the best standards of care in the world,” he said.

Tariff barriers are low between the U.S. and the U.K., which is currently covered by the EU's customs schedule. The simple average applied tariff on U.S. goods imported into the U.K. is 6%, and for U.K. goods exported to the U.S., this tariff is 4%. However, on a trade-weighted basis, the average tariff is 2% in both directions, the report said.

Still, the U.K. would like to lower U.S. tariffs on cars, machinery, cashmere, clothing, pharmaceuticals and dairy products, such as a 17.6% tariff on English cheddar. “Removing tariffs on ceramics, which face rates of up to 28%, or textiles, with tariffs of up to 32%, would make UK products significantly more competitive in the US,” the government said.

“Scotland is expected to be one of the parts of the UK to benefit most. An FTA could bolster existing trade in Scottish salmon and Scotch Whisky, while lowering tariffs on cashmere and clothing, and high quality meat,” the report said.

There are 25% tariffs on whisky now, because of the Airbus dispute. The U.K. says those tariffs should be removed. The U.K. estimated that U.S. importers of U.K. goods could pay £447 million less in tariffs, assuming “tariffs on sensitive sectors are retained.”

Non-tariff barriers matter, too, the U.K. says, saying that cars, the top goods export from the U.K. at 14% of all goods exports, face both tariffs and non-tariff barriers.

Members of the public brought up the Section 232 tariffs on U.K. steel and aluminum, and the report said that they “will expect to secure the swift removal of unjustified measures on exports of steel and aluminium originating in the UK pursuant to Section 232 of the US Trade Expansion Act of 1962 and address the treatment of UK products under future measures the United States may adopt.”

The public was also concerned about the impact on British producers if more cheap U.S. exports enter the U.K. “The Government will ensure a balanced approach to tariff negotiations that considers the interests of consumers, businesses, and industrial and agricultural producers potentially exposed to increased competition.”

They said they want the free-trade agreement to cover Northern Ireland, even though it's staying in the EU customs union, and would like to include the U.K.'s overseas territories “as appropriate.” That would include the British Virgin Islands, Bermuda, Turks and Caicos, and the Cayman Islands.