UK trade secretary Liam Fox wants a post-Brexit trade deal with the US to focus on the services sector, amid growing cabinet and business concern in Britain to an accord covering goods and agriculture.
Mr Fox’s allies say that a deal on services with the US is the big prize, acknowledging that an ambitious agreement in other areas could lead to bitter disputes with Washington over food imports, such as chicken dipped in chlorinated water.
One ally said that ultimately a trade deal on goods might be of “little value” and that the challenge was to unlock a services agreement, including financial services, adding: “That’s the big one.”
Meanwhile, the British Chambers of Commerce has told the Financial Times that it is “uneasy” over an early accord between London and Washington, partly because of fears that US companies with less onerous domestic regulation could out-compete their UK rivals.
The stakes are high. Mr Fox’s promise of a swift and lucrative UK-US trade deal was offered as one of the biggest prizes of Britain leaving the EU, which is scheduled to take place in March 2019.
But the complexities of concluding a UK-US agreement have become apparent in recent months.
Michael Gove, environment secretary, has said that the UK would not “compromise” its standards in pursuit of a trade deal. US-produced chlorine-dipped chicken, genetically modified crops and hormone-treated beef are potential flashpoints.
The US move last month to propose tariffs of more than 200 per cent on the C Series passenger jet made by Canada’s Bombardier, whose wings are made in Belfast, was a sign of the Trump administration’s tough trade strategy.
Any serious negotiations between the UK and the US on a trade deal are unlikely to start until 2019, when it becomes clearer to Washington what sort of access to the EU market the UK negotiates.
Mr Fox’s Department of International Trade declined to say whether goods and farm products would definitely be part of a trade deal with the US. “It’s too early to say exactly what would be covered in a comprehensive future deal,” said a spokeswoman.
She added that a joint trade working group was “looking at where we can deepen ties across the board, both for trade in goods and including increasing access for the strong and competitive UK services sector”.
Any move by the UK to exclude goods from a deal would risk dooming it in the eyes of the Trump administration, which has put the US manufacturing sector at the heart of its America First trade policy.
In 2016, the total goods trade between the US and UK was worth almost $110bn, according to US data. The trade in services, including tourism, was valued at $117.4bn.
Chad Bown, a trade expert at the Peterson Institute for International Economics, said that any services-only trade pact between the US and UK would be intensely complicated to negotiate and might hit prickly issues such as the movement of people.
“Any services deal that involves moving people would strike me as being less interesting to [Donald] Trump given his immigration crackdown and focus on manufacturing,” Mr Bown added.
Lord Mandelson, former EU trade commissioner, said: “Would the US go along with a deal that only covered services, given their strong agricultural and industrial interests? What would that leave us to negotiate over?
“Services deals are notoriously difficult to negotiate in a free-trade agreement, so much so that it has almost never happened.”
Mr Fox noted in a speech in Washington in July that almost 80 per cent of economic activity in the UK and US was services-based. While he was not “underplaying the importance of our trade in goods”, he said this was most important in deals with developing markets.
Adam Marshall, director-general of British Chambers of Commerce, said that he was “uneasy” about an early US trade deal, given that the UK would come to the talks with fewer experienced negotiators and less structural advantages.
He added that US companies started with lower regulatory costs and often had the advantage of “sheer size”, meaning they could out-compete British rivals and even buy out many in a “predatory” manner.
Mr Marshall said: “What we don’t need to do is a hasty free-trade deal that opens up the UK market to US competition and vice versa before we have found our feet.”
But any attempt to pursue services liberalisation through a bilateral deal with the US is likely to struggle.
This could be particularly the case in relation to financial and business services, the UK’s most important services area for export.
During the EU’s negotiations with Washington over the Transatlantic Trade and Investment Partnership, a pact for which talks started in 2013 but are now indefinitely stalled, the US refused to accept that financial services had any place in a trade deal.