Britain facing uphill struggle for post-Brexit trade deals

The country has to address divergent US and European interests as it seeks to forge a post-EU future

Boris Johnson will face off against the UK's two largest trading partners as he attempts to negotiate the terms of future trade. AFP

British Prime Minister Boris Johnson faces a difficult task of securing quick trade agreements with its two significant partners, after insisting the UK would be leaving the European Union as soon as January 31.

The UK wants deals with the EU and the US, but is caught between their competing trade practices.

In a move that sent sterling tumbling, 10 Downing Street announced that "in all circumstances" the UK will leave the EU single market and customs union at the end of January. The 1.6 per cent plunge was the steepest in more than a year and wiped out gains made after Mr Johnson's landslide electoral victory last week.

A comprehensive free trade deal with the EU, the UK's largest trading partner, would encompass everything from financial services, tariffs, state aid rules to fishing – but Mr Johnson has insisted that the agreement would be completed by the end of 2020.

The EU hopes to start trade talks with Britain by March and this week made overtures to the incoming Conservative government.

A spokesman for the prime minister's office said Mr Johnson had spoken with EU Commission president Ursula von der Leyen this week, who agreed to work with "great energy" to work out the terms of the future relationship between the bloc and its departing member.

The US and EU have clashed over differing standards for food and agriculture. Getty Images

But trade deals usually take many years. The 2,000-page EU-Canada deal known as the Comprehensive Economic and Trade Agreement took seven years to negotiate.

After the UK leaves the EU on January 31, it enters a transition period in which it remains a member of the bloc in all but name, while both sides try to hammer out a deal on their post-Brexit relationship.

If the two parties fail to strike a deal and the transition period is not extended, then trade between the two would be conducted under the terms of the World Trade Organisation, which could be more burdensome for businesses.

The EU insists it will not seal a deal with a large, economically powerful neighbour without solid provisions to guarantee fair competition.

The bloc's demands will focus on environmental and labour standards, as well as state aid rules to ensure Britain cannot offer products in the single market at unfairly low prices.

Britain's conundrum is that it will be under pressure to loosen rules on agricultural and food standards to strike a trade deal with the US.

But this would cross a red line with the EU, which may restrict access to its market to protect its own producers. Fishing will be a particularly thorny issue as EU countries will no longer be allowed in British waters like now.

With industry supply chains in the EU crossing borders multiple times for products such as cars and medicines, agreeing to exact rules to designate where products come from – what regulations and taxes apply – will also be fraught.

"It will be very complicated. It's about an array of relations, in trade, in fishing and co-operation in security and foreign policy," German Chancellor Angela Merkel told an EU summit last week.

Mr Johnson and US President Donald Trump spoke on Monday and agreed on the need for continued close co-operation and to negotiate an "ambitious" free trade agreement between the two.

White House economic adviser Larry Kudlow said this week he would visit the UK in January for trade talks after Mr Johnson won the election.

“We look forward to a trade deal with Prime Minister Boris Johnson. We’ll probably get started on that very soon,” he said.

But significant hurdles remain for a future trade deal with the US, which in 2018 accounted for almost a fifth of Britain’s total exports.

The US and EU have clashed over diverging agricultural practices for decades, and the UK now finds itself pulled in both directions.

The British public has consistently voiced opposition to reduced food standards in the US with practices such as chlorine-washed chickens and hormone-treated beef. Methods that are outlawed in the European bloc.

Formal negotiations on any deal cannot begin until the UK leaves the EU, and when they do, Britain will be facing off against the “America first” policies of the Trump administration.