Earlier this summer, British Prime Minister Rishi Sunak visited Washington, D.C., where he met with President Biden, members of Congress, and the U.S. business community.
During the trip, Sunak and Biden announced the Atlantic Declaration, intended to serve as a vector for the two countries to “build resilient, diversified, and secure supply chains and reduce strategic dependencies.”
Biden has pursued similar efforts with the United Kingdom before, as when he and former Prime Minister Boris Johnson announced the New Atlantic Charter in June 2021 to reaffirm and revitalize the bilateral relationship. While these efforts are welcome, and certainly come with flashy headlines, they do little to materially increase bilateral trade flows or improve the freedom of Americans and Brits to exchange with one another if there is not follow through.
The 2021 New Atlantic Charter did little to change the status quo because the Biden Administration has not made pursuing trade agreements a priority. A similar fate could befall the 2023 Atlantic Declaration. To follow through on both initiatives and strengthen economic ties, the United States should focus its efforts on two tasks: (1) remove the tariff rate quotas on UK imports of steel and aluminum; and (2) approve Trade Promotion Authority (TPA) for the United Kingdom and finish negotiating a free trade agreement (FTA).
The United States should be looking to import more from the UK than it did pre-pandemic, especially as the Administration seeks to diversify supply chains out of China.
The United States imposed tariffs of 25% on steel and 10% on aluminum imports in 2018 from nearly every country, arguing the imports threatened to impair U.S. national security. In March 2022, the Biden Administration replaced the tariffs on UK imports with a tariff rate quota (TRQ), which allows imports under the average import volumes of 2018 and 2019 to enter tariff-free.
While the change lessened the tariffs costs by an estimated $338 million, there are still higher barriers to trade now than there were before 2018. After all, any imports above those averages are subject to high tariffs. Additionally, TRQs themselves are a barrier to trade because they restrict imports by capping demand and penalizing increasing import levels. For American companies, TRQs can create uncertainty over whether imports will exceed the quota and limit the ability of those businesses to grow by limiting their access to greater imports.
In effect, these TRQs signal that growth in steel and aluminum imports from the UK is still a threat to U.S. national security. That couldn’t be further from the truth. The United States should be looking to import more from the UK than it did pre-pandemic, especially as the Administration seeks to diversify supply chains out of China. Removing the TRQs on steel and aluminum from the UK would only help that effort.
Another key way to increase bilateral trade and deepen U.S.-UK economic ties is to finalize and implement a U.S.-UK FTA. Such an agreement would grow both economies and ease trade by reducing and eliminating regulatory barriers. This agreement was being actively negotiated during the Trump Administration, but President Biden abandoned the talks upon taking office.
To add insult to injury, the tool to negotiate trade agreements and have them receive expedited approval in Congress, TPA, expired in July 2021. Legislation to have TPA for a U.S.-UK FTA has been introduced, but Congress has not acted on it. This is ostensibly because the Biden Administration has sought executive agreements and trade forums that exclude market access.
The New Atlantic Charter and the Atlantic Declaration make ambitious statements about the need to strengthen the U.S.-UK economic relationship, but without bold action these initiatives will not materially change the status quo.
Securing TPA for an FTA with the United Kingdom should be a priority for Congress. A UK-specific TPA wouldn’t require the Biden Administration to negotiate an FTA with the country, but it would send a clear signal to the Administration that this is where Congress thinks the Office of the U.S. Trade Representative should focus its resources. Moreover, trade agreements are a proven tool for strengthening supply chains.
The New Atlantic Charter and the Atlantic Declaration make ambitious statements about the need to strengthen the U.S.-UK economic relationship, but without bold action these initiatives will not materially change the status quo. Removing TRQ on UK steel and aluminum imports and negotiating and implementing a U.S.-UK FTA would make substantial progress in strengthening the bilateral economic relationship.
Tori K. Smith is Director of International Economic Policy at the American Action Forum. Her research focuses on international trade, the economic impacts of tariff and non-tariff barriers on American businesses and consumers, and the intersection of trade and broader international economic policy.