UK and NAFTA Backgrounder
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The UK and NAFTA

Following receipt on November 18, 1999, of a Senate Finance Committee request, the US International Trade Commission (USITC) instituted an investigation on "The Impact on the U.S. Economy of Including the United Kingdom in a Free Trade Arrangement with the United States, Canada, and Mexico."

In its letter to USITC, the Committee stated that the U.S.-Canada Free Trade Agreement (CFTA) and the North American Free Trade Agreement (NAFTA) significantly helped trade expansion between the US and its North American trading partners, and that the Committee sought an analysis to determine whether the success of the CFTA and NAFTA can be replicated with other trading partners. The week of March 15 2000, a team of officials from USITC met UK officials from the Cabinet Office and the Foreign Office, as well as the TUC and CBI.

To estimate the effect of eliminating trade and investment barriers on the US and UK economies, USITC is conducting comparative statistical analysis using the most current data available on trade, investment, the barriers to these flows, and the trade and investment relationships between these countries and their other significant trading partners. Some sources indicate that the investigation is based on two "hypothetical models" which would see Britain either joining NAFTA as a member of the EU or abandoning the EU to join NAFTA.

The unofficial campaign by a Conservative faction to draw Britain into closer relations with the United States gained momentum the last week of June as four Republican senators arrived in London to make the case for British membership in NAFTA. The Tory defence spokesman, Iain Duncan-Smith, an advocate of closer ties with NAFTA, predictably said that the unofficial US delegation visit "shows it is becoming quite a serious issue".

Senator Phil Gramm, Chairman of the Senate Banking Committee, delivered a speech July 4 making the case for a UK- NAFTA link. This is an idea with some history, and Senator Gramm has been actively engaged in its promotion; he has made numerous references to it in the US Senate chamber, including a proposal in a speech to the U.S. Senate on April 12. In his view, UK membership in NAFTA would be "a first step to building a bridge between North America and Europe".

Senator Gramm held meetings over the July 1 weekend with Conservative politicians before delivering the speech to the equally conservative Centre for Policy Studies. Mr. Gramm was introduced by Conrad Black, a persistent advocate of Britain leaving Europe and joining NAFTA. Mr. Black is the Canadian owner of the Telegraph media group. The Telegraph engages in random acts of Eurobashing, as does its clever but rigid owner. Mr. Black is well known in Conservative Party circles, and has spoken at length on the subject in speeches before the Centre for Policy Studies.


"The more venerable among you would remember…President Roosevelt's dispatch to Mr. Churchill at the end of 1940 of the hand-written verse from Longfellow beginning "Sail on, oh Ship of State" which, he said, applied to both countries."

Conrad Black, lecture to the Centre for Policy Studies Annual Meeting, July 9 1998

Mr. Gramm's remarks focused on the need for global free trade in goods and financial services. A vocal critic of the protectionist aspects of EU trade policy, he also argued that, because Treaty of Rome provisions for negotiating trade matters collectively restricts the freedom of member states to do their own bilateral trade deals, the Treaty is inconsistent with WTO rules.

During Mr. Gramm's visit, the Centre released a study that indicated that on economic grounds - growth, taxation, earnings, and subsidies - NAFTA is a better deal for Britain than the EU's single market.


"Like Odysseus, you should tie yourself to the mast. Don't get drowned in mid-Atlantic."

Pascal Lamy, EC Trade Commissioner to Confederation of British Industry, London, July 6 2000

Two days later, Mr. Lamy did reference the discussion swirling in London media, but the subject was treated in a cursory fashion. Though this may mean that the EC does not want to be drawn too deeply into the issue, it may also indicate that DG1 regards it as a frivolous matter, a view expressed by the UK Foreign Office at the time of Mr. Gramm's visit. Mr. Lamy appears to have accepted British Foreign Office assurances that the NAFTA notion is farfetched, deserving of no detailed public response, and exceedingly manageable from London.

However, the division in the Labour government over European monetary integration, represented by the contending views of Foreign Secretary Robin Cook and Chancellor of the Exchequer George Brown, has been intensified by the growing NAFTA debate. The Conservative Party recognises the value of keeping the issue in play. Not only does it unsettle Mr. Blair's Cabinet, the UK public mood is grim on the question of the EU.

The EC released a poll at the end of July indicating UK public support for membership in the EU had dropped to its lowest level in 20 years, with just 25% of the population convinced that it is a good thing. The UK public's enthusiasm for joining the single currency has fallen away dramatically, and is at a three-year low. British support for joining the single currency now stands at 22%.

The situation in North America also is volatile. The US has supported British EU membership for 40 years, but the mood in Washington could shift after November. If George Bush wins in November, a new foreign trade policy orientation is assured. How Mr. Bush will wish to further define his father's NAFTA legacy remains to be seen.


"I would be willing to say that with a week's work I could offer an amendment in the Senate - and have it adopted - which would give the President the power, the mandate to begin to move towards negotiating a free trade agreement with the UK."

Senator Phil Gramm, Centre for Policy Studies, London, July 4, 2000

Mr. Gramm's views might become a White House agenda item with genuine repercussions on US-EU relations. Within the Republican Party there are influential thinkers, including Mr. Kissinger and his protégés, who believe it is in the US strategic interest to cultivate a closer relationship with the UK, and thereby undercut the EU's emergence in the twenty-first century as a global economic threat. Nor is there any assurance that a victory by the Gore Democrats will make this issue go away in US foreign policymaking circles.

In Canada, Preston Manning, while leader of the right wing opposition, argued in Parliament for embracing the UK in NAFTA. Manning's Canadian Alliance party, now under fresh leadership, is targeting voters in Central Canada, specifically southern Ontario, to give it a breakthrough in the next election, likely to be called either thus fall or next spring. Southern Ontario is the one place in Canada where 'Britain in NAFTA' has resonance. Even within the senior mandarinate in Ottawa there are wounds following the rebuff yet again this past spring to Canada's suggestion of a bilateral free trade agreement with the EU. It is generally understood that the government's subsequent decision to launch a Team Canada mission to Asia in 2000 was done to switch off the planned mission to Northern Europe.

One can therefore envision general election outcomes within the next twelve months in which advocates of the UK-NAFTA option control the levers of power in North America, or will have influence over those who do. The debate will be re-fueled later this month. USITC plans to submit its report by August 18, 2000.


ISSN 1492-7187, TRADE POLICY MONITOR, August 2000,
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