Under the EU-UK provisional agreement, the UK and EU have tariff-free and quota-free access to each other’s markets. Considering the longstanding integration of trade and investment between the UK and the EU, this agreement marks a significant point in post-Brexit trade relations.
While the EU-UK Trade and Cooperation Agreement guarantees tariff-free access for products that meet required standards and simplifies customs requirements, it is not comparable to trade advantages held amongst EU members. The EU-UK Trade and Cooperation Agreement may result in trade complexities and some trade issues are indeterminate. For instance, the agreement’s limited treatment of sanitary and phytosanitary standards (SPS) raises questions regarding agricultural trade between the EU and the UK. Additionally, the USDA has advised that U.S. exporters should account for Rules of Origin (RoO) requirements which could impact certain third country goods re-exported between the UK and EU. The full implications of the EU-UK Trade and Cooperation Agreement and potential effects are yet to seen but should be monitored particularly with regard to U.S. exports to Europe.
Separately, prospects for a U.S.-UK free trade agreement are uncertain despite the U.S. and UK completing five rounds of negotiations in 2020. It is undetermined whether the Biden Administration will continue negotiations or what priority a UK agreement may have on the U.S. trade agenda considering other pending issues such as China or potential negotiations with the EU.
While the UK alone is a relatively small market considering the whole of U.S. agricultural exports, it is the largest market in Europe for U.S. consumer-oriented food and beverage exports assessed at about $1 billion per year by the USDA. Value-added food and beverage demand in the UK is conducive to a high-quality, premium products from the U.S. including specialty food products, fruit, nuts, and wine. It is possible that without a U.S.-UK agreement, growth opportunities could be tempered as U.S. products face competition in the UK from tariff-free products from the EU and FTA partners.