Following a short inquiry into the
General Terms for the UK-US Economic Prosperity Deal (the
‘General Terms'), the Chair of the International Agreements
Committee has written to the Secretary of State for Business and
Trade setting out considerations for the Government's continued
engagement with the US in relation to trade. The new tariff
measures provide welcome relief to the automotive industry, the
letter says, but raise serious concerns about the health of the
multilateral trading system.
It is an achievement to agree the
first and to date only ‘deal' with the US since it introduced its
reciprocal tariffs in April 2025, but this was an exercise in
damage mitigation, the letter says. The positive economic impacts
of the ‘General Terms' are likely to be limited, and the letter
raises concerns about the implications for the UK's trade and
industrial strategies. For example, the letter warns against
signing up to vague commitments on US supply chain security
requirements, as is currently proposed. This step could undermine
the UK's wider trade relationships and limit its flexibility to
attract investment into vital
sectors.
The Government is at risk of breaching
its commitments at the WTO, the letter warns. By pursuing tariff
liberalisation in a non-binding, strictly sectoral agreement, the
UK is at risk of contributing to a fragmentation of the
multilateral system, and a move towards economic warfare. This
sits at odds with the Government's stated commitment to
multilateralism. The Committee warns about the "concerning
precedent” the UK may be setting for other countries by engaging
with the US in this way. While recognising the pragmatism that
has led to this approach, the Committee warns against implicitly
supporting the dismantling of the multilateral trading
system.
The letter
also:
-
asks that the Government monitor
the use of the new ‘first come first served' quota for the
automotive sector. The operation of this quota means that
exporters cannot know until shipments arrive whether or not
the quota has been used up. Larger firms may use the quota
more quickly, cutting smaller players out
, Chair of the House of Lords
International Agreements Committee
said:
“We recognise the challenging
circumstances the Government has been operating in. It is
commendable that the Government took swift action to find
solutions to the critical challenges facing the automotive and
steel industries in particular. However, we also heard in
evidence that these sectors rely every day on the rules-based
system for trade. It is important that the Government ensures
that it also caters to these vital long-term strategic concerns.
Our multilateral system serves us all. We must protect
it.
Similarly, we note that this form of
international agreement has limitations on a number of fronts. A
non-legally binding agreement like this one can offer only
limited stability for businesses. It also undermines Parliament's
scrutiny processes. We urge the Government to set out how it
intends future trade agreements with the US and trade agreements
of this kind more generally to be scrutinised by
Parliament.”
The full letter is available to read
on the committee's website.
