By Stephen Fidler
LONDON -- British governments have struggled since World War II
to balance their skepticism and anxieties about European economic
and political integration with their worries about excessive
strategic dependence on the U.S.
Britain's departure from the European Union on Friday will mark
the next stage of that struggle, one likely to push the country
deeper into the arms of the U.S. The question for London is what
kind of partner the U.S. will be in the age of Donald Trump.
In some areas the two countries' relationship remains without
parallel -- particularly in intelligence sharing and in U.S.
cooperation over Britain's nuclear deterrent. Yet, rarely in the
recent past have there been so many tensions between the two
allies.
"I think the relationship with the U.S. is going to be tense and
strained," says Harold James, a Princeton University history
professor. "The old special relationship I don't think is viable
anymore."
After World War II, Britain initially spurned the nascent
European project, not having shared the psychological trauma
suffered across the rest of Western Europe, where nation states
were seen as having failed to uphold norms of decency and
humanity.
But the political establishment in London changed its mind as
European integration generated economic growth that was leaving
Britain behind, and worries grew about dependence on the U.S.
following the 1956 Suez debacle, when Washington's opposition
forced a humiliating retreat from Egypt by British forces. After
two failed attempts, Britain joined the EU in 1973.
Forty-seven years later, Brexit provides an opportunity for the
U.S. to pull Britain decisively away from the bloc, which Mr. Trump
says was set up to take advantage of the U.S.
The president has promised a "massive" trade deal with the U.K.
post-Brexit. Speaking last week, U.S. Treasury Secretary Steven
Mnuchin said a trade deal with the U.K. was "at the top of our
list."
"It's a big priority," Mr. Mnuchin said. "We hope to get it done
this year."
However, bilateral strains are evident across a range of issues
and it isn't clear that those tensions can be separated from a
trade agreement. Some officials hope the president's good
relationship with Prime Minister Boris Johnson will override any
obstacles -- but Mr. Trump's unpredictability means that few are
confident.
The U.K. is in the administration's sights over its plans to
impose a digital tax on technology companies and its decision to
use equipment from China's Huawei Technologies Co. in its 5G
telecoms network. Mr. Mnuchin said last week he hoped Britain and
Italy would suspend their digital taxes.
"If not, they'll find themselves faced with President Trump's
tariffs," he said.
British treasury chief Sajid Javid repeated afterward that
Britain would put in place its digital tax in April. Nonetheless,
the first collection of the tax won't be until April 2021, and
there is time before then to secure an international agreement that
would include the U.S. and resolve the dispute.
The U.K. is already facing U.S. tariffs over subsidies to the
European aircraft maker Airbus SE and could find itself hit by
tariffs, for example on cars, in Mr. Trump's trade dispute with the
EU, with which it remains associated commercially at least until
the end of the year.
Other potential disputes also loom, including a potential carbon
border tax. The U.K., like the EU, has committed to turning its
economy carbon-neutral by 2050. Peter Mandelson, a former Labour
cabinet minister and EU trade commissioner, says the U.K. is likely
to join the EU in imposing a carbon border levy to ensure
home-produced goods aren't undercut by carbon-intensive ones from
abroad.
The EU has said it would propose such a levy next year, and if
it is introduced, Mr. Mandelson predicts, the U.K. will follow
suit. The U.S. would take that, he says, as "a declaration of war"
in the trade arena.
Mr. Johnson has already come under U.S. pressure to fall in line
with its hard-line policies toward Iran, but he has so far stuck
closer to the position of his EU partners.
Mr. Trump is also taking aim at the World Trade Organization and
has neutered its dispute-settlement system just as the U.K. leaves
the world's biggest trading bloc and will increasingly depend on
the body. Meanwhile, the president has launched unprecedented
criticisms of the North Atlantic Treaty Organization that is a
critical pillar of U.K. security.
Mr. Johnson also has to strike a balance. Mr. Trump may not be
president in a year's time, and he won't want to overcommit to Mr.
Trump and damage the relationship with a Democratic successor.
Yet, for many people in Mr. Johnson's party who have campaigned
for Brexit, a trade agreement with the U.S. is a great prize.
Mr. Javid said last week that "having a free-trade agreement
between the sixth-largest and the largest economy will be good for
growth and good for jobs." But he suggested that a broad U.S. deal
this year would be difficult to achieve, as the U.K.'s trade
relationship with the EU would need to be settled first.
Its symbolic significance would likely outweigh its economic
importance, however. British government estimates show that trade
deals with Washington and a handful of other countries would add
just 0.2% to British gross domestic product.
A significant U.S. deal would inevitably involve the U.K.
allowing into the country U.S. food and other products that are
illegal in the EU. That would lead the EU to increase its border
controls in ways that heighten trade friction, pushing the U.K.
further from the EU's economic orbit and giving pro-Brexit
lawmakers the looser relationship they have long sought.
Write to Stephen Fidler at stephen.fidler@wsj.com
(END) Dow Jones Newswires
January 29, 2020 05:44 ET (10:44 GMT)
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