Written evidence – Centre for Inclusive Trade Policy (CITP) and UK Trade Policy Observatory (UKTPO) (UST0002)
This submission to the House of Lords’ International Agreements Committee inquiry, and the recommendations therein, are from the UKTPO and CITP. It is based on our research, evidence, and experience of trade and trade policy. Numerous publications regarding trade negotiations are available on the CITP and UKPTO website. We have tried to keep the discussion as concise as possible but with sufficient detail so as to be practically useful. We would be happy to
discuss / engage in more detail if requested.
The evidence was written by Achyuth Anil, Ingo Borchert, Peter Holmes, Emily Lydgate, Minako Morita-Jaeger, Sunayana Sasmal, and Maurizio Zanardi.
Key Findings and Recommendations:
The UK-US Economic Prosperity Deal (EPD) signals a marked shift in the United Kingdom’s stance—from strong support for a liberal, rules-based trading system towards “pragmatic patriotism.” The UK needs to find a consistent and credible
approach in dealing with its major trading partners that respects time tested multilateral rules.
The use, and potential proliferation, of narrow non-legally binding agreements like the EPD undermine the multilateral trading system founded on non-discrimination and the rule of law. It opens the door for economic warfare becoming the new reality where tariffs and trade actions could be unleashed at any time. This cannot be in the long- term interest of the UK as a small, open economy that lacks the economic heft of economies such as the US, EU, or China.
In a world of preferential deals with the United States, the repercussions flowing from one deal may affect other trading partners’ economic interests; the UK’s large preferential quota for US ethanol is a case in point. The disruption of supply chains that straddle several economies is also conceivable.
In prioritising a swift agreement with the United States, the UK may have secured some short-term gains but has missed a critical opportunity to demonstrate leadership in defending the international trading system through collective action.
Even if the UK preferred sectoral agreements for tariff commitments that may or may not be WTO consistent, the Government should be careful to include legally binding
obligations and enforcement mechanisms to safeguard any future agreements’ objectives and benefits.
The requirement for the UK, under the EPD, to align with the US approach to supply chain security risks alienate other key UK trading partners, in particular China. The UK should avoid negotiating commitments with the US to align with its requirements on Chinese trade controls and investment screening. It should ensure that its policies remain inclusive and avoid undermining broader trade relationships.
Similarly, the UK should avoid negotiating commitments, pursuant to the EPD, on mutual recognition of conformity assessment, mutual recognition, international standards, digital trade and SPS that prohibit closer cooperation with the EU on these issues.
The evidence was written by Achyuth Anil, Ingo Borchert, Peter Holmes, Emily Lydgate, Minako Morita-Jaeger, Sunayana Sasmal, and Maurizio Zanardi.
1) What do you see as the main benefits and drawbacks of the agreed terms in the ‘General Terms for the Economic Prosperity Deal’ between the UK and US?
The General Terms of the UK-US Economic Prosperity Deal, henceforth EPD, yields some important political and symbolic gains for the UK. It is the first and most complete ‘deal’ the Trump Administration negotiated pursuant to its introduction of reciprocal tariffs in April 2025. Economically, the EPD delivers tariff reductions preferentially for selected UK exports (manufactured vehicles, steel and aluminium, and aerospace products and aircraft engines) without compromising domestic regulatory standards (especially in sensitive areas such as agriculture).
However, the economic substance of the deal appears limited. It does little to reverse the broader trend of rising US protectionism, and further makes the UK’s economic advantages under the EPD in sectors such as steel, aluminium, and pharmaceuticals subject to US national security provisions under Section 232 investigations. A UK commitment to comply with US requirements on supply chain security (a term that is not defined and whose perceived remit could potentially be extended in future) in these sectors entails the risk of damaging the UK’s relationship with China economically and politically.
By granting preferential treatment to the US products, removing the UK’s 20% tariff on US beef and the introduction of a duty-free quota for US ethanol imports of up to 1.4 billion litres per annum, the UK also breaks its commitments to the Most-Favoured-Nation (MFN) principle of the WTO. This move adds to the risk of fragmentation of the multilateral trading system by incentivising bilateralism.
Lastly, the advantages secured under this deal are relative rather than absolute, as they depend heavily on the terms of future US deals with other countries (again, a pitfall of abandoning the MFN principle). In essence, the UK’s decision to “go first” may serve as a precedent that
weakens collective leverage and coordination among MFN-abiding states, with any competitive edge amounting to a beggar-thy-neighbour gain.
2) What are the implications of this agreement for the UK’s future trade relationships, including with the EU and other WTO members?
Trade policy in the US under the current Trump administration, with the threat of substantial bilateral tariff rates that have subsequently been paused, rescinded, altered, or renewed, is designed to pitch US trading partners against each other in a race to reach any kind of “deal” with the US to avert the most egregious economic consequences for their own economies. This kind of situation creates a collective action and coordination problem, and as a result, the US- UK EPD may almost certainly raise concerns among key partners, particularly the EU and China.
Here we highlight three implications for the UK’s future trade relationships. The first aspect is the UK’s increasing alignment with US strategic priorities—especially on China-related trade and investment policies. To the extent that the UK economy does depend on supply chains originating from, or involving, China, including its dependence on certain rare earths and other products, as-yet unspecified requirements on secure supply chains may have important ramifications for its future relationship with China.
Second, by breaking with the MFN principle, the UK risks signalling a departure from previously upheld multilateral commitments, potentially weakening its credibility in future trade
negotiations. This shift also contributes to the erosion of the WTO’s authority, as a G7 country
The evidence was written by Achyuth Anil, Ingo Borchert, Peter Holmes, Emily Lydgate, Minako Morita-Jaeger, Sunayana Sasmal, and Maurizio Zanardi.
actively engages in a bilateral arrangement that circumvents the multilateral system, further normalising such deviations at a time when other countries are also pursuing similar paths.
The EPD’s provision for a US duty free quota on bioethanol raises particular MFN issues, which are separate from the primary domestic impact of job losses in the two UK refineries. The main external impact will be on non-US exporters of ethanol. Whereas the US is by far the largest source of UK imports of ethanol (56% in value terms in 2022), followed by the Netherlands whose exports are duty free under the TCA, other countries also supply significant quantities of ethanol (Brazil, Ukraine, Norway, Kazakhstan and Poland; another 27% of UK imports between them).1 As the new US quota is approximately equal to total UK demand, these trading partners specifically are likely to be disadvantaged by this EPD provision.
Third, the EPD may potentially enhance the UK’s attractiveness as a destination for investment, particularly for firms seeking preferential access to the US market. If framed strategically, this could position the UK as a competitive entry point into transatlantic supply chains. Still, uncertainty surrounding parallel US negotiations, unilateral US decisions, and US inconsistency in upholding previously signed agreements (e.g., USMCA) may undermine this positive effect.
3) Is this approach compatible with the WTO Most Favoured Nation rules? If so, could you describe how? If not, could you assess the implications of this for the UK?
The EPD provides for selected preferential treatment and tariffs to be accorded by the UK and US to each other on specified products. As reasoned below, the approach taken in the EPD very likely constitutes a violation of the WTO’s non-discrimination principle.
Under Article I:1 of the GATT, WTO members must accord any advantage, favour, privilege, or immunity granted to the products of any country immediately and unconditionally to the like products of all other WTO members. Thus, bilateral tariff preferences are inconsistent with the MFN obligation unless justified under a WTO exception. WTO members may deviate from their obligation to accord MFN treatment in providing preferential treatment to one or more WTO members provided they satisfy the requirements provided in Article XXIV of the GATT. Article XXIV allows for the creation of free trade agreement (FTA) (and customs union) subject to, inter alia, the FTA covering “substantially all the trade” between the parties (GATT Article XXIV:8) and such FTA not raising the level of protection applied to non-participants prior to the FTA (GATT Article XXIV:5). Including as it does beef, ethanol, autos and steel, the EPD cannot be said to cover “substantially all the trade” between the UK and US. Moreover, the EPD is not an “agreement” or a binding treaty, nor does it—in and of itself—include tariff liberalization. Thus, a conservative and textual reading of the law would put the EPD outside the scope of
permissible regional integration formats envisaged under Article XXIV of the GATT. Therefore, providing preferential treatment whilst not being covered by Article XXIV in doing so is inconsistent with WTO rules.
In its newly published Trade Strategy, the UK has repeatedly affirmed its commitment to the multilateral trading system. Whereas the General Terms of the EPD may only describe the roadmap to a fuller agreement whose terms are unknown at this time, taking the mutual exchange of selected preferential treatment at face value, the UK has engaged with the US to secure exemptions from WTO-inconsistent tariffs through an arrangement that is not
1 Source: WITS trade statistics.
The evidence was written by Achyuth Anil, Ingo Borchert, Peter Holmes, Emily Lydgate, Minako Morita-Jaeger, Sunayana Sasmal, and Maurizio Zanardi.
compatible with non-discrimination as a foundational rule of the multilateral trading system. As such the UK’s commitment towards multilateralism rings hollow in light of the EPD.
It is furthermore important to note that the EPD is not a legally binding agreement. US Executive Orders by themselves are not an agreement between two sovereign states; they are unilateral
actions in the form of an amendment to the laws of the United States, putting into effect previously non-binding commitments. If the United States decided to renege on these commitments, the UK would have no further recourse under the EPD.2 This sets the trade
landscape to the pre-WTO era where economic heft dictates trade relations without the safety net of WTO rules and binding dispute settlement.
4) How can Parliament assess the value of the General Terms deal given it is not legally binding, and how should it seek to scrutinise future Agreements of this nature?
The advantages of a legally binding treaty in regulating tariffs and trade over non-legally binding arrangements are that they provide the economic, political, and strategic value of certainty and commitment, both for businesses and the UK Government.
As it stands, the UK has transposed some of its tariff commitments to the US through statutory instruments pursuant to a public announcement in June 2025, but these are difficult to locate. It is unclear how, whether, and at what timescale the UK will undertake the remaining commitments in the EPD, and when and how these will be subject to stakeholder input and Parliamentary scrutiny. The implication is to weaken the value of the EPD: its value is lost as
soon as one Party decides not to honour it.
The UK Parliament has the power to scrutinise treaties under the Constitutional Reform and
Governance Act 2010 (CRAG). Under CRAG, treaties that are subject to ratification must be laid before Parliament for a 21-day scrutiny period, during which Parliament may object to ratification. However, the EPD does not appear to constitute a treaty as it is not legally binding and therefore, Parliament may not be able to scrutinise the EPD following the CRAG procedure. Statutory backing for stronger Parliamentary scrutiny of all trade-related international arrangements would be desirable for the sake of accountability and much-needed transparency.
10) Do you have any concerns about the agreement and any future negotiations? If so, what steps could the Government take to mitigate any risks?
We have outlined above some of the risks for the UK stemming from the EPD’s breach of WTO rules and the lack of Parliamentary scrutiny.
More concretely, the EPD includes four paragraphs on “Addressing non-tariff barriers”, which provide for future talks and do not include any immediately binding new commitments. But they require very careful handling if the outcomes are to be in the UK interest, and raise particular concerns regarding future trade cooperation with the EU. One provision stipulates an “intent to accord to conformity assessment bodies of the other treatment no less favorable than that it
accords to conformity assessment bodies located in its own territory.” This means that the UK Accreditation Service must agree to approve the testing and certification carried out by US
2 The same is true, incidentally, if a US court were to rule the IEEPA tariffs as illegal, as the US Court of International Trade has recently ruled, even though that ruling has been appealed.
The evidence was written by Achyuth Anil, Ingo Borchert, Peter Holmes, Emily Lydgate, Minako Morita-Jaeger, Sunayana Sasmal, and Maurizio Zanardi.
based conformity assessment bodies provided they comply with the same mandatory standards as those in the UK. Although this does not call for any change in the standards required of conformity assessment and product quality and safety, there may be pressure on UKAS to approve bodies that are harder to scrutinise than UK based ones. US accreditation bodies are usually market driven and for-profit, which could jeopardise the Government’s aim for using regulatory dynamic alignment to achieve a mutual recognition agreement with the EU on conformity assessment.
Another EPD provision would go further in calling for extension of the principle of Mutual Recognition, the scope of which is not spelled out but it could pose risks for future market
access arrangements in the EU if the UK allows sales in the UK of goods tested by US bodies not recognised by the EU. The EPD also calls for negotiations “to discuss the principles and criteria used in order to recognize a standard as an international standard.” US and UK standards regimes are institutionally very different. The UK is part of the pan-European standards
organisations CEN and CENELEC and would have to exercise extreme caution to avoid using different definitions of “international standards” from those required by these bodies.
The EPD also calls for an ‘ambitious’ digital trade agreement. The UK currently has a data adequacy agreement with the EU, which requires alignment with the EU approach to data
privacy. Again, the US has a very different approach, and too many concessions to the US could cost the UK its free flow of data with the EU.
Finally, Para 2a says the two sides will work to facilitate agricultural market access, but affirms that “imported food and agricultural goods must comply with the importing country’s sanitary and phytosanitary (SPS) standards and other mutually agreed standards.” The “Update” to the EPD of June 20th repeats this. Maintaining this commitment is important as conceding to US demands in the area of SPS could make it very difficult, or impossible, to achieve the ‘common SPS area’ that the UK and EU committed to pursue in the May 2025 Common Understanding (para. 23-33).
12) What would you like to see in future trade agreements between the US and UK?
To qualify as a trade agreement, the EPD should evolve into a comprehensive commitment to reducing tariffs across a broad range of goods (i.e., “substantially all the trade” as per GATT Article XXIV).
A traditional FTA would include a wider set of “chapters” covering areas such as digital trade, services, labour mobility, and climate cooperation. This would reflect the modern scope of economic integration and maximise efficiency and mutual gains. That said, past UK-US negotiations have illustrated the challenges of achieving such breadth. For example, tensions had arisen in the past over the potential inclusion of UK healthcare services.
The Trump Administration is notoriously unpredictable and will require continued nimble responses from the UK Government. It has a relatively positive relationship with the US now, including on trade, a significant accomplishment. Tariff concessions made remain relatively balanced, aside from the 10 per cent reciprocal tariff being applied to the UK. This is all positive, but as we have outlined above, some difficult trade-offs may lie ahead, such as between trade ties with the US, China and the EU. If faced with these, the UK must ensure that it is not
prioritizing a good relationship with the US over all of its other trade partners, or its good citizenship in the global community.
11 July 2025
The evidence was written by Achyuth Anil, Ingo Borchert, Peter Holmes, Emily Lydgate, Minako Morita-Jaeger, Sunayana Sasmal, and Maurizio Zanardi.