The US government has been privately pressing the UK in bilateral trade talks to make a choice between the US and China.
The US is seeking to insert a clause that would allow it to retreat from parts of the deal if Britain reaches a trade agreement with another country that the US did not approve.
The proposed clause made no mention specifically of China, but is seen by British diplomats in Washington as intended to be a lever to deter closer UK-China relations.
It had been seen by the UK as equivalent to the public pressure the US had been placing on Britain not to reach an agreement with Huawei to provide the UK’s 5G telecoms network.
Most of the controversy concerning the US-UK trade talks has so far focused on the prices of medicines, food standards and a digital tax.
The proposed clause is based on article 30 of the US-Mexico-Canada agreement that locks out non-market economies. Although the UK does not formally oppose such clauses, UK diplomats are worried that in the current context it would give the US extensive and unbalanced leverage over UK policy towards China.
UK diplomats are more broadly concerned that Donald Trump’s determination to use the coronavirus outbreak as a political stick with which to beat China, and secure his re-election, is going to place the UK government under intense external pressure to side with the US against China. Support for a stronger anti-China posture is growing across the Conservative benches.
The former chancellor George Osborne said he was nevertheless confident that Boris Johnson was not going to succumb, saying: “Curiously, the member of the cabinet most in favour of engagement with China is the prime minister. He is perfectly prepared to resist some of the pressure from his backbenches”.
Osborne, speaking at a Strand Group webinar, added: “Multilateralism is a way for countries to cooperate on shared objectives. You cannot have this and side with the US in isolating China from the global system. It is the longest continuously existing civilization in the world.”
Osborne recalled that when he was chancellor, Johnson, who at the time was mayor of London, accompanied him on a trip to China and fully understood the need for cooperation with Beijing.
In a Harvard Kennedy school of government paper jointly written by the former Treasury minister Ed Balls, the authors claim a full trade deal before the US residential election in November is impossible. They also suggest even a mini-deal might present a dilemma for the UK, since it could draw it into an emerging US foreign and economic policy based on anti-China bilateralism, and so close the door on plans for a global Britain.
The paper cites an unnamed UK government official saying: “The talks could conclude with a political statement that pulls the UK towards an anti-China, anti-cooperative view of the world.”
It also cites a UK finance official saying: “The US government seems to want to use the pandemic to cut off China from the global economy, to onshore manufacturing and redesign the global economy, to reprioritise around security while saying you can’t have China as part of the system because of how they behave. Is this electioneering rhetoric? Or is it potentially much more dangerous, a desire to have a different global economy where China isn’t part of the system?”
A foreign office official is quoted saying: “The strategy is not to leave the EU and find out that the US is setting the agenda and the UK is bound to the US because of a trade deal.”
Some UK officials believe there is still merit in the UK trying to reach a preliminary outline deal with China before the US Presidential elections in November arguing it will put pressure on the EU to reach a deal with the UK by the end of the deal. They also believe the prospect of a UK deal could also be used as leverage to persuade Trump to adopt a more multilateral approach to the Coronavirus crisis.