Negotiations on a U.S.–U.K. Free Trade Agreement

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On March 29, the United Kingdom will leave the European Union. The U.S. should take advantage of the opportunities presented by Brexit by negotiating and implementing a U.S.–U.K. FTA. This deal would find broad support in the U.S. and strengthen the U.S.–U.K. Special Relationship. This past September, Heritage Foundation experts participated in drafting what an ideal U.S.–U.K. FTA would look like.¹

^{Daniel Ikenson, Simon Lester, and Daniel Hanna, eds., “The Ideal U.S.–UK Free Trade Agreement: A Free Trader’s Perspective,” Initiative for Free Trade and Cato Institute, 2018, https://object.cato.org/sites/cato.org/files/pubs/pdf/ideal-us-uk-free-trade-agreement-executive-summary-update.pdf (accessed January 8, 2019).}

A U.S.–U.K. FTA should:

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Eliminate tariffs and quotas on visible trade,
Ensure the continuation of the investment freedom that both countries enjoy, and
Develop systems of mutual recognition for standards in a few high-value areas.

Such a trade deal would be good for both nations, and would set a valuable example of liberalization for the rest of the world.

Time Is Short for Stopping Nord Stream II

The Nord Stream II, a pipeline project that would connect Germany with Russia, is neither economically necessary, nor is it geopolitically prudent. Rather, it is a political project to greatly increase European dependence on Russian gas, magnify Russia’s ability to use its European energy dominance as political trump card, and specifically undermine U.S. allies in Eastern and Central Europe. Russia’s Gazprom has begun building the pipeline alongside partner companies, including OMV (Austria), Engie (France), Uniper and Wintershall (Germany), and Royal Dutch Shell (Netherlands and the UK). Last week, EU Commissioner Guenther Oettinger stated that Nord Stream II “can no longer so easily be stopped.”²

^{“Tough to Stop Nord Stream 2 Now It’s Being Built–EU’s Oettinger,” Reuters, December 28, 2018, https://www.reuters.com/article/us-germany-russia-pipeline/tough-to-stop-nord-stream-2-now-its-being-built-eus-oettinger-idUSKCN1OR0YF (accessed January 8, 2019).}

The 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA) already authorized the President to impose sanctions on companies that assist Russia in constructing energy export pipelines.³

^{Eric Maurice, “US Yet to Push on Nord Stream 2 Sanctions,” EU Observer, March 20, 2018, https://euobserver.com/energy/141376 (accessed January 8, 2019), and Countering America’s Adversaries Through Sanctions Act, Public Law 115–44, Section 232, August 2, 2017, https://www.congress.gov/115/plaws/publ44/PLAW-115publ44.pdf (accessed January 9, 2019).}

While the U.S. has not imposed any sanctions on companies partnering on Nord Stream II, in April 2018, then-State Department spokesperson Heather Nauert, current nominee for U.S. Ambassador to the United Nations, stated that “we’ve been clear with the companies that work in that realm that those who work in Russian energy export pipeline business, that they’re engaging in a line of work that could subject them to sanctions.”⁴

^{Heather Nauert, State Department Press Briefing, April 13, 2018, https://www.state.gov/r/pa/prs/dpb/2018/04/280423.htm (accessed January 8, 2019).}

In November, U.S. Secretary of Energy Rick Perry reiterated that “sanctions were an option that the president maintained.”⁵

^{“U.S. Maintains Option of Sanctions Related to Nord Stream 2: Perry,” Reuters, November 8, 2018, https://www.reuters.com/article/us-energy-poland/u-s-maintains-option-of-sanctions-related-to-nord-stream-2-perry-idUSKBN1ND2CW (accessed January 8, 2019).}

The U.S. should continue to pressure the European Union and Germany to reverse course on Nord Stream II, and utilize the tools at its disposal to impose costs on companies that participate in the pipeline project. The U.S. should be clear that it views any potential Russian assurances to continue some gas transit through Ukraine as of dubious value, since they can be easily reversed once Russia accumulates increased leverage from a completed pipeline and decides the time is politically expedient to renege on prior assurances.

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