U.K. sets red lines on drug prices, food in U.S. trade talks

U.K. Prime Minister Boris Johnson’s government played its first move in trade negotiations with the U.S., insisting it will not give ground on politically sensitive issues including the price of drugs and animal welfare.

The Department for International Trade on Monday published its aims for the talks, which are a priority for Johnson after he led Britain out of the European Union to seek trade deals around the world, citing a U.S. accord as a key prize of Brexit.

But the negotiations come at a sensitive moment for the so-called special relationship between America and Britain. Links between the two old allies are under strain over a series of issues, most seriously Johnson’s decision to reject President Donald Trump’s request to ban China’s Huawei Technologies Co. from its next-generation broadband networks.

Published on Monday, the U.K. trade plan calls on the U.S. to end tariffs on steel and to drop the punitive levies on items such as Scotch whisky introduced after the World Trade Organization’s ruling on government subsidies to Airbus SE.

It also set red lines that reflect British concerns about a deal with the Trump administration, saying the running of the National Health Service and the price it pays for medicines will not be up for discussion.

No Compromise

On agriculture, where British voters have expressed concern about U.S. practices including washing chicken in chlorine, the document said: “We will not compromise on our high standards of food safety and animal welfare.” Negotiations are expected to begin this month.

“The negotiating objectives show the U.K. is going to take a pretty firm stance,” said Sam Lowe, trade expert at the Center for European Reform. “This will make getting a comprehensive trade deal done in the immediate future pretty difficult.”

The U.K. wants “best-in-class” rules on financial services market access. Financial services currently make up more than 20% of U.K. services exports to the U.S.

However the document also makes clear the limits of the benefits of the trade deal. At the upper end, it anticipates that tariff liberalization could save U.K. consumers up to 222 million pounds ($283 million) a year. That works out at 8 pounds per household. the upper bound for impact on gross domestic product is an addition of 0.16%, with an increase in wages of 0.2%. When the U.K. published its negotiating objectives for trade talks with the European Union last week, it didn’t include economic impacts.

U.S. Trade Representative Robert Lighthizer, who has been in the U.K. in recent days to help smooth over tensions and prepare for the talks, is scheduled to speak later on Monday in Oxford. Lighthizer met last week with British officials including U.K. International Trade Secretary Liz Truss.

While the U.S. accounts for less than 15% of Britain’s cross-border commerce in goods, the EU accounts for about 45% of Britain’s merchandise trade. In services trade, the EU accounts for about 43% versus the U.S.’s 21%, according to WTO data.