On the afternoon of May 11, the "Grandwin Trade & Business Roundtable(Session V): Analysis of the U.S.-UK Economic Prosperity Deal (EPD)" was successfully held. This salon was chaired by Lawyer Guan Jian, Director of Grandwin Law Firm, and was honored to invite Professor Du Ming from Durham Law School as the keynote speaker and Professor Yang Guohua from Tsinghua University Law School as the discussant. The event featured in-depth discussion and analysis centered on the recently concluded EPD agreement between the U.S. and the UK.

Review of Key Content of the U.S.-UK EPD Agreement

Professor Du Ming first reviewed the main contents of the U.S.-UK EPD agreement, which is divided into six parts.

The first part concerns tariff measures. Since trade between the U.S. and the UK is largely balanced without a significant trade deficit, the U.S. imposed a baseline 10% tariff on UK goods under its reciprocal tariff policy—the lowest tier among countries. The EPD did not eliminate these reciprocal tariffs but did reduce tariffs on specific industries such as automobiles, steel, aluminum, and pharmaceuticals. The U.S. committed to substantially lowering tariffs on steel, aluminum, pharmaceuticals, and other sectors, contingent upon findings from Section 232 investigations and meeting U.S. supply chain security requirements. Both sides also pledged to negotiate further tariff reductions in other industrial sectors. Regarding agriculture, the UK eliminated its 20% tariff on beef imports from the U.S., with a duty-free quota of 13,000 tons of beef granted to each other. The UK also granted the U.S. a duty-free quota of 1.4 billion liters for ethanol.

The second part involves areas where both parties committed to continued negotiations, covering agricultural trade, sanitary and phytosanitary (SPS) measures, international standard certifications, etc.

The third part focuses on digital trade, including trade in financial services, paperless trading in services, expedited customs procedures, etc. However, it does not mention the UK abolishing its digital services tax on tech companies.

The fourth part concerns economic security. It firstly emphasizes enhanced U.S.-UK cooperation on economic security, including regulating non-market economic practices in third-country markets, investment security reviews, export controls, ensuring the security of information and communications technology suppliers, etc. Secondly, it explicitly states that non-treaty country enterprises are not guaranteed non-discriminatory treatment in government procurement. Finally, both sides agree to cooperate in combating tariff evasion and illegal transshipment of goods. This part notably targets China.

The fifth part involves investment and trade to strengthen economic integration between the U.S. and the UK in critical sectors and the defense industrial base.

The sixth part addresses high-standard intellectual property, labor rights protection, and environmental protection.

Analysis of the U.S.-UK EPD Agreement

Subsequently, Professor Du Ming provided his analysis of the U.S.-UK EPD agreement.

He pointed out that the EPD is merely a memorandum-like economic agreement covering specific industrial sectors. It does not meet the requirements of GATT Article 24 and lacks legally binding force. Although not legally binding, its content clearly violates WTO agreements—because free trade agreements have thresholds. Agreements covering only one or a few sectors between individual countries are not permitted, as they contravene the Most-Favored-Nation (MFN) principle. Furthermore, even if this agreement is successfully adopted and implemented, UK goods exported to the U.S. would still face tariffs far exceeding those under the WTO framework.

Notably, the U.S. insisted on the 10% baseline reciprocal tariff within the EPD. This suggests that for the UK, the approach of first removing reciprocal tariffs and then negotiating is unrealistic. More noteworthy is that the UK did not insist on reciprocal tariff rates during the negotiations. The reasons behind this remain to be seen—whether it was due to already high tariffs on U.S. products, insufficient bargaining leverage, or other phased strategic considerations.

Judging from the agreement's content, Professor Du believes that the U.S. strategy of using economic pressure to force major concessions from other countries is unlikely to succeed. The EPD reflects two core U.S. demands in its new-era trade policy: first, expanding market access for U.S. products and reducing non-tariff barriers; second, restricting Chinese products under the guise of "supply chain security." The agreement explicitly includes provisions excluding Chinese products, but the specifics of implementation remain unclear.

Professor Du predicts that the U.S. is likely to replicate relevant clauses from the EPD in its future bilateral negotiations with Southeast Asian countries, Mexico, and others. However, while some countries might accept these "conceptual" rule frameworks, it does not mean they will fully align with the U.S. position in practice. Particularly, the EU has already expressed objections to the clauses excluding China and does not accept such overtly discriminatory arrangements.

Motivations for U.S. and UK Promotion of the EPD Agreement

Analyzing the motivations behind the U.S. and UK push for the EPD agreement, Professor Du Ming noted that it reflects multiple economic and political considerations for both countries.

From the U.S. perspective, despite the widespread controversy over its "reciprocal tariff" policy globally and its potentially damaging impact on global supply chains and the U.S. domestic economy, by reaching an agreement with the UK first, Washington hopes to create a favorable atmosphere for subsequent trade negotiations—especially with China—and establish a replicable negotiation template. Simultaneously, the then-Trump administration faced severe challenges both internationally and domestically and urgently needed a diplomatic achievement to counter external criticism. The conclusion of the EPD not only provided endorsement for its tough trade policy but also aimed to send an "America leads negotiations" signal to the international community, creating a demonstration effect.

For the UK, while the EPD lacks substantive legal force, it holds significant economic and political importance. On one hand, it helps stabilize some key industries and lays the groundwork for seeking a comprehensive U.S.-UK trade agreement post-Brexit. On the other hand, breaking the negotiation deadlock and obtaining a U.S. commitment to continued negotiations alleviated multiple domestic political pressures on the UK. Especially against the backdrop of UK political instability and declining support for the ruling party, reaching the agreement had a positive effect on the stability of the Labour government.

Furthermore, Professor Du pointed out that the UK has consistently adopted a pragmatic strategy, avoiding public criticism of the U.S. reciprocal tariff policy, reflecting its intent to seek flexible space in international maneuvering.

Deeper Issues Raised by the U.S.-UK EPD Agreement

Professor Du Ming further pointed out that the deeper issues triggered by the U.S.-UK EPD agreement extend far beyond the bilateral level. Its impact on the current international trade and economic system is equally significant and cannot be ignored.

Firstly, the agreement sets a "bad precedent" for other countries negotiating with the U.S., potentially granting the U.S. a stronger negotiation position, thereby exacerbating the fragmentation and asymmetry of global trade rules.

Secondly, as advocates and beneficiaries of the global free trade system, the U.S. and UK's choice to bypass the WTO mechanism and sign a non-legally binding intergovernmental memorandum actually deviates from the fundamental principles of international trade law they have long upheld, sending a worrying negative signal to the world.

Professor Du also raised a thought-provoking question: Against the backdrop of intensifying strategic competition among major powers, is international economic law undergoing a transformation from "hard law" to "soft law"? Does the U.S. and UK circumventing dispute settlement mechanisms and handling trade arrangements with informal documents mean that future trade relations between countries will rely more on political negotiations than legal rules?

Comments on the U.S.-UK EPD Agreement

In the subsequent commentary session, Professor Yang Guohua expressed high agreement with Professor Du Ming's remarks, noting that they provided a very valuable perspective from within the UK, aiding a more comprehensive understanding of the causes and effects of the U.S.-UK EPD agreement. He further expanded his analysis from four aspects.

Firstly, Professor Yang suggested comparing the current EPD with the UK government's published objectives for U.S.-UK Free Trade Agreement (FTA) negotiations from 2020. This comparison clearly shows that some of the UK's original goals remain unfulfilled. He pointed out that even within statements from the U.S. Trade Representative's office, one can sense that the U.S. side is not entirely satisfied with the current agreement's content. Therefore, while seen as an initial breakthrough from the deadlock, the agreement also provides important clues for predicting the direction of future U.S.-UK negotiations.

Secondly, Professor Yang particularly emphasized the appearance of "quantitative restriction" clauses in this agreement, considering them a clear violation of relevant WTO agreements. This raises a question worth深入追问: Why is the UK still willing to accept such arrangements?

He further pointed out that the UK's actions stand in stark contrast to the EU's stance. Faced with the U.S. "reciprocal tariff" policy, the EU not only immediately prepared countermeasures but also brought the U.S. case to the WTO, demonstrating its commitment to the multilateral trading system.

Finally, Professor Yang believes that this U.S.-UK EPD agreement can serve as a reference case for future Sino-U.S. economic and trade negotiations.