Does the new ‘trade deal’ with Florida mean Brexit Britain is finally making progress?

As the government proudly announces it has signed a trade and investment agreement with the Sunshine State, Sean O’Grady asks if this is really our first peak at Brexit’s ‘sunlit uplands’ or just more empty blue-sky thinking

The agreement is unlikely to lead to cheaper holidays for British citizens – though there are some positives (AP)

Kemi Badenoch, the business and trade secretary, has heralded a new “trade deal” with the state of Florida as a Brexit breakthrough and said that it “shows our US state-level strategy is working and delivering for UK firms, giving them a competitive edge in some of the most exciting markets in the world”.

Signed by the governor of Florida and presidential hopeful Ron DeSantis, the memorandum of understanding aims to raise trade and investment, particularly in such areas as space, AI and financial technology (fintech).

This is the seventh such agreement with an individual state – Indiana, North Carolina, South Carolina, Oklahoma, Utah and Washington preceded Florida. These territories have a combined GDP of £3.3 trillion, just less than the GDP of Germany. Next up could be Texas, California, Colorado, and Illinois.

Is this a big deal?

Not really. Florida’s £1 trillion economy is large and expanding, so there’s much scope for increased bilateral trade. The UK already sells lots of aero engines, alcoholic drinks, cars and yachts to the Sunshine State, and this agreement will vaguely encourage more companies and universities to develop transatlantic relationships – but in itself, the memorandum is virtually devoid of substance.

Thus, in due course, the state and the UK might, say, agree to recognise certain professional qualifications on a mutual basis. At that point, a Floridian dentist could come and practise lawfully in the UK, and vice versa, provided the immigration rules were satisfied.

Moreover, as with all such deals with individual states, there cannot be any provisions for, say, lowering tariffs or abolishing quotas. Under the US constitution, international trade is reserved to the United States Congress, and negotiations are carried out by the federal government. No state-level memorandum of understanding can override, for example, federal directions to favour US enterprises over foreign (eg British) ones.

Given the protectionist mood in both parties in the US, the chances of a UK-US trade deal are minimal, and will stay that way even if Donald Trump returns to the White House.

How does Florida compare with other trading partners?

Florida’s economy is about the size of Spain’s, but while Anglo-Spanish trade amounts to some £60bn, trade between the UK and Florida is far smaller, at around £4.7bn. Or, looking at it another way, Florida is about as important a trade partner to the UK as Slovakia. Given that the memorandum doesn’t cover important areas such as tariffs, the impact on British jobs and investment will likely be modest.

There is no official “impact assessment”, because it is not actually a trade deal, and it isn’t legally weak in any case. The agreement itself states: “This MOU [memorandum of understanding] is not intended to create any legal or financial obligations under state, national, or international law between the participants.”

Will it mean cheaper orange juice and holidays in Disneyland?

No.

So is there anything positive about it?

As the impact will be more on the service sector than on goods, the deal is well suited to the shape of the UK economy. As Badenoch says, sectors in which Florida is strong, such as space (the Kennedy Space Center), AI and fintech, are some of the fastest growing in the world economy, and anything that can link the UK to those dynamic areas must be good news.

British professionals and their enterprises may also benefit in indirect ways from working in Florida and with their Floridian counterparts.

Does it make a free trade deal with the US more likely?

It would be nice to think so, but the warming of relations with the Biden White House has been more important. As part of the Atlantic Declaration agreed in June, UK firms will now be able to benefit from “green” subsidies operated by the US.

As has been evident during the Obama, Trump and Biden administrations, the general mood in the US has been suspicious of free trade for some time. So state-level deals are about as good as it’s going to get. The UK-US free trade deal, virtually promised by the likes of Nigel Farage and Boris Johnson during the 2016 EU referendum, is as far away as ever.