10th Report – US Economic Prosperity Deal

The United States is expanding the use of trade policy to advance its strategic and security objectives. It is therefore welcome that the United Kingdom has achieved the Economic Prosperity Deal representing a new phase of UK-US economic engagement. (Conclusion, Paragraph 26)

The UK must integrate economic engagement with the US into our broader geopolitical dialogue and minimise the risks of ad hoc, zero-sum bargaining with a far larger partner by now turning paper promises into binding bargains. The UK should de-risk future volatility in US-UK trade by developing deeper long-term industry partnerships in priority Industrial Strategy sectors and maximising alignment in our shared economic security objectives. In particular it is important the UK leverages the potential for a deeper US-UK partnership to ensure Western leadership over China in the race for technological supremacy—particularly in AI and defence tech, de- risked supply chains, and greater security for supplies of critical minerals. (Recommendation, Paragraph 27) General Terms of the Economic Prosperity Deal

We welcome the Government’s work to date in securing swift tariff relief for key sectors under the GT-EPD and acknowledge the progress made in challenging circumstances. However, we must acknowledge that UK exporters are now trading with our most significant single trading partner on terms which are worse than before President Trump came to office. Because ministers have not published an economic impact analysis—or a framework for assessing potential impacts—we cannot yet estimate the economic loss or gains from the GT-EPD. While implementation of some aspects of the agreement has commenced, many of the UK’s critical industries remain in a state of uncertainty about the future tariffs regimes they may face. It is also now clear that the UK has secured less favourable terms for some sectors than our much larger neighbours in the EU. Finally, 52 the future timetable for implementing measures that might be agreed in the GT-EPD is unclear. Together, these risks are increasing uncertainty for business. Uncertainty risks hurting, not helping, the appetite of business and investors to invest. (Conclusion, Paragraph 48)

We welcome the extension of the treaty parliamentary scrutiny period from 10 to 20 sitting days, as set out in the Trade Strategy. However, we regret that scrutiny of the GT-EPD are limited due to the trade-related provisions having been negotiated outside a formal treaty process, and that an economic impact analysis or framework has not been published. It remains unclear when the House will be able to debate the individual measures already implemented ahead of the finalisation of the Economic Prosperity Deal. (Conclusion, Paragraph 49)

Going forward, we recommend the Government now maximises pressure on the US, beginning during and continuing after the President’s State Visit, to agree final terms for a lasting, Economic Prosperity Deal that de-risks the threat of future sectoral tariffs, maximise predictability and that where the UK has secured terms which are second best to the EU, we aim to improve them. (Recommendation, Paragraph 50)

We recommend that whenever the Government makes substantive trade commitments, whatever form this takes, it must ensure that they are subject to full parliamentary scrutiny. (Recommendation, Paragraph 51)

We further recommend that the Government set out, in advance of ratification, a clear timetable for parliamentary scrutiny and stakeholder engagement and of any implementing measures, so that Members and affected sectors can assess the implications of the deal before it comes into force. (Recommendation, Paragraph 52)

Given the significance of the Economic Prosperity Deal for UK trade policy, the Government must ensure that time is made available in the House of Commons for a full debate on a substantive motion. (Recommendation, Paragraph 53) National and Sectoral Impact of the General Terms of the Economic Prosperity Deal

We agree with the UK automotive industry that the tariff reductions secured under the Economic Prosperity Deal are to be welcomed, but the benefits are constrained by the 100,000-vehicle quota and uncertainty around how it will be allocated. (Conclusion, Paragraph 61) 53

The Government must work with industry to closely monitor use of the 100,000-vehicle automotive quota under the GT-EPD, agree a clear, fair mechanism for its allocation and management, and, given the complementary nature of the US and UK automotive industries, ministers should advance arguments to expand the quota. (Recommendation, Paragraph 62)

While the General Terms of the Economic Prosperity Deal outline an intention to establish a tariff-reducing quota for UK steel and aluminium exports, no detailed agreement has yet been reached. Key issues remain unresolved including the size of the quota, which products will qualify and the conditions attached. This continued uncertainty is affecting planning and investment decisions in the sector. (Conclusion, Paragraph 73)

The Government must maximise pressure on the US to minimise tariffs for UK steel and aluminium producers and work to ensure that any final agreement reflects the realities of UK supply chains and the sector’s transition to low- carbon production. (Recommendation, Paragraph 74)

Furthermore, the Government must bring forward reforms to the operation of the Trade Remedy Authority in order to ensure that is capable of moving at the same speed as the EU in implementing trade defences against diverted products into the UK market. (Recommendation, Paragraph 75)

The Government must also continue to urgently engage with UK industry, and the US administration, to understand and address the full impact of steel and aluminium derivative products being subject to a 25% tariff. (Recommendation, Paragraph 76)

The Government should continue to press for clarity from the United States on the conditions attached to future preferential access for UK pharmaceutical exports, and, where appropriate, secure wider tariff relief for scientific and medical products. Given the positive outcome secured for the aerospace sector, the Government should seek a similar resolution for pharmaceuticals, recognising that both are traditionally tariff-free sectors. (Recommendation, Paragraph 82)

We were disappointed to hear that the Government were unable to provide support to the bioethanol industry to prevent the closure of the Vivergo plant. This has already had a substantial impact on domestic production capacity of bioethanol, associated supply chains, and the UK’s ability to produce CO₂ and animal feed as by-products. The Committee will continue to monitor the impacts of the GT-EPD closely, including the impact on the agriculture and bioethanol industry. (Conclusion, Paragraph 98) 54

We recommend that the Government continue to work urgently with the remaining UK bioethanol industry to co-design appropriate support measures. These should protect domestic production capacity and associated supply chains while medium-term supply side policies take effect. (Recommendation, Paragraph 99) Building towards the Economic Prosperity Deal

The Government must now drive forward further negotiations with the US to de-risk the threat of future tariffs, seek to match EU terms where those are preferential to those for the UK, lock in agreed tariff reductions and expanding co-operation. (Recommendation, Paragraph 104)

Further negotiations could benefit from being mission-focused, in order to avoid the pit-falls of ad-hoc zero sum negotiations. This should include, for example, fostering deeper integration of US and UK science, research and universities communities and convening the investment community to understand where potential new investment is greatest. The Government should commence use of the Industrial Strategy Council to convene business and industry partners and craft an ambitious vision for future US-UK trade cooperation. (Recommendation, Paragraph 105)

It is vital that the UK approaches the EPD not merely as a trade arrangement, but as a component of an economic and foreign policy strategy focused on ensuring Western leadership in the face of global competition, particularly from China. This strategy should be shaped by three frameworks: a. the priorities for growing the eight strategic sectors identified in the Industrial Strategy and Trade strategy; b. the Defence Industrial Strategy, which as we have recommended must contain a clear definition of the sovereign capabilities the UK seeks to on-shore, the capabilities we are content to trade for; and c. a clear-eyed assessment of risks to (i) critical supply chains, (ii) critical minerals, (iii) investment and (iv) export security as part of a wider economic security strategy. (Recommendation, Paragraph 106)

Any future digital trade provisions negotiated under the Economic Prosperity Deal should strike a careful balance: promoting AI adoption and cross-border collaboration to strengthen the Western technological 55 alliance, while safeguarding intellectual property, ensuring fair taxation, and enabling the development of sovereign UK AI capabilities. (Recommendation, Paragraph 116)

The Government should work closely with industry to ensure that closer UK– US alignment on economic security measures, such as investment screening and export controls, does not create unintended obstacles for legitimate trade and collaboration. It should provide clear guidance and consult widely with sectors most affected, including advanced technology and quantum industries. (Recommendation, Paragraph 124)

In line with the previous recommendations of this Committee, the Government should align with other countries to introduce mandatory human rights due diligence legislation, and consider new levers such as import bans on products from regions where forced labour prevails, as being introduced in the US and the EU. (Recommendation, Paragraph 129)

We recognise that the GT-EPD lays important foundations for reducing non- tariff barriers. The Committee urges Government to engage stakeholders early to ensure that future commitments protect UK standards while unlocking market access opportunities. (Recommendation, Paragraph 135)

The Committee will continue to monitor developments closely and expects the Government to ensure that the UK’s economic and strategic interests remain central to the negotiation of the full Economic Prosperity Deal. (Conclusion, Paragraph 140)

Looking ahead, future commitments in the potential Economic Prosperity Deal must balance opportunities for growth in digital trade, AI, and services with strong protections for UK standards, tax sovereignty, and critical domestic industries. (Recommendation, Paragraph 141) 56