Troubles Mount for U.K.-U.S. Alliance Ahead of Trade Talks

Tim Ross

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Britain and America suddenly seem to be fighting all the time. The so-called special relationship has been repeatedly tested this week -- and the timing is sensitive, just as Boris Johnson and President Donald Trump prepare to negotiate a major new trade deal.

The latest clash came late Thursday, when the Trump administration refused Johnson’s request to extradite the wife of a U.S. diplomat who was involved in a fatal car accident in the U.K. in August.

The death of teenager Harry Dunn in the crash is an emotive subject in the U.K., where Johnson’s government has argued that diplomatic immunity granted to the American driver, Anne Sacoolas, should be disregarded. The U.S. refusal dismayed Dunn’s family, who called on Johnson to stand up against the “lawless administration in Washington.”

“It’s one of the darkest days in the history of this special relationship,” Radd Seiger, a spokesman for the Dunn family, said on Friday. “Boris Johnson wanted to be prime minister and he is now being tested severely. I expect him today to rise to that challenge.”

Johnson’s government described the U.S. decision as “a denial of justice.”

‘Considering Options’

“We are now urgently considering our options,” Foreign Secretary Dominic Raab said in an emailed statement. Raab said he called U.S. Ambassador Woody Johnson to express the government’s “disappointment” and to explain that “the U.K. would have acted differently if this had been a U.K. diplomat serving in the U.S.”

The row blew up at the end of a week of flash points between London and Washington. They include Johnson’s plan to impose a digital services tax on Internet giants in April, the imminent decision on whether to allow Chinese firm Huawei Technologies Co. a role in Britain’s new wireless broadband networks, and talks on a new trade agreement.

U.K.’s Javid Snubs Trump Trade Offer, Saying EU Deal Comes First

As usual in recent British foreign policy, the crucial context is Brexit. The U.K. leaves the European Union in a week’s time, and will be free to negotiate new trade partnerships with countries outside the bloc. Top of that list is the U.S., and Trump has said he wants a sweeping new deal as soon as possible.

The two leaders still enjoy a strong personal rapport. Trump backed Johnson to be prime minister, and this week said he has “a lot of guts” and has “done a terrific job.” Trump also championed the Brexit campaign led by Johnson.

Time Pressure

But Johnson’s focus may well be elsewhere. He has just 11 months to settle the terms of the U.K.’s new relationship with the EU to avoid a cliff-edge at the end of year, when the transition period maintaining the status quo expires. U.K. Chancellor of the Exchequer Sajid Javid said this week the EU deal would have to take top priority.

That line irked Javid’s U.S. counterpart Steven Mnuchin, who travels to London this weekend. Preparatory talks between the two governments have been taking place for three years, and formal trade negotiations could start as soon as February.

Then there is the U.K.’s plan to push ahead with a tax on technology companies from April, despite a U.S. threat this week to retaliate with tariffs on any country that takes measures it regards as discriminating against American businesses.

“As a nation we decide our taxes, not the United States,” Theresa Villiers, a member of Johnson’s cabinet, told the BBC’s Question Time program late Thursday. Finding an international solution “is taking so long that we have to act domestically now,” she said.

The U.K. is also poised to defy intense U.S. lobbying by allowing Huawei to play a part in developing fifth-generation wireless broadband networks on the grounds that excluding the Chinese company would be too costly. Trump’s administration has warned that doing so would put intelligence-sharing between the allies at risk.

Officially, none of these points of dispute are linked to each other. Yet they provide a difficult political backdrop to what is likely to be a hard-edged negotiation over trade.

(Updates with Raab comment in sixth paragraph)

To contact the reporter on this story: Tim Ross in London at tross54@bloomberg.net

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Stuart Biggs, Alex Morales

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