The Trump administration earlier this month announced a new trade agreement between the United States and the United Kingdom. This initial pact should be a harbinger of additional “win-win” American trade deals with the UK and other countries. Such agreements, besides reducing tariffs, could emphasize the mutual elimination of anticompetitive market distortions (ACMDs). Eliminating ACMDs would provide a far greater spur to economic growth than mere tariff reductions.
The Agreement
The May 8 U.S.-UK accord does far more than merely reduce some tariffs (although significant tariff reductions in such areas as steel, aluminum, cars, beef, and pharmaceuticals are certainly beneficial).
As trade expert Shanker Singham explains, the pact is a broader framework agreement that points toward future negotiations regarding:
- free digital trade between the two nations;
- coordination on foreign-investment screening; and
- the elimination of technical barriers to trade, which are a type of ACMD.
The third category is particularly important. National requirements that imports must meet the same technical standards that are imposed on domestic producers are an especially pernicious sort of technical trade barrier. A future U.S.-UK agreement that provides for the mutual recognition of technical standards would eliminate a serious barrier to numerous cross-border transactions.
The paring back of additional ACMDs, through regulatory reforms in each country, could be the subject of additional U.S.-UK negotiations. In an April 2025 executive order, President Donald Trump already committed to unilaterally rolling back ACMDs embodied in anticompetitive federal regulations.
The Agreement in Context
The U.S.-UK pact is the first fruit of a new Trump trade strategy to use tariffs as an incentive to “cut deals” with individual nations whose trade practices are seen as harmful to the United States. It reflects the administration’s negative view of the approach taken in prior trade negotiations.
The U.S.-led post-World War II trade-liberalization negotiations under the General Agreement for Tariffs and Trade (and later the World Trade Organization) succeeded in reducing tariffs and various nontariff barriers at the border. Unfortunately, however, they made little progress in dismantling ACMDs.
ACMDs are internal (“behind the border”) government-imposed regulations, policies, or practices that distort the gains from open trade, competition on the merits, and property-rights protections. They favor certain firms or industries, rather than letting competition and consumer choice drive outcomes.
ACMDs have proliferated around the world, especially in the East Asian economies of Japan, Korea, and most notably China, driving their export-led growth models. These ACMDs have suppressed U.S. exports and contributed to rising imports, which have led to excessive supply absorbed by the U.S. consumer. ACMDs have also badly damaged the per-capital gross national product of the countries that engage in them.
The Competere consulting firm, led by Shanker Singham, has developed an economic model (the ACMD model) to measure the GDP-per-capita impact of ACMDs. The econometric model evaluates the effects on GDP growth of three sets of legal policies
(“pillars”) that support a competitive, high-growth economy: property-rights protection, domestic competition, and international competition. The model has been applied to assess GDP changes in multiple countries.
Significantly, improving a country’s ACMD index scores in domestic competition provides by far the largest boost to GDP per capita. Property-rights improvements come in second and international-trade improvements (such as tariff reductions) come in third. That means getting rid of anticompetitive regulatory restrictions provides the biggest bang for the buck.
Implications for Trade Negotiations
The implications of this model are clear. U.S. trade negotiators may want to use the carrot of American tariff reductions (coupled with the repeal of anticompetitive federal regulations) to achieve the elimination of significant foreign ACMDs.
To the extent this strategy succeeds, higher economic growth should accompany new export opportunities for U.S. firms. This would be an economic win-win for both the United States and its negotiating partners.
