They didn't offer that deal to our government. They simply said "No! We will not allow you to see anyone's data, even with a warrant from a court."
Apparently they are more willing to stand up to our government than they are the British government.
Again, I don’t think you fully understand what happened. The UK demanded it happen, and under UK law Apple has to comply with the request immediately, even while they try to appeal. Apple also can not make the request, or appeal public.
So the choice were either
1: Give the UK Govt access, not tell users what was happening, and appeal
2: Turn off the service publicly so users know their data is no longer safely encrypted
The second choice is clearly better for Apple users in the UK, who can now take measures to protect or remove online data.
Apples & Oranges: Individual iPhones are still fully encrypted (if the UK user chooses)(like the US case where Apple refused to help crack an encrypted phone for the FBI)...in this case it is the data flow back & forth from the Apple’s “cloud” to UK users phones and any “cloud back-ups” that can be “back-doored” by the UK law enforcement/government. (do “local” encrypted back-ups vs. “cloud” back-ups).