US President Joe Biden’s upcoming European trip, where he will be popping in to see UK Prime Minister Rishi Sunak, will no doubt reinforce the optics of the “special relationship,” but simultaneously conceal the underlying fact that London needs Washington far more than vice versa.
Sunak was, of course, polite and diplomatic when signing in June with Biden the “Atlantic Declaration,” a watered-down version of a full-fledged free trade deal with the US. But the unilateral recalibration of UK-US ties was not hard to miss.
Sunak said a free trade agreement (FTA) was no longer “a priority” for either side and his officials said the declaration marked a “less sentimental and more pragmatic” approach to the UK-US “special relationship.”
For many, it was a watershed moment. The moment when Brexit’s dreams of unfettered UK global trade came crashing down to Earth. For others, it was simply a reminder that the UK outside the EU is weaker and less attractive to the US.
For Brexiteers in the UK, an FTA with the US was one of several promises made before and after the referendum in 2016 that have failed to come to fruition. A potential free trade deal with the US was widely seen as partly compensating for the loss of free access to the EU, the UK’s largest trading partner.
Why the UK is unable to get the US to sign free trade deal?
“Policy priorities in the US have changed…The US has moved away from the concept of traditional free trade agreements,” said Emanuel Adam from the BritishAmerican Business, a transatlantic trade association.
While the UK struggled to get former US President Donald Trump to walk the talk on his promise of a “massive” trade deal during his time in the White House, it hasn’t been any easier with President Biden at the helm. Protectionist pro-American trade policies remain the order of the day. Biden’s irritation with London’s inability to solve its “Irish question” after Brexit has also played a role.
“US trade policies have become fairly unsentimental self-interested and protectionist in tendency. And if they negotiate trade agreements at all they prefer larger partners with bigger markets, such as the EU,” former EU diplomat Albrecht Rothacher said.
What about US companies?
US businesses are losing confidence in the UK as a place to invest in as a result of Brexit, rising corporate taxes and a year of political turmoil in London, according to a survey by BritishAmerican Business and Bain & Company.
The survey of 56 US companies operating in Britain showed confidence in the UK falling for a third consecutive year.
Responding to the survey, the UK Department for Business and Trade said it was “not supported by the facts,” noting that the US had been the UK’s largest single investor for the last two decades.
What’s the ‘Atlantic Declaration?’
The declaration pledges to ease some trade barriers, strengthen defense industry links and set up a data protection deal. It also includes an agreement to collaborate on key industries — AI, 5G and 6G telecoms, quantum computing, semiconductors and engineering biology — and work on a trade pact on critical minerals, those used to make electric vehicles, solar panels, flatscreen TVs and so on.
The two nations also pledged to negotiate an agreement that would allow some British firms to access tax credits available under the USInflation Reduction Act (IRA).
Why does it matter?
Size and optics. For the UK, the declaration matters far more than for the US, though. About 12% of goods exports from the UK are shipped to the US, making it the country’s largest export destination.
The UK is the single largest European investor in the US, worth half a trillion dollars in 2019. UK firms employ 1.3 million Americans. A PwC survey last year ranked the UK as the most important market for US business leaders, overtaking China.
US foreign direct investments in the UK were valued at roughly $860 billion (€789 billion) in 2022. The UK was the seventh-largest goods export market for the US in 2022.
What free trade deals have the UK signed post-Brexit?
The UK left the EU in 2020, including leaving the single market and customs union.
Before Brexit, the UK was part of any trade deal the EU had with another country.
The UK now has trade deals with 71 countries, including many “rollover” agreements that carried over the previous relationships the UK had with countries as an EU member.
A free trade deal with Japan was signed in October 2020, UK’s first major trade agreement since leaving the EU.
The UK signed a free trade deal with Australia also in 2021 and New Zealand in February 2022 and talks with India began in early 2022, although no agreement has yet been reached.
A digital trade agreement with Singapore entered into force in June 2022 and a similar agreement with Ukraine was signed this March. Also in March, the UK announced an agreement to accede to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
Meanwhile, the UK has also adopted a state-level approach in the US and has signed memorandums of understanding (MOUs) with three US states: Indiana, North Carolina and South Carolina. The UK is discussing future agreements with Utah, Texas and California.
Earlier this year, the UK’s ex-trade minister Penny Mordaunt claimed that US state-level deals would pave the way for nationwide talks with the White House.
Edited by: Ashutosh Pandey
For all the latest business News Click Here
