Our Opinion: 2017
UK/US Trade Deal : A big opportunity
I have just spent a week in the US and was surprised that there were two issues almost everyone I spoke to wanted to discuss : our view on Trump and, secondly, Brexit. I was surprised that the UK’s trading arrangements were such a cause for debate. However, it seems that many – in Los Angeles at least – see it as an opportunity to rekindle the US affection for Great Britain.
At the recent G20 summit last, Donald Trump, repeated his promise of making a free-trade deal with the UK a priority. That might mean a deal that’s ready to go in 2020. That is a big opportunity. And the UK have promptly dispatched its Trade Secretary, Dr Liam Fox, to Washington to start discussing the detail this week.
The US is, alongside China, the world’s largest economy. And as the proposed TTIP free-trade agreement between the US and the EU now looks to be dead, we can forget about the EU matching the UK’s access to that market any time soon. There is a lot to play for and could represent a significant boost to five industries in particular.
First, fashion. The textiles industry in the US is heavily protected, mainly because of low-cost competition from Asia. But you can’t have tariffs to protect against cheap imports without hitting expensive ones as well. The UK has some of the best designer labels in the world, as well as some traditional manufacturers with the kind of heritage that well-groomed American consumers aspire to. As barriers come down, the UK can hugely increase sales.
Second, culture. The UK is second only to the US itself in creative industries such as publishing, music and film. If we can harmonise legal standards, our firms can expand their presence massively in the US. There’s no reason why copyright and licensing laws should not be made compatible, as well as for public procurement in areas such as textbooks.
Third, airlines. Under the existing rules a carrier operating in the US has to be at least 75% American-owned. In a free-trade deal the UK’s pretty good airlines, from Easyjet to British Airways, should do well against their own, with quite a poor reputation. There is no reason why American flyers wouldn’t want either our cheap and cheerful budget operators, or more upmarket luxury flights. The US has also recently shown some determination to shake up its internal airlines recently.
Fourth, infrastructure. America has been hostile towards foreign ownership of infrastructure assets from ports to energy companies over the last 20 years. It likes to keep them under American ownership. But the UK has some big players in that industry as well, from Centrica
to National Grid to Severn Trent. Some, such as Centrica, already operate in the US – but it should be a lot easier for them to expand once we have a deal.
Finally, technology. The UK has one of the fastest-growing tech sectors after
the US itself, with app companies, fintech, and software businesses growing at rapid rates. Even better, the EU is increasingly at war with the American tech giants, constantly searching for new legal actions to take against them. But linking more closely with the US tech industry should strengthen the UK’s players, while giving them more access to that country’s 321 million English- speaking consumers. A free-trade deal can only accelerate its growth.
There will be threats as well.
The US has huge companies in agriculture, food, healthcare, technology and media, and as they win unfettered access to our market, some of our companies will find it hard to survive. Food companies, in particular, will be challenged by cheaper American rivals.
There will be losers as well as winners from any deal, and overall a US-UK trade deal will offer tremendous opportunities for companies and for investors in the businesses that stand to benefit.
The US is already the largest single destination for the UK’s exports, accounting for £45bn of sales in 2016, compared with £30bn for Germany, the next largest. But businesses will need to be ready to exploit these opportunities and the Government will need to support them. It is heartening that work has started on that now.
25th July 2017