Speech adapted from BAB CEO Jeffries Briginshaw’s remarks delivered to International Chamber of Commerce on the occasion at the dinner of the ICC UK Governing Body and Policy Chairs
I am going to take as my starting place the two key points from the UK ICC Brexit position statement: First: Free trade matters, and second: inclusive free trade is important. I think that both statements are well judged, well timed and true.
Following the excitement surrounding the US election I risk disappointment, but I am not going to talk about a Trump ‘dividend’ which is the potential for a strong economic upside from fiscal stimulus and a deregulatory agenda in the United States. Nor am I am going to talk about the transition to Brexit here in the UK.
I will focus on three things:
1.The proposition that the US and the UK – and in particular the highly integrated British-American business community – have a role to play in shaping the global business environment.
2.I want to argue that the role for this community of common interest is to keep up the focus on shaping an inclusive trade agenda; and
3.What we might see in the US-UK context contributing to that dynamic.
I believe that transatlantic business does carry a ‘global value proposition’. This is more than a ‘CSR aspiration’ and is a well anchored one that creates and shares wealth. Indeed, it is a proposition responsive to expectations that there should be rules, and compliance with rules, across a whole range of risks and behaviors in our societies from food safety to ethics.
And globally-focused transatlantic business certainly seems comfortable with a diversity-enabled, innovation-hungry, ethics-compliant and democracy-inspired business model. In short, there is a value system behind the ‘playing to win mentality’ that our best companies exhibit in global markets.
It also adds up to a more expensive business model, now largely built into cost structures. But for this model to work, there’s a belief and a need that the playing field rules require that everyone else has to play by them too.
If transatlantic business is paying more to meet expectations, then so should everyone else.
That ‘strategic’ trade agenda continues to be one which supports a global trade order that is democracy-inspired and innovation-hungry, with the value system ‘locking in’ as the basis for rule making globally.
The Trump and Brexit phenomena constitute a ‘latest hit’ on a strategic trade agenda that has already been in retreat for some time now. The reason the strategic trade agenda is in retreat is because we have failed to deliver on the explicit link between the promises of globalization and the distribution of the benefits it can bring. In the US and the UK it is often felt that the benefits weren’t spread beyond a small group of folk perceived to be insiders, despite globalisation also lifting millions out of poverty around the world. For a long time, from Seattle to the financial crisis we have failed to heed the warning signs.
This year, people used the opportunity to vote to make us hear what they talk about. A majority of Brits and Americans who voted have said resoundingly ‘no more’.
This should have been obvious to us.
It should have been obvious when the £10 billion benefit to the UK economy promised as a UK economic base case for the Transatlantic Trade and Investment Partnership (TTIP) was quickly ‘translated’ by NGOs as offering the price of a cup of coffee per capita. In other words: nowhere close to the adjustment promise that would resonate in those communities missing out on the benefits from globalization.
So what does this mean in a US-UK context? If the strategic trade agenda has been weakened there is every prospect that a bilateral trade deal can still be a focus for good, I would argue.
But there is a significant policy challenge out there. An ideological fork in the road indeed is looming on trade. And there are questions we need to answer.
Are we for example to work for ‘inclusive trade’, to bring people into the promise of globalization or are we instead looking at another period of Reagan / Thatcher style neo-liberal supercharging of trade and investment, as a doubling down globalization, with a few more ‘cups of coffee’, as it were, on trickle down ?
The strategic trade agenda’s interest is in the former I would argue, but we should also take comfort that the US-UK economy in either context is always going to be a part of the solution and not the problem.
So let’s turn to a potential US-UK trade deal.
Let me start by reminding everyone about the significance of the US UK economic relationship with some of the highlights:
- 16-20% of total UK exports
- 1 million jobs in both economies
- Approximately 1 trillion dollars in foreign direct investment shared between the two economies
- Billions of dollars of trade a year
A US-UK Free Trade Agreement (FTA) is relevant as a vehicle to boost those numbers, especially if we can reduce barriers such as those routinely faced by SME’s with duplicate regulatory standards and customs complexity. And it would move the macro ‘dial’ just by its scale alone in ways that no other bilateral fta can do, for the UK at least. But the questions around when, what and how still remain.
Political momentum appears better with President-elect Trump, but the trade ‘bureaucracy’ does not move quickly and is still built on demand for multilateral, regional trade agreements. We have yet to see how quickly the US approach to trade agreements will change but can be sure that the next Administration is not setting up for business as usual. So it might be quicker than we think.
Brexit certainly complicates but also changes matters by posing a new, pretty well connected ’demandeur’ for a bilateral trade deal, particularly with the US.
In this context BritishAmerican Business is raising the prospect of an informal trade dialogue at ministerial level between the US and UK before any formal UK trade competence crystallizes. We know this formal part may take years but business can be a valuable stakeholder amongst others in shaping the debate from now forward.
A possible future FTA has to be imaginative. We have to look for things that our citizens care about to build ‘millennial-facing’, local, and nation to nation elements for such a deal.
It is squarely in the interests of the UK to frame this conversation as being ‘next generation’ ‘millennial’ and ‘inclusive’. A standard FTA template and mercantilist negotiating mindset will highlight the UK’s relative lack of bargaining strength because it has an economy six times smaller than the US. Which means that to an American every bit of UK market access in the US is in theory worth six times more than every piece of US market access in the UK. Just saying.
A good starting point would be using TTIP and NAFTA templates, both of which may have an intersecting role to play in the future. But we do need to add imagination.
We need to get ahead of the curve on obvious problem areas like NHS, Food Safety and Investor-State Dispute Resolution for the UK. And there are ways of building public confidence right now if we really want to get serious about delivering a bilateral trade deal with the US. And we have to give specific, tangible and most importantly local stories instead of the same tired, old GDP forecasts. ‘Evidence’ is crucial, but it does not have to be the driving element of the communication of benefits. And we have to take the story on the road, beyond the beltways, to our hard working communities in the ‘trade towns’ where economics happens and talk, and listen.
The strategic trade agenda may have taken a hit but it is in both the interest of transatlantic business and the UK to continue work to deliver on a globalization model. We need this time not to forget to share the benefits even if we move that forward using bilateral as well as other means.