BritishAmerican Business has today released their submission to the Committee on International Trade who are investigating the future of UK-US Trade. Click here to download the submission.
BritishAmerican Business Submission to the House of Commons Committee on International Trade inquiry into UK-US Trade
BritishAmerican Business (BAB) is the leading transatlantic business organisation, incorporating the American Chamber of Commerce in the UK. We participate in (and provide the Secretariat for) the British American Business Council (BABC) which has more than 20 chapters in major business centres throughout the UK and North America.
BAB and BABC speak for over 2000 UK and US-based companies on both sides of the Atlantic. Our membership includes leading British companies and major American investors, who contribute significantly to jobs, growth and innovation in the UK.
The UK and the US are each other’s largest source of Foreign Direct Investment (FDI). A million British people go out to work every day in the UK to work for a US headquartered company, while a million American go out to work for a British headquartered company in the US. The UK and the US are also major trading partners, with the US being the UK’s largest export partner and second-largest import partner.
Our members are on the frontline when it comes to strengthening the economic ties between our two nations. Whether through our support for the Transatlantic Trade & Investment Partnership (TTIP) or our work on future trade options for the UK, we see the UK-US economic relationship as a source of great strength and stability that will provide abundant opportunities for citizens in the years to come.
The responses contained in this document are based on letter sent to Prime Minister Theresa May on behalf of our wider network on 14th March 2017, in which we outlined areas of collaboration that can help shape the UK’s trade objectives going forward (see ANNEX).
Our response is being submitted with the understanding that the UK won’t be able to formally negotiate trade agreements before it has left the EU and that the US Administration is still in transition after the November 2016 elections. It is also submitted against the background that BritishAmerican Business members have strongly advocated for a comprehensive TTIP agreement and that UK Government has expressed its support for such a deal as long as the UK is a member of the EU.
What should the UK’s priorities and objectives be in negotiating a UK-US Trade Agreement?
A future trade arrangement between the UK and the US should seek to:
- Build on the strengths of both economies, our shared interest and existing market access, encouraging further growth, investment and innovation for our countries.
- Build on advanced draft texts, prepared in context of the Transatlantic Trade and Investment Partnership (TTIP) or Trans-Pacific Partnership Agreement (TPP), where appropriate.
- Acknowledge the deep integration of British and American businesses with the European market.
The possible impacts (positive and negative) on specific sectors of the UK economy from such an agreement
- The UK has a highly competitive economy that attracts investment and delivers exports around the world, particularly to the US (the destination for 24% of UK goods exports and 34% of UK services exports). The main sectors for UK exports to the US are financial services, chemicals, pharmaceuticals, machinery, e-commerce, digital services and business and ITC.
- A study conducted by the Swiss World Trade Institute on TTIP in 2016 revealed that most sectors in the UK are likely to grow if a comprehensive trade agreement were in place with the US but that electrical machinery may decline.
- While tariffs between the UK and US are low on average, sectors with high tariffs, such as textiles, stand to benefit from a bilateral trade arrangement. Reducing all existing tariffs to zero could save UK exporters almost £1 billion.
- In terms of non-tariff barriers (NTBs), it is hard to quantify economic benefits without knowing which NTBs could realistically be reduced in a UK-US trade arrangement. However, sector-specific work conducted by BAB on TTIP reveals where benefits might be expected:
- Automotive: The Automotive sector stands to benefit from regulatory alignment, through mutual recognition of technical regulations in car safety and car parts, including safety equipment. An agreement could bring substantial benefits for this sector from increased production, competition and consumer choice. An increase in UK exports to the US would create job opportunities across the automotive supply chain.
- Pharmaceuticals: The UK’s Pharmaceuticals and the Life Sciences industry would equally stand to benefit from regulatory alignment which reduces unnecessary duplication, including on packaging and labelling. UK-US trade discussions present the opportunity to enshrine high standards for Intellectual Property (IP) protection which could incentivise the development of pharmaceutical innovation.
- Chemicals: The UK Chemicals sector is a global leader and deeper US market access offers huge potential due to its size and low energy costs. Regulatory alignment could occur in this sector and reduce production costs without lowering safety standards. Alignment could include measures around classification, labelling and assessment. Standardizing customs procedures could also reduce the financial burden of UK exporters who export to the US.
- Food and Drink: For the Food and Drink industry, the largest goods sector in the UK, Much of the benefits will depend on whether the agreement recognizes country-specific protections and export opportunities. One area of potential is the lowering of transaction and compliance costs connected to duplicate regulatory requirements in the UK and the US
- An agreement between the UK and the US can also offer cross-sector benefits in areas of:
- Intellectual property rights (IPR). Both the UK and the US recognise the importance of IPR in generating innovations, jobs and growth. Strong protections and enforcement provisions already exist in the UK (as part of the EU) and the US. A UK-US IPR rule which further aligns each countries IPR rules – Ie on patent filing grace periods, geographic indications and resistance to erosion of the global IPR – can greatly benefit all sectors by allowing companies to deliver products to both markets without having to apply for new IPR’s.
- Data: The free flow of data is more crucial than ever to companies operating across the Atlantic, and avoidance of data localisation measures whilst respecting adequacy norms on personal data privacy and protection.
The extent to which any agreement could and should open up markets in services, including public services?
A UK-US trade arrangement should cover enhance trade in services, particularly in business services, which are key input for global value chains. The UK and the US should also explore ways to further enhance competition and encourage regulatory convergence in the market for ICT and digital services. This should include transparent, pro-competitive telecommunications network access regulation.
- A special commitment should be made towards the UK-US financial services relationship. The UK and the US are home to the leading financial centres in the world. UK-US financial services offer deep pools of liquidity and agile product and service structures and share many common features including an overriding commitment to prudence over excessive risk taking.
- A UK-US trade arrangement should include elements that help UK and US markets integrate under one regulatory umbrella.
- Further opening of public procurement opportunities would serve businesses on both sides of the Atlantic. Any commitment should, however, acknowledge the protection of public service obligations.
The extent to which any agreement could and should open up markets in public procurement?
- Any new trade arrangement between the UK and the US should create a level playing field by expanding access and opportunities in public procurement. Sub-federal and regional levels should be a part of any new bilateral trade arrangement.
- A UK – US trade arrangement should set new standards for transparency, anti-corruption, and the rule of law in procurement practices. While both the UK and the US allow for foreign bidding on public procurements, they remain low. There are benefits on offer for both taxpayers and companies, including increased choice, better value for money, job creation and increased demand for existing products or services.
- Ongoing dialogue and sharing of best practises at sub-federal level should be pursued while working with the US Federal Government on including sub-federal public procurement in a trade agreement.
What dispute-resolution mechanism should form part of any such agreement?
- Investment protection and a mechanism for dispute resolution is a bedrock upon which investor confidence is built, and investment risks taken.
- Investment makes up a large part of the economic relationship between the UK and the US. US investors are the biggest investors in the UK economy and UK investors are the biggest investors in the US economy. Those investors sustain roughly a million jobs in each other’s economies.
- In a world of increasing public private collaboration and cross-border investment, providing a separate and meaningful class of protection designed to protect and support international investment is key.
- A future trade arrangement between the UK and US should provide for an investor-state-dispute mechanism. The UK and the US should, however, use the opportunity to further develop approaches for a state-of-the-art dispute mechanism for investments which is efficient and transparent.
How any agreement should approach regulation, including regulatory harmonisation?
- Regulations and standards protect people and provide structure and predictability for businesses. They reflect value systems and accommodate local needs.
- A future UK – US trade arrangement should cover areas and sectors where the alignment of bilateral regulatory systems can lead to new business opportunities and reduce the cost of unnecessary duplication where regulatory systems provide the equivalent levels of protection.
- Cooperative mechanisms that identify and unlock regulatory barriers can work. Most of the economic value in trade agreements is delivered through the elimination of regulatory barriers. Small and medium-sized businesses in particular stand to benefit from the removal of non-tariff barriers. Organisations such as the Transatlantic Economic Council have had some success in helping to deduce the impact of regulatory barriers, in particular by examining future opportunities for convergence, rather than legacy problems, and taking a project-based approach.
- Future alignment should be around science based pursuit of norms that ensure balance and proportion between risk and precaution, while supporting innovation led approaches to deliver better outcomes in healthcare, consumer safety, environmental management and emerging technologies.
What involvement, if any, the UK should seek to have in the North American Free Trade Area or any future regional free trade agreement involving the USA
The future UK-US economic relationship
Published on 24th March 2017
BritishAmerican Business (BAB) and British-American Business Council (BABC) speak for over 2000 UK and US-based companies on both sides of the Atlantic. Our membership includes leading British and American companies, contributing significantly to jobs, growth and innovation on both sides of the Atlantic.
We are committed to helping UK and US Governments with our expertise and transatlantic presence in their efforts to open a new chapter in the UK-US economic relationship; a relationship that is so crucial for the prosperity for our economies, companies and citizens.
Below are 10 areas that we see as a starting point for collaboration, which can help leaders strengthen this special relationship and shape objectives for the future:
The UK and the US share the world’s largest foreign direct investment partnership. We encourage the UK and the US Government to make a joint commitment on investment, reflecting the largest bilateral investment relationship of one trillion dollars between the UK and the US and offering joint leadership to sustain open, inclusive and competitive markets as a basis for prosperity. As part of this commitment, the UK and the US should develop new approaches for a state-of-the-art dispute resolution mechanism. Further, the UK and the US should explore incentive schemes for bilateral investment and capital flows, particularly around public-private partnerships and with respect to government procurement opportunities.
The UK and the US should continue exploring areas and sectors where the alignment of bilateral regulatory systems can lead to new business opportunities and reduce costs of unnecessary regulation. Future alignment should be around science based pursuit of norms that ensure balance and proportion between risk and precaution, while supporting innovation led approaches to deliver better outcomes in healthcare, consumer safety, environmental management and emerging technologies.
- Research and Innovation
The UK and the US have world leading research and innovation systems, benefitting our economies and its citizens. We encourage leaders to develop of a joint agreement that builds on the existing Horizon 2020 EU-US Agreement and enables further collaboration in science and research between UK and US scientists and researchers. The UK and US Governments should also explore increasing collaboration in higher education, particularly between our world-leading universities, which will allow for our countries to build on their joint leadership role and to draw on the great economic potential linked to it.
- Financial Services
The UK and the US are home to the leading financial centres in the world. UK – US financial services offer deep pools of liquidity and agile product and service structures and share many common features including an overriding commitment to prudence over excessive risk taking. UK and US Governments should make a joint commitment to the UK-US financial services relationship that seeks to explore how UK and US markets can be integrated under one regulatory umbrella.
- Talent Mobility
Attracting and employing skilled workers by drawing on an international pool of talented professionals is imperative in yielding a successful economy, particularly to address shortages of high-skilled labour. Our history of immigration and the role played by immigrants has been closely tied to the economic success of our nations. The UK and the US should therefore explore new visa arrangements for UK and US citizens to foster the bilateral movement of talent, with enhanced abilities to live, study and work.
The free flow of data is more crucial than ever to companies operating across the Atlantic. Building on progress being made with the EU-US ‘Privacy Shield’ mechanism, the UK and the US should lead driving new pragmatic solutions that protect citizens’ privacy while allowing for the free flow of data. In any innovation economy, data is the heart and soul of growth. The pragmatism of the UK and the US can offer a path that is globally compelling for sustainable deployment of data driven technologies.
The UK and the US economies are characterized by large and growing services sectors. The UK and the US should explore ways of enhancing trade in services, particularly in business services, which are key input for global values chains. The UK and the US should also explore ways to further enhance competition and encourage growth in the market for ICT and digital services.
- A Rules-based System for Trade
The UK and the US have been leading in creating a global rules-based system for trade. The UK and the US should assess if and how both countries can help further develop global governance structures of trade, particularly through the World Trade organisation (WTO). With that, the UK and the US should commit their leadership role in the Trade in Services Agreement (TiSA) negotiations.
- A new Trade Policy
Both, the UK and the US benefit from trade, but trade also changes economic infrastructures. The UK and the US should be leading in developing a new trade policy that includes improved mechanisms, such as Trade Adjustment Assistance Programs, designed to help workers to adapt to global trade and protects public service obligations, while spurring innovation and growth for our economies.
- Trade Outreach and Consultation
In light of a future formal trade arrangements, the UK and the US should prepare trade education campaigns aimed to showcase the benefits of mutual trade and investment for our economies and its citizens. Governments should also use the opportunity to map out future stakeholder consultation process on trade.
 World Trade Institute (2016) TTIP and the EU Member States: http://www.amcham.ch/news/downloads/160202_ttip_report_def.pdf
 House of Lords Report (2014) Transatlantic Trade and Investment Partnership Report: https://www.publications.parliament.uk/pa/ld201314/ldselect/ldeucom/179/17904.htm#a6
 BritishAmerican Business (2016) Four Sectors, Many Stories, One Ambition: https://issuu.com/babnewyork/docs/four_sectors_many_stories_one_ambit
 All Party Parliamentary Group on TTIP (2014), TTIP: The Potential Gains and Concerns for UK Agriculture, Food and Drink – consumers, workers and companies: http://tradeinvest.babinc.org/wp-content/uploads/2014/10/Agriculture-Food-and-Drink.pdf
 Center for European Policy Studies (2016) Policy Brief: TTIP and Public Procurement https://www.ceps.eu/system/files/PB339TTIPandPublicProcurement.pdf