Notes from the CEO – March 2020

The following article is an extract from BAB’s March Transatlantic Topics mailing. You can read it here: Transatlantic Topics – March 2020

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BAB CEO Duncan Edwards

The impact of the Coronavirus epidemic on businesses, large and small, is going to be immense.  We can see this in the markets (and the supermarkets) and if you have been through an airport in the last week, you can immediately feel the challenge that the airline business, and the surrounding ecosystem, is already facing.  We know that boards, management and business owners are working as hard as they can to mitigate the impact and, particularly to ensure the safety of their employees and customers.  At BAB, we are continuing with our program but staying tuned into public health advice on a daily basis; we have had some events cancel and we will take a pragmatic approach to our convening while the crisis lasts.

Inevitably, and rightly, a huge proportion of government time and attention is focused on dealing with the health issue but meanwhile, the last two weeks have seen critical milestones on the road to future transatlantic trade relations.  First, both the UK and the EU published their respective negotiation objectives and the first round of detailed talks took place on March 4th and 5th.  And then last Monday, the UK government published its negotiating framework for a UK US Free Trade Agreement, and we expect formal negotiations to start imminently.

For the first time we have been able to look at the British and American objectives for the negotiation side by side and our initial analysis confirms our prediction that there is lots of common ground.  There seem to be very few areas of outright disagreement and even on the issue of market access for US agrifood products the UK seems to have left the door open to a solution, rightly so in our view.

More concerning, things that might scupper an agreement more than the substance of the FTA itself are side issues that we have commented on before.  The UK’s commitment to a revenue tax on large tech companies, while popular in the UK, is seen as a direct charge on US champions and the decision to allow Huawei to be a part of the UK’s 5G network has certainly irked the US administration and some members of the House and Senate.  Conversely, the US section 232 tariffs on steel and aluminium and the WTO endorsed retaliatory tariffs related to the Airbus dispute which are hitting British exports like Scotch Whisky are extremely unhelpful.

But the biggest challenge is going to be timing; if a deal isn’t agreed by the summer it will almost certainly need to wait ‘til after the election and the result of that is anyone’s guess.  For this reason, we will be urging both sides to look for as many quick wins as they can; it may be possible to agree a ‘skinny deal’ fairly quickly which will capture the majority of the economic upside.  We will be publishing our ‘side by side’ analysis of the two negotiating positions together with our recommendations for a set of ‘quick wins’ on March 23rd once they have been reviewed by our policy committee.  If you have views on this from your industry perspective, please let us know.

The UK EU negotiation looks much more difficult.  Our members, particular those that deal in physical goods in the UK with supply chains and customers in the EU, remain anxious about the outcome and we hope that an agreement can be reached that maintains zero tariffs and quotas on physical goods, and an open market for data, at the very least.  There is very little likelihood that the UK government is going to agree to the ‘level playing field’ that the EU wants and so unless the EU has a rethink (which it might), costs of doing business between the UK and Europe will rise.

To finish, a couple of notices of major BAB events coming up in the next month or so.  On March 30th in London we will be recognizing 30 British and American companies for their commitment to investment in the other market at the Transatlantic Growth Awards and you can register to attend here.  And then on May 6th in New York City, we will be staging the Transatlantic Finance Forum, a one-day conference for FS professionals from the US and UK.  We will be guests of Citigroup and you can register here.

We wish all our members the very best in dealing with the impact of the coronavirus and hope everyone stays healthy.