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Cautiously optimistic. Toward a new level of US-UK economic integration

Emanuel Adam / Sep 2023

Photo: Wikimedia Commons

 

On Tuesday, September 12 2023, the transatlantic business and trade body BritishAmerican Business published its 2023/24 Policy Agenda, a document that sets out the organization’s policy priorities for the year to come.

Together with the annual BritishAmerican Business/Bain & Company Transatlantic Confidence Index, the BAB Policy Agenda also offers a snapshot of where the US-UK economic relationship stands and what is top of mind for leading transatlantic firms when it comes to policy making in the UK and the US.

This year’s document reflects a cautious optimism that the transatlantic relationship may well be on course to a new level of economic integration. In fact, the Policy Agenda was being produced in the wake of the release of the Atlantic Declaration, an ambitious list of aspirations released in June 2023, ranging from leadership in critical and emerging technologies; cooperation on economic security and technology protection toolkits and supply chains; digital transformation; and clean energy.

This set of commitments, though not binding, reflect that US President Biden and UK Prime Minister Sunak have notably been able to overcome recent political irritations between both countries. They have also used the new momentum to have their governments explore transatlantic alignment on important issues where both the UK and the US could show global leadership.  

The BAB 2023/24 Policy Agenda integrates many of the commitments made in the Atlantic Declaration. Whether it be increased collaboration on data flows and the secure and safe development of AI technology; more flexible export controls in aerospace and defence; the development and deployment of civil nuclear technologies; collaborative work on priority technologies such as semiconductors; or engagement on a Critical Minerals Agreement between the US and the UK are all issues that transatlantic businesses very much support. In the view of transatlantic business leaders, these objectives can, if properly implemented, set a new benchmark for bilateral economic collaboration that other countries should take note of.

Though the Policy Agenda primarily focuses on areas where there is scope for transatlantic collaboration, it also highlights areas where both the UK and the US need to take action domestically. One of the areas highlighted in this year’s document is digital skills. This comes with the common understanding that for the US and UK to lead on critical and emerging technologies, as set out in the Atlantic Declaration, it will depend on whether the economies are able to produce people with the right skills.

The other area that businesses highlighted for domestic action is on domestic competitiveness. The repercussions from COVID-19, the war in Ukraine, heightened tensions with China, supply chain vulnerabilities, and rising energy costs have all led to renewed efforts to attract and secure crucial industries and jobs domestically, with intervention which goes beyond traditional investment promotion.

US policy action included passing three major investment incentive packages, the 2021 Infrastructure and Jobs Act, the 2022 CHIPS and Science Act, and the 2022 Inflation Reduction Act (IRA). The incentives and tax credits included in those packages have already had a visible investment impact coming from both domestic and international firms, and have overall strengthened the US position as being an attractive place to invest.

In the UK, though policy action such as the country’s approach in the Financial Services and Markets Act or its improved relationship with the EU have been largely welcomed, other policy action received a rather mixed response from business. In fact, in the latest BAB/Bain & Company Transatlantic Confidence Index, US investors expressed notable concern over the UK’s future growth trajectory. Overcoming those concerns will have to remain a key priority for the UK in the immediate future.

On trade and investment, the Confidence Index shows that reaching a FTA continues to be the top policy ask transatlantic companies make to government. This year’s Policy Agenda, however, takes the view that the various ongoing initiatives, commitments and negotiations, including the ambition to reach a US-UK Critical Minerals Agreement, the creation of a sound US-UK Data Framework, or enhanced cooperation in defence, health security, and critical technologies, plus continued trade and investment promotion efforts, such as the UK-US State level MoUs, are a robust set of actions that could easily be seen as elements of a broader FTA discussion. Next year’s 2024/25 Policy Agenda may give us an indication whether these current initiatives are the most one can do on transatlantic economic cooperation or whether they are in fact the foundation to more in the future.

 

Emanuel Adam

Emanuel Adam

September 2023

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