A “positive path” exists for UK-US trade, but don’t expect a quick free trade agreement

Interview

Duncan Edwards
CEO of BritishAmerican Business

The US is the UK’s biggest trading partner and remains one of the most attractive markets for UK CEOs looking to grow their business. And while uncertainties lie ahead, including the long-term impact of Brexit and negotiations over a free trade agreement, Duncan Edwards, CEO of BritishAmerican Business (BAB), is optimistic over the UK’s trading relationship with the US.

“Beyond the COVID crisis, there are no material reasons why trade and investment between the US and the UK shouldn’t continue on what has been a pretty positive path,” says Duncan, speaking to PwC UK for our 24th Annual CEO Survey.

Brexit

Duncan says the UK remains the most likely place for American companies to invest outside the US and he expects this to continue following the recent Brexit deal.

BAB’s members were “all breathing a sigh of relief” when the Brexit deal was announced on Christmas Eve. “Whatever your point of view on it, the outcome in the end could have been a lot worse,” says Duncan.

He believes there is real momentum in the UK’s Department for International Trade to negotiate more trade deals, following agreements with countries including Japan and South Korea. “The US deal is going to be the one they desperately want, because the optics are so important and the scale is so big.”

UK-US free trade agreement

Duncan is less optimistic about the possibility of a free trade agreement between the UK and US being signed in the near future. “I’d say there’s a 50/50 chance of it happening this year,” he says.

He puts this down to a lack of appetite and time on the US side. “Does the Joe Biden administration want to prioritise and use political capital on a free trade agreement with the UK? I’m not so sure,” says Duncan.

The route to a free trade agreement will become more difficult after the trade promotion authority (TPA) expires in July. The TPA gives the President the right to negotiate trade deals and then get the bill passed with a simple yes or no vote. Congress cannot amend or slow down the bill.

“Does the Joe Biden administration want to prioritise and use political capital on a free trade agreement with the UK? I’m not so sure.”

“If they're going to have an agreement approved before the TPA expires, it has to be in the House and Senate by April. It just doesn't feel like there's time.”

While the UK and US have gone some way to agreeing a free trade agreement, there are still major differences to overcome. These include negotiating access to agricultural markets, which Duncan believes is being held up by “straight economic protectionism” on behalf of the UK, and technical issues around rules of origin and intellectual property rights.

Were a free trade agreement to be signed this year, Duncan believes the short-term impact would be limited. There might be a small boost in sales due to reduced tariffs, but exporters would still need time to “find customers and distributors, and all the other things you need to do from a practical perspective if you're to be able to sell into a different market.”

However, Duncan is bullish about the long-term economic impact of an FTA, with small and medium-sized businesses likely among the main beneficiaries. He says there is "a lot of ambition" around removing red tape and reducing paperwork, which would make it easier and more efficient for SMEs to export goods and services.

Labour mobility

As the UK looks to re-establish itself on the world stage, it needs to build on its existing strengths in research and development.

Alongside its technology sector, Duncan highlights life sciences as a “real strength” for the UK that will continue to attract US investment. He says liberal labour mobility will be important if these areas are to continue to thrive.

“Smart, clever, ambitious people need to be able to come to the UK to work in these areas that need high levels of educational achievement, such as biomedicine, life sciences, technology, and AI.”

While Duncan believes “more liberalised labour mobility is generally a good thing,” he says the UK government has accepted that increased labour mobility with the US will not be part of any free trade agreement.

UK CEOs will be hoping the country’s departure from the EU hasn’t come at the cost of attracting the talent it needs to support its most promising industries.

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Marco Amitrano

Marco Amitrano

Head of Clients and Markets, PwC United Kingdom

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