Brexit Minister urges US to support free trade in the new Industrial Revolution

SUMMARY:

For Brexit Sec David Davis, addressing the US Chamber of Commerce was a welcome respite from arguments in Brussels. But will his ‘free trade is essential’ message collide with making America create again?

Mr Davis goes to Washington

It’s been said that the the US and the UK are two nations divided by a common language. As Brexit looms, David Davis, the UK Secretary of State for Exiting the European Union, prefers to pitch the so-called ‘special relationship’ as being between two nations joined by a shared technology focus.

In an address to the US Chamber of Commerce, Davis played up the commonalities between the two nations, while also delivering the occasional rebuke towards the protectionist tendencies of the current Trump administration in Washington.

For Davis, the speech was clearly a welcome respite from the deadlocked talks in Brussels earlier in the week. Or as he put it:

I want to step away from the detail of our negotiations in Brussels. to look beyond the next few years to the kind of country the UK will be outside the EU. And to outline how, by working together with our closest friends and allies, like the United States of America, we can tackle the greatest social and economic challenges we face in this new era of globalisation.

It was a message that was aimed less at Washington and more at the US businesses in the audience, businesses that the UK needs to encourage to continue to trade with a post-Brexit Britain. To those companies, he pledged:

For the UK, the terms of engagement are really quite simple. We are the world’s fifth largest economy. We lead the world in our adaptation (SIC) of technology. And we will soon be setting the terms of our own independent trade policy, outside the European Union. But achieving this won’t be easy, so, we need global businesses to help us deliver our global vision.

There was a big tech angle to Davis’s address as he argued the coming of a new Industrial Revolution demands (a) a renewed commitment to free trade and (b) leadership from the US and the UK:

Advances in technology are generating new forms of production and disrupting others and it feels to me that it is necessary to make the case, once more, for free trade.

For me, here, in the United States, is the logical place to make that case. The US is the crucible of the modern technological revolution. It is here in America that we are seeing some of the most dramatic advances in technology, in artificial intelligence, in genetics and biotechnology. in robotics.

Often, this is happening in partnership with companies and research centres based in the UK. Our countries and companies are great collaboratorsl pushing the boundaries of academic research. producing more research together than any other nations.

The other Industrial Revolution

The UK has been here before, he added:

Two centuries ago, it was the North of England rather than the west coast of America that drove the Industrial Revolution. We associate the Industrial Revolution with the great technologies of the era: the combustion engine, electricity, the railway. But it was free trade, as much as technological change, which created that wave of globalisation. Free trade helped to spread that new technology beyond Europe.

Away from the nostalgia though was a clear rebuke to protectionist thinking, something seen increasingly in the US and made manifest by the Make America Great Again rallying cry from Donald Trump. Davis was robust in his criticism, while avoiding direct mention of the America First economic policies:

Last year, the WTO (World Trade Organisation) recorded a rise in new protectionist measures. And we saw that measures to restrict free trade were outstripping measures to encourage it. We have also seen examples of countries failing to play by the rules, in turn creating risks to the global trading system…But the 1930s taught us the dangers of protectionism. It damages global trade. Between 1929 and 1932 volumes of trade fell by a quarter and half of this was due to new trade barriers, barriers that deeply inhibited global and domestic growth. It is through free trade that we can deliver sustainable growth in our economy.

Davis stated that a post-Brexit Britain will avoid what he called a “race to the bottom” in order to try to compete with low-cost economies and called upon the US to work with the UK on setting high standards, citing as an example carbon emission standards. Now, in a US where climate change denial is currently in vogue in the White House, that might be thought to be dodgy ground. But Davis persisted:

These standards do more than protect the environment. They can help drive innovation and promote the uptake of new technology in industry. They can benefit our economy too, by helping companies to export new products and adopt new technology. And they can help spread the new technology which is emerging in this third phase of globalisation, such as autonomous vehicles, electric cars and “smart” technologies.

We are going to have to create a whole new class of standards in the digital and data technologies where both our countries dominate if we are going to prevent some regions using their own standards to create anti-competitive non-tariff barriers.

My take

Whatever the outcome of negotiations with Brussels, a post Brexit Britain is going to need a strong trading partnership with the US – and with US corporations. The US is the UK’s largest single trading partner, with around $230 billion passing between the two economies annually. It’s no coincidence that the UK government has been so eager to promote inward investment by the likes of Facebook, Apple and Google in London.

The current Trump administration, with its inherent scepticism of the European Union and its perceived protectionism, is generally believed to be receptive to striking a quick trade deal, although the price tag on this remains to be seem – chlorinated chickens may be only the start. It’s also the case that this enthusiasm to do a deal might well be tied to President Trump still being in office on Brexit day in 2019. Whether a potential President Pence would take the same view isn’t guaranteed. So expect to see a lot more of Davis popping up in the US over the next 18 months.

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