A UK / US Free Trade Deal Strengthens the UK’s Hand, and Here’s Why

by ETF Base on February 24, 2017

The United States and the United Kingdom economy are closely related to each other, as both have a similar trade interest.  While the U.K Sterling witnessed some decline in years following the Brexit referendum, many feared that an exit from the EU could land the United Kingdom’s economy in trouble.

Similarly, following the emergence of Donald Trump as the United State of America President, the financial market was globally affected, as many feared that a bad foreign policy by President Trump, will not just affect the US economy, but also have a ripple effect on other major and minor economies.

However, after Trump assumed office, he held a meeting with United Kingdom’s Prime Minister, Theresa May, over a US-UK trade deal. According to reports, the deal is meant to slash tariff, and allow free flow of workers between the two countries.

The US and the UK already have a mutual trade policy that allows both countries import and export goods from each other. The free trade deal would focus on items the two countries already export to each other. Discussions are still ongoing to agree a “lower or even zero tarrifs on goods and services

While the UK is still bound by EU trade policies, a possible trade deal with the US will strengthen the UK’s economy.

The first benefit would be an increased foreign investment for the UK. The United States over the years has been a major source of direct foreign direct investment (FDI) for the United Kingdom.  According to statistics, in 2015 alone, the US imported from the UK, goods worth about $59 billion, while it sold to the UK, goods worth $56 billion. Similarly, in same year, the United Kingdom contributed 3 percent to US two-way merchandise trade with global markets, making it America’s 7th largest trading partner.

Also, New York and London are two of the major financial cities in the world. A trade deal that allows free flow of workers between these two cities will attract more foreign investors, as they will see it as an opportunity to expand their business, at the same time benefiting the GDP of both countries.

Apart from benefiting both countries economically, a free trade deal between both countries will strengthen their diplomatic relationship.

Finally, a deal between the two countries will lead to pioneering an international trade model that other countries would emulate. The deal will not just be seen as a UK/US affair, but as an intercontinental move in enhancing trade among neighboring countries. This is something that the UK would likely benefit from the most. Due to the country’s dwindling competitiveness in it’s traditional heavy industry’s such as coal mining and steel production.

The last 3 decades have seen the rise of the entrepreneur. Something that the British government will be looking to encourage to allow its core industries to evolve with the times. Following on from this, goods imported directly from the US will be cheaper in the UK, which in turn will make many neighboring countries import directly from the UK, instead of the US.

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