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US-UK Trade Relations: An English Summer of Friendship
America's First Trade Partner

The US and the UK have long been partners in the world forum. Be it trade, economic factors or wars and other platforms. The United Kingdom has always been an ally of the US, either by will or by fate right from the outbreak of the World War I. In the vicious World War II, when the US had been forced to join the allies to seek revenge against Japan’s unprovoked attack on Pearl Harbor, and more recently in the Iraq war of 2003, the United Kingdom has always been a trusted partner to the US. Because of these strong ties between the two nations, the trade relations have also been strong.

Being a British colony in the 18th century, the US had been influenced by the Imperial rule, and this reflects on its trade policies and trade relations maintained in the arena of global trade even today. What is more interesting is that the US and the United Kingdom both have been close as far as determining trade policies in international business. Though free trade is more vouched for by the United States, the United Kingdom is also interested in the huge potential that the US markets have.

Trade: Major Exports and Imports

While the US is one of the leading importer and exporter of goods and services in the world, UK focuses more on exporting and importing services. The fact that the US does almost $1200 billion worth of import and around $700 billion worth of exports, the UK becomes a certain trade partner with its voluminous export of services. United Kingdom is almost the sixth largest importer for the US, with the net trade sum hovering around the $93 billion mark in the year 2006.

Along with Germany, United Kingdom is the leader in foreign trade with the US among other European countries. This is because of the fact that UK exports services worth almost a mammoth $150 billion. This has enabled this nation to buy more imports and hence make it a centre of attraction for American manufacturers and US exporters. Another advantage is the common culture and language - English. This enables greater ease of understanding of mutual needs and demands and hence helps nurture trade relations better.

The exports of US goods and services to UK summed up to about $92 billion in 2006. This is not all. Apart from trade, tourists form a large part of the US revenue, where British tourists numbered to almost 4.5 million in 2007 alone. The Americans visiting UK was no less either, with almost 3.1 billion tourists visiting the United Kingdom in 2007.

The US and the UK also have the world’s largest foreign direct investment partnership, which has helped both the countries in expanding and improving their economy. In the year 2005, US firms had invested almost $324 billion in the UK while the latter had investments amounting to $282 billion in the US. The British investment has helped sustain almost 1 million American jobs, stabilizing the economy of the country as well as that of the investors.

USA has had a trade deficit with the UK for the past 10 years. Since 1998, the US trade deficit with UK has widened and stands at $4.4 billion in June 2008. This has not yet hampered or threatened to hamper the relations between the two nations.

The major exports of the UK to US are machinery and transport equipment, manufactured goods, chemical products, mineral fuels, beverages, and tobacco. The vast US market provides a great opportunity for such United Kingdom exporters. The reputation of United Kingdom exporters has been good and hence to make a mark in the US market will not be a start-from-square-one business!

Major exports of the US to UK in the goods arena include gold, machinery and transport equipment, medical supplies, motor vehicles, and aircrafts. The United Kingdom importers have been heavily in business being the fifth-largest export base for the US. Moreover, with the foreign direct investment partnership and other such agreements, doing business with the United States has proved to be an excellent financial opportunity for the United Kingdom manufacturers.

US-United Kingdom Defense Trade Cooperation Treaty

The trade ties between the two countries have intensified with the introduction of a treaty that will help ease the trade of defense goods, services and tactical defense-oriented information. The treaty comes as a novel element to help enhance the already close military relations of the two countries. As long standing allies in the war of terrorism, this trade treaty is bound to help build on their trade and defense relationships.

The Defense Trade Cooperation Treaty was signed between the US President Bush and former UK Prime Minister Tony Blair on 26 June 2007. It was formed keeping in mind the increase in strength that joint operations and trade relations with military at the core will bring to both the nations. The technology and the state-of-the-art military equipment of both United Kingdom and the United States will be interoperable and trade of such defense articles will be more inhibited with ease-of-transaction.

Some of the elements in this Defense Trade cooperation Treaty include:

  • The Treaty will create two ‘communities’ where select defense companies will be integrated into a group. These two groups, one each of UK as well as the US will be responsible for exporting and importing defense articles and equipment to the partner country.
  • The Defense Trade Cooperation Treaty also has provisions for the export of defense articles to US from British companies that need no prior authority approvals and export licenses when within the community that has been created for this specific purpose. This is also applicable to the US companies who export or import defense articles for joint military exercises in the host nation or in UK. This treaty was to be brought into implementation by late 2007 with both governments eliminating domestic hitches and amendment of laws.
Points of Conflict

Like two sides of a coin, the rosy side to the US-UK trade cooperation and liaisons almost overshadows the minor clashes and conflicts they have had in economic ideologies and world trade policies. While USA is pro-free trade, United Kingdom does not approve much of this, and are against open international trade. UK feels their export will be compromised if global trade becomes common, identifying the main threats as China, India, and other nations of the developing world.

US trade policy conflicts with the EU has also often left UK in a dilemma of sorts. With being the largest export market for the UK, they cannot ignore or malign the US stand, and neither can they refute the EU stance. For an instance, in the ‘beef hormones crisis’, the EU had blocked all beef imports because of the use of hormones in American cattle, that had been deemed unsafe and health risk-prone by the EU authorities. In addition, during the ‘Banana’ crisis, the EU, backed by several other countries, had to alter their import rules due to a WTO ruling. This was triggered by the fact that EU markets had rendered the American banana growing company Chiquita profitless with a complete screen on their products, giving preference to colony grown bananas from Africa and the Caribbean.

This was disadvantageous to the US-UK trade relationship as UK is the second largest economy and military power in the EU.

Another point of conflict that threatened to dismantle the trade proceedings was the US problems with the barring of foreign companies in UK’s flourishing Broadband market. But till now, no signs of formal complaints or trade rivalries have been brought out in the open in this regard, though the US had promised to submit a complaint report to the WTO on this matter.

The Future

The US has always been keen in doing business with the United Kingdom. The latter has been in a more advantageous position as far as influencing the developing nations is concerned. Hence, the US realizes the potential of diverted trade if a mutually beneficial foreign trade relationship is maintained with the UK. Moreover, UK understands that the export base for its goods and services has the biggest selling potential in the US market. An important example of this might be the British film industry. Hollywood has employed many established British actors to strut their stuff and the Britons have done the same with the Hollywood celebrities. Thus, both nations earn huge revenues though overseas film buffs.

Both nations are keen on building a long lasting partnership that will help boost mutual trade, economy, and military operations between the two nations. This will help them in both ways - keeping their long-standing alliance intact in future as well as intimidating the foreign trade policies of other countries, tilting them in their favor. In the case of the UK, it is in a win-win situation as its largest export market base broadens, as the trade ties get more intimate and binding.


Note: Trade statistics, industry links, economic projections and global business resources on this page have been compiled from hundreds of trade related websites, government guides and resources on the Internet. We provide this valuable information for industrial suppliers, manufacturers, exporters and importers seeking to enter or expland business opportunities in the United Kingdom.

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