The United States: the UK's biggest trade surplus

The United States: the UK’s biggest trade surplus

A ’special‘ commercial relationship

  • Population: 314 million
  • GDP (nominal): .7 trillion (more than six times larger than UK GDP of .4 trillion)
  • GDP (PPP): .7 trillion (more than six times larger than UK GDP of .3 trillion)
  • GDP per capita (PPP): ,900 (35% larger than UK’s ,900)
  • GDP growth over 2012-18: 3.0% pa[46]
  • UK exports to US 2012: £84.1bn (17.1% of UK total exports) [47]

The US is by far the UK’s most important non-EU market, accounting for 17.1% of the UK’s total exports. China, the next most important non-EU market, accounted for 2.8%.[48]

  • In 2012, UK exports to the US were £84bn while imports amounted to £51bn – a trade surplus of £33bn.[49]
  • Britain is the largest foreign investor in America. In 2011, the UK had 2 billion invested in the US, representing 17% of the .5 trillion of foreign direct investment (FDI) in America.
  • Every state in America has workers in jobs that are created and sustained by British companies. In total, they employ around 902,000 American workers – which is more than any other country.[50]
  • The US has a number of underlying qualities that UK companies appreciate: the size of the market, a culture that fosters innovation and risk-taking, the deep capital markets, and the pool of talented workers all rank highly.

UK business success in the US market

Philips AVENT: A leading manufacturer of mother and childcare products, with one of its global manufacturing sites located in Suffolk. Philips AVENT is a market leading brand across Europe, as well as in the world’s largest market, the United States. Part of the Dutch Royal Philips group, the majority of Philips AVENT’s innovations are produced at its Suffolk manufacturing site,

Virgin Atlantic: A major player in the transatlantic market, flying from London to 10 US Airports. The strength of commercial ties between the US and the UK is reflected in the fact that 8 of the 10 most popular transatlantic routes link the two countries. There is potential for significant further growth between the two markets if runway capacity issues in the UK can be addressed. Virgin Atlantic recently launched UK domestic flights to offer additional connections around the UK, and will shortly launch a transatlantic partnership with US based Delta Airlines which will offer the passengers of both airlines connections to 63 destinations across the UK and North America. Delta have also completed the purchase of a 49% stake in Virgin Atlantic.

Atkins: One of the world’s leading design, engineering and project management consultancies, Atkins are a UK based firm employing 18,000 staff across 26 countries. In the USA, the 70 offices across 28 states and territories employ over 3,000 people delivering projects in a range of sectors including water, education, energy, building and transportation.

WPP: The US is the largest market for London-based WPP, the world’s leading advertising and marketing services company. In the US the company has revenues of more than billion and employs 30,000 people. WPP companies provide the full range of marketing services to clients in the US, from advertising and media investment management to public relations, branding and data investment management.

Despite historic successes, work towards removing remaining barriers can boost UK trade even further

The United States is one of the world’s more open markets, and the UK–US economic relationship is particularly strong, but barriers to increasing both exports and investment still persist. The bureaucracy of exporting to 50 individual, albeit related, markets adds another layer of complication, as import rules and regulations can vary in each state.

For UK firms to capitalise on the opportunities available, work needs to be done to:

Eliminate tariffs. Although UK companies exporting to the US already benefit from very low tariffs – the average is around 3%, and high-exporting UK sectors today face tariffs of between 0.5 and 1.5%[51] – eliminating tariffs as much as possible must be a priority.

Liberalise trade in services to boost market access in the transatlantic services economy, where longstanding trade barriers remain in sectors such as aviation, shipping, ICTs, re-insurance and professional services.

Improve access to US public procurement contracts, where opportunities are currently limited by imbalanced commitment under the Agreement on Government Procurement (GPA) and ‘Buy America’ provisions.

Reduce current non-tariff barriers to trade in key sectors.  In automotive, chemicals, food & drink, financial services and pharmaceuticals among others, regulatory divergence limits export potential. Full regulatory harmonisation for most sectors may not be realistic, but sensible and economically meaningful mutual recognition agreements can help limit discriminatory regulatory requirements.

Prevent new non-tariff barriers to trade from arising in the future. The establishment of stronger mechanisms for cross-border co-operation and consistency when designing or updating regulations is an important stepping stone to future regulatory convergence.

While eliminating tariffs would offer economic gains, a trade deal between the EU and the US which acted to address some of the major non-tariff barriers would bring even greater benefits for all sectors. The Transatlantic Trade and Investment Partnership (TTIP) could therefore be a game changer for the UK: it should help minimise non-tariff barriers and encourage regulatory cooperation between two economies that already share many common values and important trade and investment links.


References

[46] IMF World Economic Outlook, April 2013

[47] ONS Pink Book 2013

[48] ONS Pink Book 2013

[49] ONS Pink Book 2013

[50] CBI, ‘Sterling Assets V: British Investment Creating US Jobs’, 2013

[51] Centre for Economic Policy Research, Estimating the Economic Impact on the UK of a Transatlantic Trade and Investment Partnership (TTIP) Agreement between the European Union and the United States, March 2013, available at: