The view from Europe

The overall picture

The ongoing tensions at the Russia-Ukraine border is dominating the headlines in Europe. The EU relies on Russia for around 40% of its gas, and any disruption to supply would only worsen the energy crisis. The EU is looking to diversify gas supplies, with a U.S.-EU Energy Council scheduled for 7 February to tackle the issue. However, when it comes to sanctions, we risk seeing more uncoordinated approaches.

Behind the scenes, there is a busy legislative agenda in Brussels. The French Presidency of the Council of the EU is pushing forward an ambitious programme with Macron using the opportunity to support his re-election campaign at home. Just as questions are being asked over gas supply, the European Commission unveiled its taxonomy classification system, which labels nuclear and gas as ‘green’ investments – something which is dividing many.

In parallel, the European Commission has adopted its standardisation strategy, which aims to ensure Europe remains a global standard setter when it comes to emerging technologies. This is part of a wider move towards promoting European sovereignty and protecting its competitiveness.

Negotiations on the Northern Ireland protocol ramp up

After Foreign Secretary Liz Truss took over the Brexit brief from Lord Frost, negotiations on the Northern Ireland protocol have intensified. There have been signs of a more optimistic tone, with potential landing zones to be found in certain areas, such as customs. However, with elections to take place in Northern Ireland in May, the end of February has been set as an unofficial deadline to reach an agreement, at least on some of the key issues. The CBI is continuing to work with both sides to make sure the voice of business, including Northern Irish business, is heard.

Get involved with CBI’s work on UK regulation post-Brexit

This week the government launched its ‘Benefits of Brexit’ policy paper which largely focusses on economic and regulatory opportunities. The CBI broadly welcomes the government’s focus; rather than viewing regulation as a race to the bottom on standards, the UK can be a world-leader and rule-setter in new innovative sectors. Data, financial services, and artificial intelligence are all areas where government policy can promote innovation, competitiveness, and investment in the UK. The CBI is working with members to understand their experience of regulatory change since the TCA and the opportunities they see from regulatory reform.

The view from India

The launch of UK-India FTA negotiations

In January, the International Trade Secretary, Anne-Marie Trevelyan and the Chief Negotiator, Harjinder Kang visited Delhi to launch the UK-India FTA negotiations. The International Trade Secretary also co-chaired a meeting of the UK-India Joint Economic and Trade Committee (JETCO) to review how businesses in both countries are benefiting from existing market access commitments under the UK-India Enhanced Trade Partnership.

The first round of negotiations – which took place virtually from 17-28 January – aimed to establish a strong rapport with the Indian negotiators, building upon relations from existing working groups between the two countries. The talks went well, with a positive momentum spanning 32 separate sessions covering 26 policy areas. The second round of negotiations is due to kick off on 7 March, with both sides having a shared ambition to conclude negotiations by the end of 2022.

Find what the UK-India FTA deal could mean for business

The CBI are aiming to hold a roundtable with a senior official on the FTA negotiations over the next few weeks, and will be setting up a regular working group on the FTA for members wanting to feed in their priorities. There is also an opportunity to collaborate with the CBI on an India thought leadership series, where members will be able to share best practice in successfully navigating the Indian market in their respective sectors. If you are interested in getting involved in any of these opportunities, then please get in touch.

India’s Budget announcement

India’s Finance Minister, Nirmala Sitharaman announced the country’s 2022-2023 Budget on 1 February. The Budget, dubbed as a booster shot, is focussed on strengthening sustained momentum towards growth, investment, jobs, and infrastructure creation. It also lays the foundation and steers the economy with a focus on upcoming sectors and digitalisation.

The budget estimates GDP to grow at 9.2% – the highest among all large economies. The fiscal year beginning April 2022 proposed a massive 35% jump in capital expenditure to approximately £75bn, coupled with a rationalisation of customs duty, an extension of time for setting up new manufacturing companies and plans for starting a digital currency and tax crypto assets.

The budget also introduces Ease of Doing Business 2.0 and Ease of Living as the second run of process reforms for simplification, standardisation, and promotion of trust-based supervision for businesses. The CBI in India has been lobbying for this change for the last few years.

India’s Economic Survey

Presented by the finance minister at the start of Budget session, the theme of the Economic Survey this year relates to the art and science of policymaking under conditions of extreme uncertainty. To realise the ambition of US$5 trillion GDP by 2025, India needs to spend approx. US$1.4 trillion over this period on infrastructure.

Key highlights of the Indian economy suggested by the survey projected the economy to grow in real terms by 8.0-8.5% in 2022-23. The economy is expected to grow at 9.2% in the current fiscal year.

The industrial sector went through a big swing, by first contracting by 7% in 2020-21 and then expanding by 11.8% in this financial year. The services sector is estimated to grow by 8.2%. Finally, India’s total exports are expected to grow by 16.5% and imports by 29.4% in 2021-22, surpassing pre-pandemic levels.

The view from the USA

FTA negotiations with Canada and Mexico

CBI Washington continues to engage with the UK government about negotiations for new free trade agreements with Canada and Mexico. Securing member feedback ahead of these negotiations is a top priority for the CBI entering the first part of 2022.

The Washington office flies to the UK

The Head of CBI Washington, John Dickerman recently spent a week in London for engagement with members and government stakeholders, the first international travel for the U.S. team in over two years. Notably, John met with Penny Mordaunt, Minister of State for Trade, to discuss U.S.-UK trade ties and the value of engaging with state governments to open opportunities for UK businesses in the U.S.

The role of trade in UK foreign policy

Trade and foreign policy are intricately linked in today’s geopolitical environment: whether this is through tariff agendas, energy diplomacy, investment screening, or the redirection of critical supply chains, states are willing to use economic policy to achieve political ends – sometimes at the expense of the rules-based system.

In a post-Brexit Britain still shaping its global identity, the way the government positions itself here is critical. There needs to be a clear dialogue between government and business to ensure that the UK maximizes its international competitiveness, upholds the norms and rules of international trade, and develops economic relationships abroad that can boost prosperity at home.

The business voice in these trade and foreign policy is key and to ensure your views are represented, the CBI is responding to the International Trade Committee’s consultation on the role that trade should play in UK foreign policy.

The view from China

The Year of the Tiger

To celebrate the Year of the Tiger, the CBI in partnership with Huawei Technologies hosted a small dinner as an opportunity to take stock of the UK-China relationship. Attendees heard remarks from CBI President, Lord Bilimoria and Victor Zhang, Vice President at Huawei, and keynotes from Mark Logan, MP for Bolton North East and His Excellency Zheng Zeguang, The Ambassador of The People’s Republic of China.

Watch the CBI’s 2022 Chinese New Year celebration

Hope for UK-China flights restarting

At the start of 2022, the CAAC (China’s Civil Aviation Authority) and relevant UK/China ministries have agreed to restart flights for a test period of two weeks. Starting in mid-February, the test period will include two return flights from London LHR to Shanghai PVG, with passenger capacity at a maximum of 30%, to understand if current testing measures are useful in stopping the spread of the virus in international travellers. If results show less than five positive cases/flight, then flights will be able to resume.

With all eyes on this test period, businesses hope that UK-China flights can resume with appropriate COVID-secure measures and clear guidance around keeping safe. Direct flights between the UK and China are key to many UK firms and regardless of the February test outcome, the CBI will continue to champion the voice of your business.

International travel and the reopening of direct flights to mainland China from the UK will remain a key business issue for much of 2022. It will also factor prominently in the forthcoming Joint Economic and Trade Committee (JETCO) and China-UK Economic and Financial Dialogue (EFD), from a business perspective.