On Global Trade & Investment
Published Three Times a Week (with occasional bonus quotes) by
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-559-9316
No.13 of 2020

Click HERE for last Friday's quote from Clementine Churchill.

 "The U.S. and the UK are not trading T-shirts and shoes anymore."

January 28, 2020
The United Kingdom is no longer a member of the European Union, and the future trading relationship between the two is an urgent matter for both, because the current arrangement – an arrangement with the UK inside the single market of the European Union, complete with EU tariffs and regulations – will come to an end on December 31. Even then, of course, the European Union will still be Britain’s largest trading partner. But then again, the EU is a group of 27 countries, and on a country-by-country basis, the United States is the UK’s largest trading partner. The UK’s future relationship with both – that is with the United States and with the European Union -- was front and center at GBD’s January 28 program, Beyond Brexit.  

John Miller, now the Chief Data Analyst at Trade Data Monitor, was one of the four panelists at that event. Formerly a journalist with The Wall Street Journal, Mr. Miller joined TDM because, he said, he believes in the product. That product is data. As the TDM website explains

Every time a car, banana or iPhone, ton of steel, copper or aluminum, or load of iron ore, coal or oil is shipped, it’s counted. We get that data straight from customs agencies all over the world, and package it exactly how you want. 

At GBD’s January event, Mr. Miller talked about the power of data to reveal underlying realities, what is happening in bilateral and global trade, and of course he came armed with some charts. Here is one of them. As you will see, it highlights the kinds of products traded today between the United Kingdom and the United States. 

And here is some of what Mr. Miller had to say about this chart:

The general reality of it is that trade between the U.S. and the [UK] according to trade data is concentrated in the higher value and more industrial parts of trades.  The U.S. and the UK are not trading T-shirts and shoes anymore. This sector, Tariff Code 84, includes everything from bulldozers, forklifts, and dishwashing machines to turbines and ball bearings, including dairy machines … . And that’s the biggest trade category between the U.S. and the UK.

[Tariff Code] 87 is cars. So of all sorts. BMWs from South Carolina, Teslas from California. 

Gas going to the UK from the U.S. is Tariff Code 27 and down the line to works of art and organic chemicals.  

Mr. Miller was careful to note that Trade Data Monitor doesn’t cover everything. They don’t publish data on services and trade, and later he added, tongue in check, “We also do not have any trade data on Harry and Meghan.”

For us, his more telling point dealt not just with tariffs but with the regulatory framework that will be affected by the UK’s separating from the European Union. The example he gave from the chemical sector was dramatic. Quoting BASF, Mr. Miller said that “the cost could be €75 million to register over 1000 chemicals in both places,” that is in the UK as well as in the European Union.  
Have there been changes in the UK’s trade in the last couple of years? Of course. Still, our guess is that one or two useful insights can be gleaned from this list of Britain’s top ten national trading partners for 2017.

Again, the EU was the UK’s number one trading partner in 2017. UK exports to the EU 27 that year were valued at £274 billion and imports from the 27 were valued at £341 billion. Thus in 2017, the UK ran a £67 billion deficit in its trade with the European Union. It is also useful, however, to look at the UK’s trade on a country-by-country basis. Here are the figures for the UK’s trade in 2017 with its top ten national trading partners:

Trade policy – tariffs, quotas, NTBs, and rules of origin were once the boring backwater of international relations, but they are the stuff of high drama now. And the opening acts of the three sets of negotiations mentioned here – those between the U.S. and the UK, between the U.S. and the EU, and between the UK and the EU have more in common than just drama. For one thing, they are all inter-related. For another, they are all affected by the relationships between each of those parties and the rest of the world – and most importantly by their relationships with China.

We expect to follow all of those things in the months ahead as best we can. Now, however, we shall close this entry with a brief note on each of the charts above. 

UK-U.S. Trade. With respect the TDM table on the composition of U.S.-UK trade, one cannot resist adding the obvious point, namely, that the negotiations yet to come between the U.S. and the UK will be driven as much by those who want to effect some change in that composition – U.S. agriculture for example – as by those concerned with protecting what they have.

UK-EU Trade. As for the snapshot of the UK’s top trading partners, we think the bilateral balances are worth noting. We are aware that there are many who believe that bilateral trade balances simply do not matter. Whether that view is correct or not, we are convinced that negotiators, policy makers, and CEOs all pay attention to trade balances, surpluses as well as deficits. The strong surpluses enjoyed by certain EU countries in their trade with the United Kingdom – as well as the surplus enjoyed by the EU has a whole – suggests to us that both sides have cards to play in their currently acrimonious negotiations. 
Not T-Shirts is a link to the GBD transcript of John Miller’s presentation at the GBD’s January 28 colloquium, Beyond Brexit. This was the source for today’s featured quote.

January 28 Event is a link to the page of the GBD website with materials from the Beyond Brexit colloquium, including audio recordings of each of the presentations. 

TDM is a link to the website of Trade Data Monitor.

The UK’s Top Trading Partners is a link to a Wikipedia page on this topic. This was the source for the second of the two charts in today’s entry. The UK’s Office of National Statistics is shown as the source for the Wikipedia data.
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