The announcement that UK-US free trade agreement discussions have officially begun will have been welcomed by many firms across the Square Mile last Tuesday.
Incidentally, it also coincided with my first virtual ‘visit’ to the country to speak to US regulators alongside UK Finance.
Accounting for nearly £22 billion, the US is by far the UK’s largest single export market for financial services, a figure testament to the much-touted special relationship.
All 50 US states have jobs that are connected to investment by a UK company. We are the single largest investor in each other’s economies- much of this facilitated through businesses in the City of London. Prior to COVID-19, a million UK citizens worked for US firms, while a similar number of those in the US were employed by UK firms.
While I expect this picture will have shifted somewhat in the last few months, what won’t have changed are the longstanding intrinsic links between our two nations.
Yes, we’ve both been hit hard by the pandemic, but the response from our respective financial sectors has been comprehensive, ensuring markets remain open and functioning.
This doesn’t mean the long path to recovery should not be understated. To quote one US regulator I spoke to last week, the economic rebound may look more like a “Nike swoosh” than the ‘V’ curve some are expecting.
However, what is increasingly evident is that international trade will be one of the routes out of this crisis, with the financial and professional services sector- capital markets in particular- playing a key role. This sentiment was shared by US regulatory counterparts I met online, many of whom also talked about the importance of greater international cooperation in the face of strained global supply chains.
Of course, the official commencement of trade talks has generated a buzz on both sides, and rightly so. In the City Corporation we’ve long said that it’s important to ensure the best possible access for US firms to European markets after Brexit, and we remain keen for an ambitious UK-US FTA which locks in current openness and goes beyond existing precedent in the future areas of data flows and digital trade, particularly in the wake of the United States–Mexico–Canada Agreement.
Less glossy, but equally important though are discussions around increasing regulatory and supervisory cooperation and coherence, and we now have a once in a generation opportunity to do just this.
Encouragingly, there appears to be huge appetite for this on both sides, and those I spoke to said the COVID-19 crisis has only amplified the need for bilateral regulatory dialogue, particularly around issues including fintech, cyber security and environmental and social governance, as well as existing barriers to doing business.
As co-chair of the UK-US Trade Associations Coalition, a body which feeds into government negotiations, I will certainly be taking many of these proposals forward.
I’ll also be looking more closely at the possibility of the creation of a bilateral “regulatory highway” based on mutual recognition of regulatory outcomes- something many companies on both sides have long awaited.
Of course these things take time, and the talks will be long and complex. What’s clear though is that there is massive ambition and enthusiasm on both sides for a closer relationship, particularly in financial services.