The Atlantic Declaration: What will it mean for UK-US trade?

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How could a new economic deal signed between the UK and US impact transatlantic trade?

Last week, UK prime minister Rishi Sunak headed to Washington for talks with president Joe Biden. While the discussions were wide-ranging, one outcome was the announcement of a new economic partnership between the two countries.

Known as the Atlantic Declaration, the agreement aims for closer cooperation across a number of issues, including the development of new technologies such as artificial intelligence, advanced telecommunications and semiconductors, alignment on net zero ambitions and a joint approach to tackling security threats from the likes of Russia and China.

Where there are also commitments that should enable easier trade between the two nations for some sectors, the deal falls far short of the UK's previously-stated ambition to secure a full free trade agreement (FTA) with the US. This was at the heart of the government's post-Brexit strategy, but has been much less of a priority for Washington. 

As a result, it has fallen down the agenda and some commentators have suggested the limited agreements included in the new partnership will put an end to hopes of a more comprehensive deal. So what does the declaration include that could impact trade between the UK and US?

What's in the new agreement for trade?

Among the key provisions of the agreement will be closer cooperation on defense, which will include steps to streamline trade of critical goods for this sector. As part of this, the US Congress will be asked to modernize export control rules to make the flow of items between the US, the UK and Australia - the third member of the AUKUS defense pact - easier. Congress will also be asked to designate the UK as a "domestic source", which will allow British importers to operate on a more equal footing to their US counterparts.

Similar moves are focused on critical minerals, in particular those that are crucial to the production of electric vehicles (EVs). Negotiations are set to begin on allowing such resources extracted or processed in the UK to count towards tax credit requirements for EVs under the US' Inflation Reduction Act.

Subsidies for US-produced EVs have been a major source of tension between the US, UK and EU in recent months, with European nations arguing it will make their imports less competitive. The Atlantic Declaration may therefore ensure UK-made vehicles are not at a disadvantage if talks go as planned.

Business groups broadly welcomed the news. William Bain, head of trade policy at the British Chambers of Commerce, for example, said it marks an "important milestone" in developing trade and investment ties across the Atlantic.

He added: "We also welcome the clear commitment to negotiate a strong deal on access to the US market for critical minerals like cobalt, graphite, lithium, nickel and manganese that have been extracted or processed in the UK." 

Mr Sunak said: "The Atlantic Declaration sets a new standard for economic cooperation, propelling our economies into the future so we can protect our people, create jobs and grow our economies together."

Is a full FTA now off the table?

Despite the positives for some sectors, many details have yet to be worked out and some commentators have suggested that, as the declaration is in essence a collection of mini-deals, it reflects concerns in the UK that the goal of a full FTA is unlikely to be realized any time soon.

By focusing on specific areas of agreement, such as defense and technology, this may still allow UK companies to increase their transatlantic trade without the need for a more comprehensive deal to cut tariffs in areas that are more contentious.

When asked about the lack of a full FTA at a joint press conference in Washington, Mr Sunak said UK companies would still be able to benefit, adding that the new declaration "responds to the particular opportunities and challenges that we face right now, and into the future".

Political opponents in Westminster, however, criticized the scope of the deal. Labour's shadow foreign secretary David Lammy said the government had "failed to deliver the comprehensive trade deal they promised ... or to secure the ally status under the Inflation Reduction Act that is so important for the automotive sector and for the green transition".

The agreement is therefore not expected to bring forward any negotiations on a full FTA, which are currently not expected to begin before 2025 at the earliest.