The Transatlantic Economy - An Interview with Joseph Quinlan
The Transatlantic Economy, an annual survey of jobs, trade and investment between the United States and Europe. BABC recently spoke with Editor Joseph Quinlan about the relationship between Europe and America.
How significant is the Transatlantic economy to both countries?
The United Kingdom and the United States are not only key entities of the transatlantic economy, but also among the most dynamic economies in the world. American and British firms are global leaders in such sectors as finance, insurance, transportation, life sciences and defence, to name just a few. Many of the goods and services of US and British firms are sold within the transatlantic economy, and the latter is hugely important to both the US and UK. Remember: the transatlantic economy is largest and wealthiest economic bloc in the world—no other country or region comes close to the commercial importance and dynamism of this region. The roots of the transatlantic economy run deep, notably between the U.S. and U.K.
The last 12 months have seen seismic, unexpected, events on both sides of the Atlantic. What’s been the impact on the Transatlantic economy?
Thus far, the impact of “Brexit” and the unexpected victory of President Trump have been limiting—for now at least. Trade and investment flows between the US and EU, including the United Kingdom, remain relatively robust. That’s not surprising in that both the United States and Europe are in the midst of a cyclical economic upswing, with cross-border trade and investment on the rise. 2016 was another strong year for bi-lateral trade and investment, with the US and the EU emerging, again, as each other’s investment partner. U.S. foreign direct investment flows to the UK totalled a record $48 billion last year, while flows from the United Kingdom to the United States were also quite robust ($43 billion). Meanwhile, total trade between the two parties topped $110 billion last year, representing one of the largest bi-lateral trade figures in the world. That said, transatlantic relations are frayed and have been undermined by Brexit and the populist and protectionist stance of the new US administration. The transatlantic economy is too big to fail—the stakes are too high, something policy makers must recognize.
A year on from Brexit, what are the biggest investment challenges the UK faces?
There is little doubt US and other firms are re-thinking their strategic positioning in the United Kingdom relative to European Union. The former has long been a bridge or gateway to the Continent, thanks to its preferential access to one of the largest markets in the world. However, Brexit null and voids the privileged access firms have to the European Union; the pending divorce has forced U.S. firms to re-think and reassess their presence in the U.K. The key challenge to the U.K.: how to remain an attractive destination for foreign firms; how to convince existing foreign entities in the UK to remain. In the end, the U.K. faces significant challenges when it comes to competing and attracting the capital of firms. In that a more pro-Europe axis is being formed between Germany and France, I think Brexit talks will be very challenging and difficult for the U.K.
President Trump recently celebrated his first 100 days in office. With the rhetoric of the campaign in the rear-view mirror, what has the Trump Administration’s approach to trade and investment, particularly in regards to the UK, told us?
It has been a mixed picture overall. The Administration has decided to opt out of the Transpacific Partnership (TPP) and has abandoned the Paris climate accord. Nafta looks likely to be re-opened for negotiation. However, the administration has been more accommodating towards China. “America First” does not spell the end of globalization or America’s commitment to the key multilateral institutions spawned in the post-war era. The US wants more nations to share in the burden of policing the world’s key trading lanes and more defence spending from NATO alliances. The US economy remains one of the most open and liberal in the world; US multinationals are just that—multinational firms with extensive operations/footprints all of the world. That isn’t going to change any time. For stance, while the US does not plan to abide by the Paris climate accord, US firms will remain key players/drivers in reducing the planet’s carbon footprint.
Where does Europe fit?
US-EU relations have soured over the past few months—in particular, US-German relations have hit a rough patch, with the US’s $65 billion trade deficit with Germany a bone of contention between the two parties. I don’t expect a US-European trade war; cooler heads will prevail since the losses to both parties would be substantial. However, I don’t see much hope for TTIP and believe US technology firms will remain in the cross hairs of EU regulators bent on adopting more stringent data privacy/sharing policies.
During a recent visit, US Speaker of the House Paul Ryan vowed to ‘chart a course forward’ on TTIP, raising home that it may be revived. What are your predictions for TTIP?
The prospects of TTIP being revived under current circumstances are slim. There is no appetite in the US for such a deal, and EU trade negotiators are busy preparing for Brexit. The latter is going to happen—TTIP most likely not, so not much manpower is expected to be expended on TTIP. Another key concern: would TTIP include or exclude the United Kingdom? Most likely not. The UK will most likely have to negotiate a trade agreement with each party—the EU and the United States.