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New Trade Deals Will Affect US and UK Technology and Defence Spending

04 September 2017, 20:29 CET

Outside of the EU, the USA is the UK’s largest trade partner, with 15% of all UK goods exports going to the US, while 47% go to the 27 other EU countries.

With the UK set to officially leave the EU around March 2019, there will then be plenty of scope for new trade deals to be set up between the UK and USA. Depending on what happens during negotiations and what is agreed, the technology and therefore military sectors on both sides will be affected in many possible ways.

Potential New Trade Deals

Any new trade deals between the UK and USA cannot be put into place until the UK has left the EU. There will be many aspects to discuss and focus on when creating a deal, with both sides wanting to avoid any disruption to flights between the two countries, while protecting commercial data flows, trade in nuclear materials and technology.

Whatever terms are agreed in a future trade deal, both sides will want to arrange something beneficial to their own and shared interests. A free trade agreement seems to be the most likely option at the moment, with tariffs set to be lowered from their existing low position. Ecommerce and data services could benefit here, given the mutual recognition of data protection standards and procurement.

Factors such as whether the UK retains access to the single market and how strained relationships with other EU countries become could also impact any agreement. This is because US companies may want to use the UK as a base for their European expansions, given the close ties between the two countries. Being outside the single market and with poor relations may move the USA's focus elsewhere in Europe.

The Technology Sector

The US and UK have close commercial ties when it comes to technology. The UK is home to many tech developers that produce products and services which increase business productivity and are adopted across many firms in the US. Likewise, various large US technology companies still have plans to expand within the UK, such as Google aiming to create 3,00 new jobs and Facebook to double its headcount in Britain.

Within the USA and depending on Trump's actions, such as the approach to immigration and travel potentially putting metaphorical walls around Silicon Valley, it may provide more power to the UK's tech industry. This could provide some leverage when it comes to negotiating a trade deal to make it more favourable, lowering export costs for technology firms.

Defence Spending

Linked in to the technology sector, military and defence spending for both the UK and USA will be affected by any trade deals. There are specific import and export regulations for military goods for both countries which must be adhered by, though they may change once the UK leaves the EU.

Should a new trade deal be passed through, this could increase the costs of sending weapons, military technology and equipment both ways. The two countries have a close military alliance though, so it will be in both of their best interests to create a trade deal that has minimal impact on costs.

Impact on Budgets

The likes of technology, machinery, electrical equipment and vehicles make up some of the most common exports from the UK to the USA. From small electrical parts to big bits of machinery, the costs of importing or exporting between the USA and UK could soon change. This will impact upon government, military and business budgets, so it is important to stay on top of developments for new trade deals.

It could still be a few years before a new USA/UK trade deal is agreed and pushed through, but all businesses should be prepared for financial changes.

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