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Does the Atlantic Declaration ‘de-risk’ economically?

The Council on Geostrategy asks five experts how the Atlantic Declaration helps the United Kingdom (UK) and United States (US) ‘de-risk’ their economies

Robert D. Atkinson, Information Technology and Innovation Foundation

Given the joint challenges Britain and the US face from the People’s Republic of China (PRC), the recent Atlantic Declaration signed by Joe Biden and Rishi Sunak, the US President and UK Prime Minister respectively, is welcome. This is in part because too few nations are willing to stand with the US in countering the PRC’s aggression, preferring to hide in the back rows, taking advantage of nations that stand up to the PRC’s innovation mercantilism so they can curry Beijing’s favour and avoid any perceived diplomatic or economic punishment that would come from openly siding with America.

In that sense much of what the Declaration calls for is needed and useful, including critical technology cooperation and further defence and economic security cooperation. However, to be effective, these talking points need to be translated into real, tangible action. Also, some of the provisions, like facilitating reciprocal talent flows, are frankly small beer when compared to the kind of broad-based talent flows that should be enabled. And other steps, especially partnering on an inclusive and responsible digital transformation, are not only a diversion from the real challenge of the PRC, but not needed. Finally, what is needed on top of this declaration is a formal, world-class free trade agreement (FTA). In this regard, it is troubling that the Biden administration refuses to sign any new FTA, even with Britain.

Stephen Booth, Council on Geostrategy

The Atlantic Declaration reflects the times. ‘Free trade’ has been relegated behind economic security in the order of US priorities. However, in the absence of a deep and comprehensive UK-US FTA on the horizon, the commitments the Declaration makes on technology, energy co-operation, supply chains, investment, and data present genuine opportunities to deepen strategic economic links with the UK’s biggest trade and security partner.

In this new era of geostrategic competition, a major risk facing the UK is that it gets squeezed between mounting interventionism by the major economic blocs, embodied in US legislation such as the Inflation Reduction Act, and similar policies within the European Union (EU).

One answer is to diversify strategic economic relationships, which the UK is doing in the Indo-Pacific by deepening its links with countries such as India and acceding to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which includes other important mid-sized Indo-Pacific strategic economic partners such as Japan and Australia. The UK should also ensure its own domestic regulatory regime is adapted to facilitate innovation and investment in the technologies of the future.

But with trade and security now firmly intertwined, transatlantic economic diplomacy will be increasingly important. Building on the AUKUS agreement, and in the wake of thawing UK-EU relations, the Declaration is an important milestone in ensuring the UK remains a key power in an increasingly complicated geostrategic environment.

Agathe Demarais, Economist Intelligence Unit

It is unlikely that the Atlantic declaration will be able to help either the UK or the US advance the de-risking of their economies. The document is a nice diplomatic declaration, but the US will continue to pursue de-risking on its own whatever happens (although it would like to have allies and partners on board). Meanwhile, the UK is yet to formulate a clear strategy for this challenge (apart from following the US lead, because it is the only credible thing it can do).

The two big global economies engaging in some form of de-risking strategy are the US and PRC, with the EU attempting to become the third power that counts on the global economic landscape. The EU is in a trickier position than the US, though, given its trade with the PRC is far more extensive than that of the US and the EU does not have as big an edge as the US in the global technology scene.

To be blunt, Britain is not a priority country for the US’ de-risking strategy: the two foundational speeches on de-risking of Jake Sullivan, the US National Security Advisor, did not mention the UK even once. Britain’s economy is too small to count. In addition, the UK is not a high-tech power (like Taiwan or South Korea), and it is grappling with structural economic issues (not least chronically low investment).

For the US, it is within the EU, like-minded Asian democracies (such as Japan, South Korea and possibly India), and the ‘Global South’ that the economies that will matter for de-risking purposes can be found. Emerging economies are of particular importance given the PRC’s advances in Africa, Latin America and Southeast Asia. Any other country that would like to join US de-risking efforts will be a nice bonus for Washington, but they are not a must-have.

Joshua Huminski, Mike Rogers Center for Intelligence and Global Affairs

Whilst short of a Free Trade Agreement, the Atlantic Declaration is a step forward in reducing allied exposure to geopolitical instability and maximising allied economic competitiveness – both of which are necessary to ensure successful de-risking efforts. However, considerable follow-on action is necessary if the Declaration is to achieve its full effect.

The Declaration builds on the already strong bilateral partnership, but in a manner that recognises the complexity of the challenge that the PRC represents. The reduction of barriers such as export controls and improving data sharing regimes, increasing cooperation on next generation technologies such as artificial intelligence (AI), and working to secure allied supply chains will both reduce British and American vulnerability to economic coercion and instability. It may also create an alternative centre of gravity for innovation. Most importantly, it looks at the UK as a key partner and works to substantively empower London.

Bureaucratic and legislative inertia, of which there is much in Washington, could well stymie the Declaration’s agreements. The White House would do well to seize upon the momentum of the Declaration. Failure to do so will see it consigned to the shelves of the Biden Presidential Library, and merely create more space for the PRC to progress.

Linda Yueh, Economist and author of The Great Crashes

The Atlantic Declaration states: ‘The United States and the United Kingdom resolve to partner to build resilient, diversified, and secure supply chains and reduce strategic dependencies.’ There are three aspects that could translate this aim into a policy that helps to ‘de-risk’ supply chains.

First, to build resilience, supply chains in key sectors should be stress tested in the same manner as global banks whose failure can reverberate across national borders. Transparency about which sectors are deemed important for national security, health or critical economic functions, among other areas, would be preferable to a more ad hoc or broad brush approach that would generate uncertainty for companies that make investment decisions on a commercial basis.

Second, diversification is paramount. Companies are amply aware that geopolitical events and trends are increasingly affecting economic policies and commercial decisions. So, diversification helps to ensure continuity of operations that can make supply chains more secure. It is worth stressing that diversification requires not putting all eggs into one national basket. 

Third, secure supply chains could mean that the UK and US prioritise allies or countries that share their broader foreign policy interests in their economic policies, including supply chains and inward/outward investment. Being transparent about the sectors in which commercial decisions may be affected by foreign policy considerations would add clarity rather than introduce more uncertainty that can deter firm investment.

By implementing this new approach to supply chains in a transparent manner, the Atlantic Declaration has the potential to reformulate supply chains in a way that reflects the changed 21st century global economy.

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