Written evidence from UK Trade & Investment
INTRODUCTION
1. The Foreign Affairs Committee (FAC) has
announced a new Inquiry on "Global Security: UK-US Relations".
The Committee has indicated that it wishes to inquire into the
relationship between the UK and the US and the implications on
UK foreign policy. As UKTI is responsible for the trade and investment
work of embassies and other diplomatic posts, the Committee may
find it helpful to have a separate memorandum on this issue. This
memorandum specifically addresses the "basis of the bilateral
relationship between the UK and the US".
2. UKTI, established in 2003, brings together
the work of the Department for Business, Innovation and Skills
(BIS) and the Foreign & Commonwealth Office (FCO) on trade
development and promotion of foreign direct investment (FDI) into
the UK. UKTI exists in order to help UK-based companies succeed
in the global economy and to assist overseas companies in bringing
high quality investment to the UK. There are clear economic benefits
for the UK in increased international trade and investment. UKTI
can intervene, providing cost-effective ways of supporting industry
at the Government level.
3. UKTI works with a variety of partners, including
the nine Regional Development Agencies (RDAs), the trade promotion
and inward investment organisations in the Devolved Administrations
(DAs), Partners Across Government (PAGs), trade associations and
private sector organisations active in the field of business development.
The shared goal is that our customers receive services tailored
to their individual requirements, irrespective of where they are
based. UKTI has 2,400 staff, of whom 1,300 are overseas working
in 96 markets.
4. UKTI's strategic target objective, agreed
with HM Treasury as part of the 2007 Comprehensive Spending Review
settlement is as follows:
By 2011, to deliver measurable improvement in
the business performance of UKTI's international trade customers,
with an emphasis on innovative and R&D active firms; to increase
the contribution of FDI to knowledge intensive economic activity
in the UK, including R&D; and to deliver a measurable improvement
in the reputation of the UK in leading overseas markets as the
international business partner of choice.
5. UKTI has targets for raising revenue
as well as Service Delivery targets for helping business. The
key source of data to measure UKTI's performance against the set
targets is the Customer Relationship Management (CRM) system,
used by all teams across the global network. It provides the information
used within the Performance and Monitoring Survey (PIMS), which
is an independent survey carried out by a leading market research
organisation. The findings demonstrate that trade customers reported
an averaged annual total of £3.6 billion additional bottom-line
profit, which they would not have achieved without UKTI support,
which equates to every £1 that UKTI spends generating £16
of benefits to the UK economy.
6. Trade policy issues relevant to the USA
are the responsibility of Europe, International Trade & Development
(EITD) in BIS. Contributions from EITD and the Export Control
Organisation have been included in this memorandum at paragraphs
25-26.
THE US MARKET
UK-US TRADE STATISTICS 2007-08
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| Exports 2007-08 | Imports 2007-08
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|
| Goods | Goods
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| £34.7 billion | £28.7 billion
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| Increase of 8.3% over 2006-07 | Increase of 9.9% over 2006-07
|
| | |
| Services | Services
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| £36.2 billion | £19.7 billion
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| Increase of 9.7% over 2006-07 | Increase of 7.2% over 2006-07
|
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7. The US is the UK's largest single overseas market
and is the leading destination for UK overseas investment. It
has an integrated and largely self contained economy and every
major industry is represented. With the exception of a number
of import quotas, and some strategic industry ownership restrictions,
there are no limitations on foreign firms seeking to do business
in the US. The US has Federal laws applicable throughout the entire
country, and State laws, which are passed by individual States,
both sets of which apply in the business world.
8. The US is an attractive market to UK exporters and investors
for the following reasons:
— UK goods have traditionally enjoyed a good reputation
for quality in the US.
— US manufacturers often source components overseas.
— Wider market access to Canada and Mexico through the
North America Free Trade Agreement (NAFTA).
9. The US has consistently been the major single investor
into the UK. In 2008-09, we successfully attracted 621 FDI projects
to the UK from the US and they are a major source of growth and
employment for the UK economy. The 621 projects (out of a total
of 1,744), created 12,888 new jobs in the UK. There were 30% more
projects from the US in 2008-09 than in the previous year. This
figure was underpinned by the increase in companies locating their
headquarters operations in the UK as a platform for accessing
global markets in Asia and Africa.
SECTOR SPECIFIC
INFORMATION
10. For the 2009-10 year, in tandem with business, UKTI
has highlighted eight priority sectors for the US market:
Construction, Creative & Media, Energy, Environmental,
Financial Services, ICT, Healthcare and Pharmaceuticals.
UKTI TEAMS IN
THE US
11. The 120 staff working full or part time for UKTI
in eight offices across the USA represent the organisation's largest
overseas trade and investment team and reflects the importance
of the market. UKTI has offices in Washington, New York, Boston,
Miami, Houston, Chicago, Los Angeles and San Francisco. The majority
of the staff cover both trade and investment work. Sir Alan Collins,
Consul-General, and Director General, Trade and Investment in
New York, is Head of the UKTI US team. There are five UK-based
Directors located in Los Angeles, Chicago, Washington and two
in New York. Each of the teams at Post is led at operational level
by a Locally Engaged officer (Head of Trade & Investment).
Separate arrangements exist for help to the defence sector—see
paragraph 22.
THE UKTI NORTH
AMERICAN SCHOLARSHIP
SCHEME
12. UKTI and co-sponsors, the Ellis Goodman Foundation
and British Airways, offer UK SMEs a unique opportunity to attend
the JL Kellogg School of Management in Chicago. The course aims
to help UK companies understand the importance of effective marketing
for the USA. There are two calls per annum for UK companies to
participate in this initiative.
ACHIEVEMENTS
13. In 2008-09, the US UKTI team raised a total of £342,405
in revenue against a target of £265,000. 2,500 UK companies
were significantly assisted in accessing the US market against
a target of 2000. This was accomplished despite EU-US trade falling
by 20% between January 2008 and January 2009, as a result of the
economic recession.
SUCCESS STORIES
14. The Committee may wish to note a few examples of
successful UKTI activity in support of trade development and FDI.
Further examples can be submitted if required.
— In January 2009, Microsoft opened a Search Technology
Centre in London. Employee numbers are expected to reach several
hundred in the next five to 10 years.
— Guardian Industries Corporation, a worldwide glass manufacturer,
launched a new £6m laminating line at its plant in Goole.
The plant will produce safety glass used in schools, hotels and
shopfronts.
— Pfizer, the world's largest drug company, announced
plans to spend $60m on a new stem cell research centre in Cambridge.
— CyberSource Corporation announced plans to establish
an R&D centre in Belfast, employing up to 60 software development
professionals.
US-UK DEFENCE EQUIPMENT
COLLABORATION
15. The Defence and Security Organisation (DSO), which
promotes defence exports is now part of UKTI. The UK enjoys a
close relationship with the US which covers a broad range of joint
capabilities and programmes spanning high-tech, state of the art
equipment to off-the-shelf purchase of components. This delivers
value for money and enhanced interoperability as well as helping
to meet the UK's priority of securing the best equipment for our
Armed Forces. The UK and US are partners in 22 collaborative equipment
programmes, the most significant of which is the Joint Strike
Fighter (JSF) programme.
16. US Government and Industry have also provided invaluable
support, which the UK greatly appreciates, in acquiring equipment,
ranging from Reaper Unmanned Aerial Vehicles, to Mastiff Armoured
vehicles through to desert boots, and in expediting export licenses
to meet Urgent Operational Requirements in both Iraq and Afghanistan.
17. The US International Traffic in Arms Regulations
(ITAR) control the export of equipment, technology and other information
on the US Munitions List and can be bureaucratic for nations seeking
to obtain US export licences. In 2007 Prime Minister Blair and
President Bush signed the US-UK Defence Trade Co-operation Treaty,
which seeks to ease the transfer of specified categories of equipment,
technology and information. The President is awaiting advice and
consent from the Senate Foreign Relations Committee on the Treaty,
prior to ratification. This would allow the UK to access, more
quickly, material required to support operations, help improve
interoperability between our forces and enable our defence industries
to work more closely together. The UK continues to work closely
with the US Administration to prepare for ratification and subsequent
implementation.
18. The principles of the two-way street are reflected
in an intergovernmental Memorandum of Understanding (MOU) (Declaration
of Principles for Defence Equipment and Industrial Co-operation—signed
5 February 2000). Defence trade between the US and UK amounts
to approximately $2.8 billion per year. The US is the largest
importer of UK defence goods after Saudi Arabia. The balance of
US-UK defence exports is approximately 2 to 1 in favour of America.
This is not surprising considering the scale of the US defence
budget and defence industrial base and it reflects well on the
performance of British companies in the challenging US defence
market.
19. The US sources a relatively small proportion of its
defence equipment from overseas and the UK is the biggest offshore
supplier to the US military. Similarly the US is the biggest overseas
supplier to the UKMOD. The two-way defence trade makes an important
contribution to each country's military capability. UK companies
have been very successful in meeting niche requirements such as
avionics, vehicle communications, military bridging, howitzers,
and Chemical, Biological, Radiological and Nuclear (CBRN) defence
equipment, and they have well established relationships with US
primes. Platform sales have been relatively few. The Anglo-Italian
AW101 helicopter was selected for the VH-71 Presidential Helicopter
requirement in 2005, although the Department of Defense (DOD)
recently announced its decision not to proceed further with the
project because of cost escalation. Around 100 British companies
are working on the JSF programme. UKMOD purchases of US equipment
include Apache and Chinook helicopters, C-17 and C-130 transport
aircraft, and armoured vehicles. UK companies have been successful
in establishing themselves as valued parts of the supply chain
through industrial participation agreements with a number of US
prime contractors, who are suppliers to the UKMOD.
20. The transatlantic defence trade has also encouraged
two-way investment in the defence industrial base. US companies
who have established a presence in the UK include Boeing, Honeywell,
Lockheed Martin, Raytheon, ITT, General Dynamics, Harris, Rockwell
and Northrop Grumman. They are an important part of the UK's defence
and aerospace industrial base, contributing expertise and investment
to the benefit of UK defence requirements and exports. In the
US, BAE Systems, QinetiQ, Rolls-Royce, Cobham, Ultra and Martin
Baker are examples of successful British investment with similar
positive contributions to the US defence industrial base. UK companies
employ around 117,000 people in virtually all of the 50 states.
21. An increasingly important focus for UKTI activity
in the US is the homeland security market which is dominated by
US suppliers but offers significant business opportunities for
the UK security sector to provide niche solutions utilising the
UK's innovative technology and extensive experience of dealing
with security threats.
22. UK Government support to British defence and security
companies in the US market is provided on both sides of the Atlantic.
In the UK, DSO within UKTI provides support to UK industry campaigns
and advice to companies pursuing business opportunities in the
US. In the US, support for UK defence companies and UKTI is provided
by the British Embassy Defence Trade Office in Washington, while
Security companies are assisted by locally based UKTI staff.
UK & US EXPORT CONTROLS
23. UK export controls broadly correspond to US controls
on military items (munitions) and dual-use goods. The US Munitions
List (USML) and the UK Military List (UKML) are comparable both
in scope and coverage of goods and technologies, though they take
a slightly different approach in some areas. There is a high level
of commonality between the USML and the UKML, and between US and
UK dual use controls.
24. The UK and the US governments liaise closely on export
control issues where appropriate, including the sharing of intelligence
material to inform licensing decisions. We also share intelligence
where possible with a view to preventing breaches of our respective
controls. A delegation of export control officials from the State
Department visited the UK for talks with their counterparts here
earlier this year. We expect to see them again soon—possibly
with a return visit to the US in the course of the coming year,
for which we have a standing invitation.
TRADE POLICY
25. Trade Policy is an area where the European Commission
negotiates on behalf of EU Member States, on the basis of mandates
agreed with EU Member States. However, in line with the comments
made on the global economy and other economic issues in the FCO's
memorandum, and working closely with others (in Government and
outside), the Europe and International Trade Directorate (EITD)
in BIS leads on the UK engaging effectively with the US, including
through the EU, both bilaterally and multilaterally. Some recent
and ongoing examples of this are:
— the trade policy aspects of the G20 engagement and
the reform of international institutions, mentioned in the FCO's
memorandum;
— discouraging protectionism through the extension and implementation
of `Buy America' provisions, visas and Border Adjustment Mechanisms;
— seeking to avert new trade disputes and managing the
downside risks of existing ones (eg. Boeing/Airbus); as well as
— engaging the US in relation to the Doha Development
Agenda (DDA, the current WTO Trade Round).
26. In addition, the UK works to promote UK/EU-US economic
co-operation, and address market access and regulatory barriers
to trade and investment, including through the EU's Market Access
Strategy, and inputting into and influencing the EU-US Transatlantic
Economic Council. The FCO memorandum also mentions the objectives
on Aid for Trade, Trade Finance and Development, which the UK
is fully committed to and pursues actively.
22 September 2009
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