Date: Tues, 3 March 2020
Author: Huw Jones
On Monday, the government reported that Britain’s financial services industry could perform less well compared to sectors such as energy, autos and others under a free trade deal with the United States.
In their negotiating mandate with the United States for a free trade agreement (FTA), Britain specified that it needed “ambitious commitments” on U.S. market access for the UK’s most important economic sector.
The government also reported that while there is possibilities that the value of financial services will face “small reduction” in value under the U.S. trade deal, other sectors from energy, motor vehicles, chemicals, plastics and rubber sectors would spot significant percentage increases.
Britain reported that this would be an indication of a reallocation of resources directed towards other sectors in the UK economy as they continue to expand under a U.S. trade deal.
The government said, “It should not be taken to reflect the level of ambition expected in financial services in the FTA or any financial regulatory agreements or arrangements which could be negotiated separately to an FTA., Trade liberalisation in the financial services sector would still continue to aid in economic growth.”
Adding on, financial services trade data does not take into account the substantial amount of cross-border activity undertaken at U.S. branches or subsidiaries of UK financial firms. “Reduced barriers to foreign direct investment (FDI) could have a positive impact on financial services output not captured in the initial results,” it added.
The City of London financial district mentioned that an FTA could establish a modern global standard on what is conceivable in cross-border financial services trade. “Alongside these discussions, closer cooperation on regulatory issues can play an equally important role in increasing transatlantic trade in financial services,” the City of London leader Catherine McGuinness expressed.
London, which contends with New York as top global financial centre, presently serves as a secondary homeground for U.S. banks such as JPMorgan, Morgan Stanley and Citi and U.K. Banks like HSBC conduct operations in the United States.
Britain and the United States achieved a common agreement to replicate an EU-US agreement on cross-border trade in insurance and re-insurance, a pivotal step accustomed to the United States that would serve as a crucial point for the Lloyd’s of London insurance market where U.S is one of its major market.
The Office of US Trade Representative (USTR) drew out specific negotiating objectives in February 2019 for a trade deal with Britain. It stated zero requirements for U.S. financial services firms requiring a UK presence. Additionally, there must also be no curbs on cross-border data flows, or requiring the use or installation of UK-based computing facilities, USTR said at the time.
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