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Rishi Sunak, the UK Prime Minister, and Joe Biden, the President of the United States, have pledged their commitment to a collaborative agreement on defence and critical minerals. This strategic move by the UK prime minister marks a departure from the post-Brexit vision of unrestricted free trade, prioritising mutual protection instead.
During a joint press conference at the White House, Sunak emphasised the robust economic ties between the two nations, saying, “The economic relationship between our two countries has never been stronger. The relationship is strong—it’s booming. However, our agreement today focuses on addressing the particular challenges and opportunities we face in this moment.”
As part of the deal, both countries have pledged to commence negotiations immediately to mitigate the impact of Biden’s Inflation Reduction Act (IRA), which restricts nations without a US trade agreement from accessing tax credits and subsidies provided by the law.
Sunak hailed this collaboration as “a new standard for economic cooperation,” marking a departure from the initial plan for a comprehensive free trade agreement following Brexit. UK officials have praised this new approach as a more effective response to the challenges posed by Beijing and Russia’s incursion into Ukraine.
In a similar vein to the agreement between the US and Japan, Biden has committed to granting the UK access to critical minerals, thereby easing barriers that previously hindered the production of electric vehicle batteries.
Last August, President Biden enacted the IRA to reduce reliance on China within the electric vehicle supply chains, which raised concerns about potential disinvestment from car manufacturers in countries without a US free trade agreement. Under the terms of the agreement, currently under finalisation, UK electric car manufacturers will be eligible for half of the $7,500 tax credits available to US companies under the IRA.
Biden highlighted the transformative shift occurring in international trade, stating, “A fundamental change is taking place in terms of international trade. We realised during the pandemic that the reason we couldn’t produce automobiles was because the facility we relied on in Southeast Asia had shut down due to the pandemic. I made it clear to our NATO allies and partners that although we would be generating semiconductor capacity in the United States, it would be available to all our allies and friends.”
Moreover, Biden has pledged to seek Congress’s approval for designating the UK as a “domestic source” under US defence procurement laws, enabling increased American investment in British firms. Efforts will be undertaken to enhance the resilience of supply chains, with a particular focus on limiting Russia’s access to the global civil nuclear market. The agreement also includes a push for mutual recognition of engineering qualifications, which may necessitate state-level approval in the US.
In a move that will alleviate burdens for small businesses engaged in transatlantic trade, a data protection deal will be established, potentially saving £92 million. The two nations will also collaborate on crucial industries such as artificial intelligence, 5G and 6G telecommunications, quantum computing, semiconductors, and engineering biology.
The US has affirmed its support for the UK’s aspirations to act as a facilitator in international efforts to ensure the safe development of AI. The UK will host a summit later this year to kickstart these initiatives.
