Foreign policy and economic policy should be connected to each other and should support each other. We are gearing up British diplomacy to support our economy, and by doing so to support your economy, and to support businesses on both sides of the Atlantic doing business with each other and all over the world.
In these economic times, there is only one sure source of growth, and that is trade, and the expansion of trade across the world allowing each country to benefit from its particular skills and specialities. The simple truth is that by reducing tariffs, subsidies and quotas, and by making sure that regulations are kept to a minimum, you can improve the lives of billions of people, including in developing countries.
Nowhere in the world are the benefits of open markets and healthy competition more apparent than right here in California. From the cultural impact of Hollywood to the technical revolutions of Silicon Valley, this state has been at the centre of progress and innovation for decades. It’s impossible to wander the streets of London today without seeing an iphone every yard, to sit in a Berlin cafe without being surrounded by MacBooks, or to work at a desk in any European city without being utterly reliant on Microsoft software. The ingenuity and creativity of California has changed positively the lives of billions of people.
It is open and fair markets that I want to focus on now. Last week at the G8 Summit in Northern Ireland, negotiations were launched towards what would be a groundbreaking Transatlantic Trade and Investment Partnership between the United States and the European Union. If we can conclude this, which I hope we can rapidly, then an agreement between the world’s two largest economies would be like no other.
The US and the EU account for almost half of global GDP, almost a third of world trade, and with almost 2 billion Euros in goods and services traded between us every day, it would be the biggest bilateral trade deal in history.
But this agreement is about more than just boosting trade between old allies. It’s also about ensuring that American and European companies are able to compete in an increasingly competitive world, that they are in a position to create jobs at home, and that together we can advance the principles of enterprise, competition and fair play on which so much of our shared identity is forged.
The truth is that the United States and the European Union remain the dominant forces in world trade, but our share is diminishing. At the beginning of the 1980s, the G7 countries accounted for around 55 percent of world GDP. That has now fallen to around 40 percent and will decline further. To maintain our way of life we need to build new links with markets in Asia, Latin America and the Gulf states, but we also need to strengthen our existing relationships.
The potential benefits of a Transatlantic Trade and Investment Partnership are too big to ignore. What I want to persuade you of is that American business en masse needs to get behind it.
First of all, removing the remaining trade barriers could add $280 billion a year to our economies, and secure millions of jobs on both sides of the Atlantic. And regulatory coherence would reduce the cost of compliance for those businesses that trade in both markets.
Second, an ambitious agreement would enable us to show leadership on trade liberalisation and to shape global economic governance in line with our values. By creating standards that would apply to half of the world’s economy, it’s likely that many other countries would adopt them too, creating 21st Century rules in intellectual property rights, and growth industries like the clean energy technologies that I saw at Caltech this morning. There is every possibility that if we conclude this successfully we would create a model for a future deal on global trade.
Third, if it’s agreed quickly, then this agreement would demonstrate that Europe is relentlessly focussed on creating prosperity for its people. That is something we are advocating. The UK wants to see changes in Europe that will make it more competitive and flexible for the future, so that we can put that to the British people as the basis of our membership of the European Union.
And fourth, it would reinvigorate the transatlantic ties between Europe and America, putting that relationship on a more modern footing and ensuring that it continues to benefit us all.
That is why Britain, a country whose support for open markets dates back to the writings of Adam Smith, and which has been leading the charge for free trade for centuries, has been championing this agreement so strongly within the EU.
But the deal has got to be an ambitious one. There will be big challenges ahead, and nobody is pretending that the negotiations will be easy, but as President Obama has said, we will need to keep our eyes on the big picture and avoid the temptation to temper our ambitions.
I know that here, on the West Coast, attention is understandably often focussed on the Trans-Pacific Partnership, which is very important too. But I believe that the benefits from a transatlantic deal would be felt as much in Los Angeles as they would be in Boston.
This state exports $4.3 billion of goods and services to the UK each year, and much more of course to the whole of Europe. Our Embassy in Washington has undertaken a study in partnership with the Atlantic Council and Bertelsmann on the potential benefits across the US, and our early findings show that a deal of the kind I’m talking about would increase Californian exports to the EU by over 25 percent and could create 65,000 new service sector jobs.
In addition, the impact from reduced tariffs will be even greater if we can ensure that the Trans-Atlantic and Trans-Pacific Partnerships are mutually reinforcing. Together they could form the basis for a radical reinvigoration of the global trade agenda, offering a once-in-a-generation opportunity to rebuild trust in trade and investment as the engine for job creation and economic growth.
Asia and the Pacific Rim are crucial to Europe as well, and we have an ambitious agenda to deepen our ties there. We now have in the EU a comprehensive trade agreement in place with South Korea. We have recently launched talks with Japan. We are negotiating with Vietnam and Thailand on free trade agreements. This could be an additional incentive for the US to join with Europe in a free trade agreement.
Speaking for the UK, we are expanding our presence in those emerging markets, and charging those diplomats with expanding trade and promoting British exports.
This is why the Transatlantic Trade and Investment Partnership is so important. It could bring great benefits here. European states are some of the largest consumers of the films and music of Los Angeles, as well as the technical innovations of Palo Alto. And with California’s economic future looking bright, a deal across the Atlantic, as well as the Pacific, would only put further wind in your sails.
So, in the British Government we will do everything that we can to ensure a successful outcome. The promotion of trade has been one of the main objectives of our G8 presidency. We are going to build on this now and inject as much energy as we can so that businesses can be confident about this.
We have a small window of opportunity and if this moment is not seized it may not be seen again for a generation, at which point the world will be a very different place. So agreement has never been so necessary, or so achievable, as it is now, and with the support of Californian businesses, as well as companies and entrepreneurs across the United States, I believe we can succeed in doing this and take a major step towards securing future prosperity for our people.