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Strength of UK-US trade relationship underplayed, study finds UK commerce with US underplayed compared with EU trade links
(35 minutes later)
Britain's transatlantic trade links with America are more important and those with Europe less significant than previously thought, according to a new way of calculating the true value of international commerce.Britain's transatlantic trade links with America are more important and those with Europe less significant than previously thought, according to a new way of calculating the true value of international commerce.
In a study likely to intensify the political debate about Britain's role in the European Union, a joint initiative by the Organisation for Economic Co-operation and Development and the World Trade Organisation revised up the strength of the UK-US trade relationship. In a study likely to intensify the political debate about Britain's role in the European Union, a joint initiative by the Organisation for Economic Co-operation and Development and the World Trade Organisation revised upwards the strength of the UK-US trade relationship.
The initiative – which looks beneath the gross value of trade to look at the countries that provide the parts and services that go into imports and exports – found that the US received a "much higher" share of UK exports on a so-called value added basis.The initiative – which looks beneath the gross value of trade to look at the countries that provide the parts and services that go into imports and exports – found that the US received a "much higher" share of UK exports on a so-called value added basis.
Ahead of David Cameron's big speech on Europe later this week, there have been warnings from business leaders to the prime minister of the risks of jeopardising Britain's vital trade links with the EU, while Eurosceptics have said stronger links should be established with faster-growing regions of the world. Ahead of David Cameron's big speech on Europe this week, there have been warnings from business leaders to the prime minister of the risks of jeopardising Britain's vital trade links with the EU, while Eurosceptics have said stronger links should be established with faster-growing regions of the world.
The OECD/WTO findings show that the EU as a whole is a more important trading partner for Britain than the US, but that more of the UK's lucrative exports than previously believed head across the Atlantic. The OECD/WTO findings show that the EU as a whole is a more important trading partner for Britain than the US, but that more of Britain's lucrative exports than previously believed head across the Atlantic.
According to the new methodology, the high value content of Britain's service-sector exports to the US make them more valuable than they appear at first sight. The OECD and WTO said 60% of the value of UK gross exports originated from the service sector. According to the new methodology, the high value content of Britain's service sector exports to the US make them more valuable than they appear at first sight. The OECD and WTO said 60% of the value of UK gross exports originated from the service sector.
By contrast, the report said UK exports to other EU countries were "at least partly intermediate services and inputs that are then further processed and shipped to other countries (in particular to the US)". On a value-added basis, Britain's trade with France and Ireland was sharply lower.By contrast, the report said UK exports to other EU countries were "at least partly intermediate services and inputs that are then further processed and shipped to other countries (in particular to the US)". On a value-added basis, Britain's trade with France and Ireland was sharply lower.
Work by the OECD and the WTO, which tries to give a more accurate picture of the process by which goods and services are produced in a globalised economy, also found that America's politically charged trade deficit with China was 25% smaller once the value of manufacturing components imported into the country were taken into account. Washington has been putting pressure on Beijing to allow a revaluation of the yuan that would make Chinese exports less competitive.Work by the OECD and the WTO, which tries to give a more accurate picture of the process by which goods and services are produced in a globalised economy, also found that America's politically charged trade deficit with China was 25% smaller once the value of manufacturing components imported into the country were taken into account. Washington has been putting pressure on Beijing to allow a revaluation of the yuan that would make Chinese exports less competitive.
Both the OECD and the WTO were keen to flag up the results of the exercise in order to combat growing protectionist pressures. The two international bodies say that barriers to imports will backfire because they also hurt exporters.Both the OECD and the WTO were keen to flag up the results of the exercise in order to combat growing protectionist pressures. The two international bodies say that barriers to imports will backfire because they also hurt exporters.
"Today, we have to think about goods and services as 'made in the world', forcing a radical change in how we need to look at trade flows," Angel Gurría, secretary-general of the Organisation for Economic Cooperation and Development, said."Today, we have to think about goods and services as 'made in the world', forcing a radical change in how we need to look at trade flows," Angel Gurría, secretary-general of the Organisation for Economic Cooperation and Development, said.
"This growing process of international fragmentation, driven by technological progress and trade policy reforms, challenges our convention wisdom on how we look at and interpret trade policies," he said. "This growing process of international fragmentation, driven by technological progress and trade policy reforms, challenges our convention wisdom on how we look at and interpret trade policies."
Gurría launched the initial set of data alongside Pascal Lamy, the director-general of the World Trade Organisation; European trade commissioner Karel de Gucht; and New Zealand trade minister Tim Groser.Gurría launched the initial set of data alongside Pascal Lamy, the director-general of the World Trade Organisation; European trade commissioner Karel de Gucht; and New Zealand trade minister Tim Groser.