By Daniel Hunter
The UK must carve out a new global trading role for itself as part of a new, rapidly-changing European Union, CBI Director-General John Cridland has urged.
In his New Year message, he outlined the importance of securing a ground-breaking EU-US free trade agreement to generate long-term UK growth and boost the flat domestic economy.
He called on politicians both sides of the Atlantic to seize the moment during the first 100 days of President Obama’s second term, to create a long-lasting economic legacy — and not risk looking back with regret in four or five years’ time.
The CBI says a historic US deal is vital to creating long-term, sustainable economic growth and job creation in the UK and EU. It would eliminate tariffs, liberalise goods and services, harmonise regulation, promote investment and set benchmark standards for trade in the 21st century.
Mr Cridland said the UK could not afford to miss out on opportunities to use the EU to help rebalance the economy towards exports and create new trade deals based on its world-class reputation — in particular in financial and professional services; pharmaceuticals; and creative industries.
It comes as the CBI kickstarts a major project in the New Year to flesh out how the UK’s global role should look in a new Europe. It will examine how the UK can remain a leading location to do business globally - expanding export markets particularly for high-growth small and medium-sized firms, without losing access to the Single Market. It will report in mid-2013.
The CBI says that while the EU and US have relatively open economies, there are numerous examples of obstacles to trade across many sectors — from tariff costs and mismatched regulations, which lead to significant costs to firms on both sides:
- The transatlantic chemicals industry enjoys low tariff levels, but it pays over 500 million EUR in customs duties each year.
- Logistics firms, when trading in the EU, must handle 27 different customs processes and costs, while pharmaceutical firms believe major cost savings would be possible with the harmonisation of packaging in both markets.
- ‘Unseen’ barriers such as these cost businesses across a whole range of industries, impeding the level of trade possible for US and European companies. One study identifies up to 122 billion EUR in potential gains being possible for the EU every year, if those regulations that could plausibly be aligned, were (see notes to editors).
Mr Cridland argued that business leaders were pragmatists and have always adapted to new economic and political realities emerging in Europe.
But overall, they still saw the EU as a strong launchpad to project themselves globally and a basis on which to attract inward investment.
He said the UK must drive forward ongoing EU trade talks with India, Japan and rapidly growing economies.
He said businesses were clear the Eurozone crisis showed that the EU needed to address huge structural reforms that it had ignored for many years — but did not want the “baby thrown out with the bathwater” - when it came to getting the UK’s future relationship with Europe right.
Mr Cridland said it was vital the UK remained at the EU table banging the drum for its national interest — shaping the agenda on Single Market reform; on climate change; protecting the financial services industry; and promoting new trade agreements.
On EU-US free trade agreement and global trade
John Cridland, CBI Director-General, said: “President Obama and the EU’s political leaders need to grab the bull by the horns. We need to be mature and resist the siren calls of protectionism and look long-term. The best way of creating jobs, promoting investment and stimulating growth is by eliminating the tariffs and harmonising the regulation which holds back businesses on both sides of the Atlantic.
“Business leaders want to see real urgency on this in the first 100 days of Obama’s second term. We don’t want to turn around in four or five years’ time and regret not seizing this massive opportunity.
“We can’t beat around the bush — we pack a bigger punch in securing trade deals inside the EU than outside. The US wants the big prize - access to a market of 500 million customers across the EU, not just 60 million on our own shores. So the best way of getting the right deal for the UK is on an EU-wide basis. The EU must be the launchpad for UK business to trade with the rest of the world, carving out a new global role for ourselves.”
On the UK’s relationship with the European Union
John Cridland, CBI Director-General, said: “We need to recognise and adapt to the realities of the multi-speed Europe which is emerging. The fallout in the Eurozone from the debt crisis is not just forcing through rapid political and financial integration. It is also forcing all countries to fundamentally rethink the EU’s wider purpose and deal urgently with the sort of structural flaws Europe has ignored for decades.
“We must tread very carefully though. The debate about our future in Europe in 2013 must be based on an informed, hard-headed analysis of where our long-term economic and financial interests lie and business will need to make its voice heard.
“We need global trade deals to drive growth and create jobs, especially when the domestic economy is growing more slowly than required. Businesses don’t want the baby thrown out with the bathwater — not with 50% of our exports heading to Europe.
“The UK has ensured its values of free and open trade have been at the heart of Europe over the last 40 years, helping to create one of the biggest successes of the European Union — the Single Market. It’s essential we stay at the table to bang the drum for businesses and defend our national interest, particularly protecting our world-class financial services industry to maintain our competitiveness internationally.”
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