The Atlantic Declaration: Real Opportunity or Political Dialectic?
“Global Britain” is a slogan that became popular as a result of the Brexit referendum. In the words of former Prime Minister Boris Johnson, and in the minds of all Brexiteers, it would have represented the newly-founded freedom of the UK to reach economic and trade agreements around the world to reimpose its lost global influence. After some years, it might safely be said that none of this is foreseeable in the near future. This is why the expectations around the “Atlantic Declaration” just signed by the UK and the USA should be lowered. However, the document proves interesting when analysed from a global commodities point of view.
The Declaration
The document, it must be said, has a political value that is quite higher than its potential substantial one. Indeed, the first part is dedicated to showing in detail the relationships between the two countries in the last decades after the Second World War. The emphasis is put on the shared history and the democratic and liberal values the two countries share, especially in light of the war in Ukraine. Then, various cooperation sections are outlined: the main areas are about the protection of critical technologies, emerging technologies in the fields of health, security and space, and especially, clean energy and supply chains. Most importantly, the Declaration comes at a critical point for the world economy and the commodities sector specifically. On this note, the Declaration eases some trade barriers between the two countries, strengthens defence and security ties and implements a framework to safeguard sensible data in the face of Chinese threats. Crucially, the two countries agreed to mitigate the adverse effects of the Inflation Reduction Act (IRA) on trade relations, since the law prevents countries without a trade agreement with the US foreseen, under some circumstances, by IRA: indeed, under the Declaration, the UK will be able to access these advantages, notwithstanding the lack of such a trade agreement with the United States.
Potential Consequences
For now, it is fair to say that the Declaration seems no more than a piece of political communication, indicating the willingness by the two historic allies to cooperate and, in the hopes of the UK, to reach a free trade agreement in the near future. However, the document offers some reflection points.
American influence and potential dominance in the commodities sector
The Declaration is a positive step for the United States since it is another demonstration of its resolve to assert itself as the main global actor in the commodities sector. Indeed, Covid, the Ukraine War, and the renewed international tensions made it imperative for countries to relocate their energy supplies. Especially, Western countries have striven to distance themselves from China and Russia and build a coalition guided by the United States to ensure the safety of global chains. In this scenario, the Inflation Reduction Act might be considered one of the most important passages for Biden’s presidency. However, the Act also creates problems for the relationship between the US and other allied countries, in that it is specifically aimed at favouring domestic production over foreign ones. In this sense, the Declaration is a way for the United States to redress this imbalance. In any case, there seem to be doubts about the capability of the United States to assert itself as the dominant actor on the energy market. Indeed, while pump prices in the US have been falling, there is disagreement among experts on whether this might be attributed to decisions made by the Administration or the Federal Reserve. As a consequence, the Declaration, from a political point of view, is certainly significant and underlines the willingness of the United States to “build” a coalition of like-minded states to drive a decoupling move from Chinese and Russian commodities markets. However, it remains to be seen whether the effects will be as good as the words used to present them.
Impact on UK firms
It’s important to analyse the potential effect the Declaration might have on UK firms, especially since it exempts the UK from some limitations for accessing American critical minerals. This is similar to what was granted to Japan, and it is a further demonstration of willingness to limit Chinese dominance in the sector. This move might be significant since the UK is one of the Western countries paying the highest cost in terms of inflation deriving from the Ukraine war. Moreover, Brexit is not helping, since the impact of the UK on commodity markets might be put at risk by it. Moreover, it is no secret that the so-called “green revolution” might represent an incredible hurdle for the British industrial sector, famously in decline since the second half of the 20th century. The Labour Party has recently announced an investment plan to finance this revolution, but the challenges will be difficult to overcome. Undeniably, the Declaration will have positive effects on British industry. Indeed, since the passage of the IRA, it has been argued that UK industries should be given access to American minerals and critical commodities. However, it remains to be seen how this aspect will develop, whether the US will indeed grant access to British industries and, crucially, which minerals this agreement will take into account. Indeed, from a political point of view, Washington is in a better bargaining position and this might be fundamental for it to build its dominance in the commodities sector.
Final Takeaways
The Atlantic Declaration is, surely, an important step in US-UK relations, and it is an occasion for the two countries to “move on” from Brexit and acknowledge the challenge of the post-Covid, post-Ukraine war world. Importantly, it might be the first step towards the conclusion of a US-UK trade agreement. However, as of today, the agreement is much richer in words than in substance. Indeed, it remains to be seen whether it will help the US to build a coalition of Western states to support its staunch de-coupling policies; moreover, from the British side, the advantages for its industrial sector are still uncertain and, especially, they rest on Washington’s willingness to grant more advantageous market conditions to foreign, even if allied, actors.
Image credit: BBC News