Steering through turbulent times

Lord Davies of Abersoch, Minister for Trade and Investment, explains how the US and UK must continue to work together to survive the economic downturn

I have taken on the position as Minister for Trade and Investment at perhaps one of the most challenging economic times in the UK’s history. The global recession has impacted every country around the world and that is why it is so crucial we work together to survive the downturn and position our markets for future growth.

The US is Britain’s single most important trade and investment partner, with around 40% of overseas direct investment in the UK coming from the US. Investment from the US sustains over one million jobs here in Britain, while investment from UK firms supports around a million jobs in the US. So it’s clear to see the synergies are huge.

But in these unprecedented economic times, our governments have been forced to intervene in our business markets to provide fiscal stimulus packages and introduce emergency measures to support critical domestic industries. Here in the UK, small and medium-sized companies are the backbone of the economy, comprising roughly 90% of the UK’s output. If they are unable to fund investment or even meet daily cash flow needs, then their ability to survive the downturn is slim.

That is why the UK government has announced a host of measures to assist businesses, including up to £20bn worth of loan guarantees to banks for SMEs and £1bn to help small exporters access new markets.

Early in 2009, the Secretary of State for Business, Lord Mandelson, flew out to New York to discuss continuing investment opportunities for US companies here in the UK’s pharmaceutical industry. The sector is a major contributor to the UK economy, directly supporting 70,000 jobs with a wider footprint of some 250,000 people employed in supporting enterprises. Ongoing investment in research and development is therefore vital to the UK’s pharmaceuticals market.

The UK Trade and Investment’s biopharmaceutical and healthcare teams are implementing a long-term strategy to facilitate transatlantic research collaborations and technology licensing agreements. Officials will work extensively with the US to help companies understand the regulatory approval process in the UK. We need to ensure that US investors can tap into the UK’s world-class research and development capabilities.

We will also continue to rely on our business ambassadors’ network, which has been tasked with the job of recognizing and exploiting business opportunities abroad. The ambassadors, who are all key business people in a range of industries, are responsible not only for meeting major players within their sector, but are tasked with breaking down existing trade barriers by meeting foreign government ministers and representatives.

We must also exploit new business opportunities, especially within the transportation and manufactured goods markets, which remain our country’s largest export sectors. The UK’s low-carbon industrial strategy, launched at the beginning of March, provides a chance for new and established businesses to enter a new market. Supply chains will need to be built from scratch and a host of new products will emerge – products that will become increasingly integral to all of our lives. By working together we can position ourselves at the forefront of the low-carbon market and pass the knowledge of our experts on to other countries.

The digital economy will also be a very important source of new business opportunities and I am pleased to say that in spite of the slowdown in advertising, creative businesses are continuing to invest. We all realise how integral digital and communications technologies have become, and will continue to be, to all of our lives. Our role as government is to help UK businesses identify and exploit new technologies and routes to market, we need to aid companies in cultivating partnerships with key US players.

In times of economic hardship, it is tempting to put up barriers to trade to artificially protect domestic industry from international competition. However, I firmly believe that no country in the world can be fully self-sufficient, and imposing tariffs on our neighbors’ goods and services only creates artificial distortions in the global economy which exacerbate poverty and inequality. It is also not in the interests of either of our economies, which are so dependent on foreign trade and attracting foreign investment.

That is why the future of the multilateral trading system was a key theme of the G20 London Summit. We all accept that the next year isn’t going to be easy, but our actions now will directly impact our position in the upturn. We must continue to forge strong ties between our countries and work together to develop opportunities in emerging markets.

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