The United Kingdom’s Role in the World

Sixty years after former secretary of state Dean Acheson proclaimed that Britain had lost an empire, but not yet found a role in the world, the observation worryingly remains accurate as ever. Britain remains adrift, a national Goldilocks in search of “just the right” foreign policy, and the future does not look bright. The recent move by the Prime Minister Liz Truss’s government to pursue ultra-liberal Reaganomics overlooks the difficult legacy of that policy in the United States as well as the fact the British economy is not the U.S. one. Furthermore, Truss’s heavy-handed view of the United Kingdom’s role in the world neglects the very real, weak position of London—that of a middle power, not a great one. This reality started to hit home to Whitehall when the His Majesty’s Government (HMG) did an about-face on the unfunded tax cut for top income earners and culminated in Truss’s resignation today after just six weeks in the office. The turbulence that enveloped the United Kingdom in the last few weeks highlights the challenges facing the country as well as the fact that Britain desperately needs to find its role in the world. It is in the Washington’s interest to help this ally to find the right fit. To this end, if Great Britain is willing to stay the course in Northern Ireland and uphold the Good Friday Agreement, the White House should offer the Britain the free trade agreement it so desperately wants and needs to help with domestic reforms, sustain the British economy and help develop a stronger Britain on the world stage.

When a slim majority of Britons chose to leave the European Union in 2016, the move was an English populist revolt, not a national consensus on the role of Britain in the world. In doing so, the United Kingdom abandoned a position of strength within the world’s largest economic bloc, and a political body that amplified Britain’s power on the world stage. The nation also lost access to a host of economic subsidies which many of the communities that voted for Brexit greatly enjoyed. Briton, everyone was told, would be the hub of a globalized economy. This future, however, has not come to pass for several reasons—some were poor luck, some were more foreseeable, and all were bad for Britain and the world. No one could have predicted Covid-19, which shut down the very globalized economy the United Kingdom hoped to parley to benefit. Putin’s war against Ukraine was a little more predictable, but hardly likely. The outbreak of the war has been terrible for European inflation levels. And the resultant fracturing of the global economy into economic spheres of influence, once again does little to help London. Instead, the verdant isles find themselves gasping for energy, and caught between the United States and China struggling over the shape of world order.

In the face of global economic headwinds, the chancellor announced a host of tax cuts to jump-start the UK economy. But the logic of this move made little sense—these unfounded tax cuts would increase government borrowing and inject more cash into a market already beset by inflation. Meanwhile, the Bank of England, which is trying to control rampant inflation, would need to further raise interest rates, thereby putting a hand break on the very growth the government wanted to achieve. Investors, unsure of quite what is going on, demanded higher returns on their investment to balance out the insecurity of investing in the UK economy. A crisis thus ensued, forcing the Bank of England to step in and purchase gilts to steady the situation.

Prime Minister Truss’s policy was informed by President Reagan’s economic approach in the United States during the 1980s. But Britain is not the United States, as HMG learned over the last few days. Servicing the debt bestowed by Reaganomics costs the United States enormous sums, but with 330 million people and an economic output of around 20 trillion annually, as well as the position of the dollar as the global reserve currency, the United States can afford its financial lack of discipline. Britain, with an economy around 2.8 trillion—a little less than that of California and without the structural economic power of a reserve currency—cannot. The UK economy is also very finance- and oil-leveraged, which is not suitable for next-generation industries because finance is being consolidated in U.S. banks, with European ones falling farther behind or disrupted by fintech. Furthermore, UK energy firms are going to be disrupted by green tech long term despite a 2022–2024 bridge transition period as Russian energy is replaced. What is a middle power, with a global perspective, to do?

Britain desperately wanted and needed a free trade pact with the United States, but a wholesale abandonment of free trade by the Biden administration and London’s threat to upend the peace in Northern Ireland scuttled any hope of achieving one in the near term. Washington, the broker of the Good Friday Agreement, made it clear from the get-go that stability and the status quo in Northern Ireland was a must. This is in line with broad U.S. interests in peace and stability in Europe. With current challenges on the continent, the last thing the United States wants or needs is renewed violence in Northern Ireland. With the author of the British plan to abandon a signed treaty with the European Union on Northern Ireland in Number 10 Downing Street, the road was always going to be rocky. But regrettably, British politicians also failed to appreciate how important this issue is domestically to U.S. policymakers.

The U.S. president is among one in ten Americans of Irish heritage. The president, like many other Irish-Americans, is sympathetic to his heritage, noting in a press conference in March 2021 that his family, like many other U.S. families of Irish descent, was forced from Ireland due to British policies. That same month, a Senate resolution supporting the Good Friday Agreement won uniramous support in the highly divided house. Unfortunately for the United Kingdom, this block supports the Good Friday Agreement and most, if not all, are sympathetic to the Republican position, not the loyalist one. Brendan Boyle, leader of the American Friends of Ireland group in the U.S. House of Representatives spelled it out for London: “This is a highly partisan time in U.S. politics, and there are very few issues, precious few, that are truly bipartisan. Defence of the Good Friday agreement and preserving peace on the island of Ireland is one of those few.” A potent domestic constituency in the 1980s, the group might not be the force it was, but Biden and congressional leaders will have little reason to appease Britain and risk domestic trouble. As House Speaker Nancy Pelosi put it, there is “absolutely no chance” of a U.S.-UK trade deal if London pulls the plug on the EU agreement on Northern Ireland, upsetting the status quo.

The situation is certainly a muddle.

For Washington, a strong, global Britain is a pillar in the liberal world order. A weak United Kingdom is a liability, and renewed violence in Northern Ireland would be catastrophe. To help alleviate some of the challenges London faces, and to help the United Kingdom find the role it seeks, President Biden should offer the Whitehall the free trade agreement it desires, offering an economic lift to the United Kingdom and helping it to situate post-Brexit Britain. Such a move will not be easy, but it is doable. 

To sell the package to the U.S. public, the president should hail Britain as a vanguard of freedom in its support for Ukraine, guardian of peace in Northern Ireland, a trusted partner in intelligence collection and analysis, a go-to voice at the United Nations, and a second-to-none military ally. Such an agreement would do little harm to the U.S. economy—in fact, it would most likely make already affordable British goods and services even more affordable to U.S. consumers. Meanwhile, it will improve access of U.S. firms in the world’s fifth-largest market. Britain, for example, consumes 23 percent of U.S. digitally deliverable services exports, but imposes a 2 percent tax on those services. American banks and service providers will also be able to strengthen their positions’ in the world’s second largest banking hub, the City of London. A harmonization of food and agricultural standards would allow for the export of more U.S. products to Britain. According to the U.S. Department of Agriculture, the potential for growth is significant. In the defense sector, a free trade agreement would allow better Anglo-American defense integration and a boost to defense industry on both sides of the Atlantic. It would allow for more U.S. tech to be used in British military kit—particularly important for the development of next-generation weapons. Such integration would facilitate “build allied” proposals that will in turn strengthen NATO.

This agreement would be for five years and would be renewable. This renewability catch is required because under the leadership of the Conservative Party, the United Kingdom has shown a worrying willingness to abrogate treaty commitments with respect to Northern Ireland. This will leave Number 10 in a fix at home, but if the choice was between loyalists in Northern Ireland or a free trade deal with the United States, the prime minister and HMG would be foolish to choose the former at the expense of the latter. In any event, the current economic arrangement is an economic boon for Northern Ireland, the real problem is ideological blinkers in the Conservative Party. A renewal clause will dovetail nicely with the poisoned pill in the EU-UK Trade and Cooperation Agreement that allows either party to suspend parts of the agreement if one side goes rogue, as Britain has suggested it would do.  If it were to retaliate, the European Union would most likely suspend tariff free trade between the economic bloc, which is five times bigger than Britain’s, and the United Kingdom. Therefore, a U.S.-UK Trade Agreement would reinforce EU objectives to create order and stability and promote free trade—Brussels should welcome such a move.

Successful conclusion of such a trade agreement would be the cornerstone of future U.S. efforts to build a truly western economic order, built on the integration of North American, EU and UK economies. While nary a free trader professes their name in Washington, this is the reality of great power competition in the twenty-first century. The United States and the wider West cannot be militarily strong and economically dependent on China—Russia’s war against Ukraine and the difficulty of weening Europe of Russian energy and the Russian market is just a foreshadowing of what is to come vis-à-vis China. Only in creating a unified, liberal-democratic economic bloc can Washington and its allies fight off the challenge from illiberal China. The first step, with an old partner in need of a helping hand looking to finally find its global role in the twenty-first century, is a good place to start.

Michael J. Williams is a senior associate (non-resident) with the Smart Women, Smart Power Initiative at the Center for Strategic and International Studies in Washington, D.C.

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