An Innovative Trade Strategy- U.S. States Strike Individual MoU’s with the U.K. Government

The CSIS Scholl Chair Trade MOU Chart highlights key differences and similarities between all new trade pacts the UK government has signed with individual American States in the past year.

By: Meredith Broadbent and Joyce Bongongo

This month, Florida became the seventh state to sign a trade Memorandum of Understanding (MoU) with the United Kingdom, advancing a new strategy to cement deeper economic ties. Business and Trade Secretary Kemi Badenoch and state Governor Ron DeSantis finalized the new trade pact in Jacksonville on November 14, 2023. 

The UK Business and Trade Secretary and staff have ventured from the East to West Coast for two years, negotiating and signing seven separate agreements with different U.S. states. The cited purpose of these MoUs is to address trade barriers and increase trade, investment, and business cooperation across the economies.

The surprising MoU campaign has been prompted by a refusal of the Biden Administration to pursue new trade agreements that include market access provisions. Frustrated by potentially missed opportunities, these states have signed MoUs with the UK, hoping to create and sustain jobs and achieve economic growth for U.S. workers by removing barriers to U.S. exports. 

There is a hint of protest in this campaign on the part of both the states and the UK. The effort in the various states, of course, is not anywhere near the level of defiance against Washington's trade policy displayed by South Carolina in 1832, when its legislature passed an Ordinance of Nullification, declaring the "Tariff of Abominations" "null, void, and no law". Since the U.S. Constitution vests authority to regulate trade with the federal government, the new UK MoUs are strong declarations of political interest in moving the trade agenda forward rather than anything legally binding. The U.K. government has openly expressed its understanding that the current U.S. administration is unwilling to negotiate a free trade agreement such as those the U.S. has with Mexico, Canada, and seventeen other countries. Despite this, Secretary Badenoch sees value in advancing the UK's interests in the U.S. market however she can.  

The United States remains the U.K.'s largest trading partner, accounting for 21% of its exports and 12% of its imports in 2022. The accompanying chart outlines key elements of all the MoUs signed to date. Each state MoU lists 'priority sectors' where the parties agree economic ties should be strengthened. Each state's top imports and exports have also been included in the chart. The comparison will allow officials to cross-reference interests for important American trade sectors in the event of future negotiations led by USTR with the U.K.

The chart shows how each of the states have identified sectors that correspond with their export profile, while others chose to outline more general policy goals. South Carolina, for instance, cited 'the automotive sector,' including electric vehicle components, and 'life sciences' as priority areas for growing economic relations with the U.K. This correlates with their high rate of trade in motor vehicles, packaged medicines and pharmaceuticals. The state of Washington named 'aerospace' and 'agriculture' among its top priority areas, and this corresponds with the high volumes of aerospace parts, wheat, and pitted fruits exported in the past five years. In contrast, the MoU signed with North Carolina outlined the importance of 'ensuring economic opportunities for previously underinvested regions' and 'strengthening people-to-people ties' between the two economies. Some high-priority areas common to all MoUs include aerospace, automotive, agricultural, and health-related sectors. In addition to naming sectors, states have referenced priority policy areas cited at least twice including 'government procurement,' ‘academic cooperation,' and 'women's empowerment' across all the MoUs. Electric vehicle components and life science-related machinery or technology to pharmaceuticals also featured.

The MoUs have also highlighted major UK trade priorities. The UK is a global center for fintech; recognizing this, in June 2023, officials successfully negotiated 'fintech' into a state MoU with Utah and did so again with Florida. In 2022, leading British imports from Florida included medicaments, civilian aircraft, and engine parts, while exports to the state included turbo jets, motor cars, and vehicles. Several British companies operating in the automotive and transportation sector have subsidiaries in South Carolina, including, Doncasters Trucast Inc.; GKN Aerospace, and Sigmatex, correlating with the first priority sector in the South Carolina MoU to increase trade opportunities in the 'automotive sector.' The UK Department for Business and Trade recently hosted a delegation from North Carolina, which met with British companies in Liverpool, Wrexham, and Manchester. The delegation focused on exchanging expertise regarding workforce development and clean energy before the visit ended in a second working group meeting for the North Carolina MoU on June 22nd, 2023.

Notably, all the documents, except the Florida MoU, refer to environmental commitments reflecting British investment interests to encourage clean energy through renewable sources,  while also highlighting differing interests of the states. MoUs signed with Washington state, North Carolina, and Oklahoma explicitly emphasize net zero emissions as a priority. The documents detail a need to increase investments in hydrogen, wind, photovoltaic solar power, and carbon capture technologies. The remaining MoUs make more general statements regarding environmental preservation. Indiana, South Carolina and Utah leave out wording overtly referring to a 'net zero target' and instead cite needs to protect 'the natural environment’. The latter MoUs make the point that more cooperative research and development is needed for infrastructure that safeguards land, air and water against pollution.

The nuanced difference in wording across documents regarding environment reflect different agendas at play during negotiations. In June 2019, UK became the first major economy to set a legally binding target date of achieving net zero emissions. The country amended its Climate Change Act of 2008 setting a new target date of achieving net zero emissions to 2050. Environmental commitments are a seemingly seminal topic in British trade policy. In America there are marked differences in priorities for climate centered policies, largely dependent on the prevailing political interests in each state. However, the climate related provisions featured in most of the MoUs, despite competing interests and different wording, proves the ability of the respective officials to reach negotiated agreements on the matter.   

The UK -U.S. states trade strategy is certainly a time-intensive approach when compared to negotiating a single trade agreement. This current process is understood to be separate from the agenda of the U.S. federal government. Although different states are getting the opportunity to promote their own trade agendas with the current UK government and agree on priority areas in need of improvement or change in their respective state economies, the varied focus areas, including different environmental targets, could eventually lead to uncertainty for UK businesses seeking a seamless regulatory framework across the United States. That being said, necessity is the mother of invention. The UK should be credited with crafting a novel approach to overcoming the administration’s current resistance to a free trade agreement.

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