Computer software, as well as computer and data services, made up more than $620 million in exports from Washington state to the UK in 2017. 4 These segments have grown substantially in the last few years, and the US and the UK are among each other’s largest e-commerce markets. Current trade negotiations may present an opportunity for the UK to align its privacy standards more closely to those in the US, although the UK government has stated that it will continue to follow the EU General Data Protection Regulation as it stands. 

The leadup to trade negotiations hit a snag when the UK passed a 2% digital services tax in 2018. The tax went into effect in April 2020 and applies to firms with global sales of more than $624 million (£500 million) and over $31.7 million (£25m) in the UK. US officials have criticized the tax as largely targeting American firms. Digital trade is a major focus of the UK’s negotiating objectives, and the US is using current talks to push for the tax’s repeal.

This new flexibility to adopt US standards may also apply to food regulations. This is a difficult issue for the UK government, which must balance reducing tariffs with the interests of domestic farmers and consumers. The EU also has stricter guidelines on genetically modified food products. Changing these restrictions could increase access for Washington farmers. A major question that will be addressed in these negotiations is the extent of the UK’s market reorientation away from the European Union, with the potential of greater alignment and harmonization of standards and regulations between the two nations. The extent to which the United Kingdom retains its current European food standards or makes a decisive shift to acceptance of US standards could impact US and Washington state agriculture trade with the UK.

This longstanding European approach to regulatory issues, including food safety regulations and technical barriers to trade, has impacted agricultural trade between the US and Europe. Many US agriculture interests including farmers and ranchers in Washington state, have historically felt their input has been marginalized in regulatory discussions and decisions with the hope that this will not be the case in the US-UK negotiations.

Trade barriers and transportation costs have also impacted agriculture trade between Europe and the US and efforts to remove barriers and create a level playing field for Washington farmers and ranchers will impact some Washington state commodities more than others.

Washington state fruits and vegetables, including potatoes, apples, cherries and pears, are currently impacted by European tariffs. Removing these barriers through a US-UK FTA can potentially create new opportunities for Washington state exporters. For example, the total value of Washington apple exports to the EU in 2019 was $1,270,864 with the UK accounting for almost all of that. Beyond fruits and vegetables, the US exports over $1 billion worth of fish and seafood products to the EU each year, with Washington state second only to Alaska with $302 million in exports. The UK was the leading market for Washington seafood products last year ($50 million.) The US wine industry, in which Washington state is a leading producer, also faces EU tariffs on imported wine and is another potential growth area with a new trade accord.

To download the full report, please click here.

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Dear Senators and Representatives:

On behalf of National Taxpayers Union (NTU), the nation’s oldest taxpayer advocacy organization, I write urging you to avoid adding burdensome “Buy American” mandates to the Fiscal Year (FY) 2021 National Defense Authorization Act (NDAA). “Buy American” requirements for prescription drugs, in particular, could lead to shortages, higher costs, and less access for the patients and providers who need these treatments the most.

One bill that some lawmakers have expressed interest in including in the FY 2021 NDAA is the Pharmaceutical Independence Long-Term Readiness Reform Act (H.R. 4710).^[1] This bill, which has attracted support from both Republican and Democratic Representatives, would require the Departments of Defense and Veteran Affairs to “only acquire and purchase American-made and Federal Drug Administration approved raw materials, medicines, and vaccines for the Department of Defense.” The legislation defines “American-made” materials, medicines, and vaccines as ones “supplied from, created, or supplied by the United States, including any territory or possession of the United States.” While the bill includes an exception allowing the Departments to obtain such materials “from a trusted foreign supplier” if such a scenario is “unavoidable,” the bill’s authors do not define who is a “trusted foreign supplier” nor what constitutes an “unavoidable scenario.”

NTU Foundation warned lawmakers last year about the many pitfalls of protectionism in U.S. defense spending, with Bryan Hickman writing:

“At least in recent years, this debate has focused more on parochial interests and populist rhetoric, neither of which really serves the needs of the military or the DIB. Some may also argue that defense spending is too important to subject to the same thrift and scrutiny applied elsewhere. However, in reality, the opposite is true. With ever-expanding debts and deficits, the United States should never settle for spending blindly with no accountability, regardless of any national security implications. Moreover, with a growing list of increasingly complex threats to America’s security, military spending should be efficient and provide the best possible resources and equipment to the men and women in uniform. Policies that needlessly restrict competition in order to protect U.S. companies and contractors undermine these objectives by increasing long-term costs and reducing the quality of products purchased and placed into military service. Worst of all, they often do so to serve political ends.”^[2]

These concerns are particularly pertinent as the national debt soars in the wake of the COVID-19 pandemic and recession.

Besides glaring issues with the legislation’s lack of specificity on key terminology, and with protectionism in U.S. defense spending already writ large, any “Buy American” requirements for the Department of Defense will only backfire on military leaders and American troops. Recently, more than 250 economists sent a letter to President Trump, Speaker Pelosi, and Leader McConnell warning them about “Buy American” requirements for medical supplies and pharmaceutical products. They wrote:

“Current shortages of critical medical goods in the Covid-19 pandemic have revealed to all the desirability of diversifying sources of supply and increasing inventory of storable medical goods. Diversifying supply sources and increasing inventories will be costly, but a broad Buy America regime will be more costly. The variety, supply, and price of goods available to Americans will suffer under a broad Buy America regime. Taxpayers and patients will pay more for drugs and medical supplies. Smart policies such as federal government stockpiling look more promising.”^[3]

Some recent “Buy American” requirements appear aimed at China, given misperceptions about China’s role in America’s medical supply chain. While the federal government can and should hold China accountable for alleged abuses and misconduct, a “Buy American” requirement for medical goods – applied to the Departments of Defense and Veteran Affairs as proposed in H.R. 4710, or to every federal agency as proposed by some in the Trump administration – would harm America and its trade and security allies first and foremost, not China.

NTU Foundation has noted that a plurality of U.S. pharmaceutical imports come from Ireland, a close ally. Germany, another ally, is next on the list, followed by three more allies: Switzerland, Italy, and India. China is 17th on the list, supplying only 1.2 percent of U.S. pharmaceutical imports in 2019.^[4] Even when accounting for active pharmaceutical ingredients (APIs), a narrower category, only 13 percent of API manufacturers supplying the U.S. market are in China, while 28 percent are here in the U.S. and 59 percent are located around the rest of the world.^[5]

Many policymakers pushing “Buy American” requirements want to shore up domestic manufacturing of medical goods and supplies. While a global supply chain for medical goods remains critical for American providers and patients, boosting domestic manufacturing for some of these products remains a legitimate aim. NTU has outlined a number of policies Congress can pursue to make it easier for medical goods and supplies manufacturers to invest in America, while still retaining a robust global supply chain. Our options include:

• Suspending tariffs on medical products that help the U.S. fight the pandemic;
• Enacting broad-based changes to the tax code that make it less expensive for pharmaceutical innovators to onshore their production to the U.S., such as full and immediate expensing;
• Correcting the Tax Cuts and Jobs Act’s mistreatment of research and development (R&D) costs, and;
• Relaxing or repealing outdated regulations that inhibit pharmaceutical R&D and approval in the U.S.^[6]

Any of the above would be far more productive and less destructive for patients and taxpayers than “Buy American” mandates, and we stand ready to work with Congress to implement them in a future COVID-19 relief or stimulus package. Thank you for your consideration, and should you have any questions I am at your service.

Sincerely,

Andrew Lautz

Policy and Government Affairs Manager

Citations

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To view the full report at Tax Foundation, please click here

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