Aurelia Butler

Chinese exports contracted more than expected in May on weaker global demand for the country’s goods, as the world’s second-largest economy struggled to revive growth after a pandemic-induced slowdown last year.Exports contracted 7.5 per cent compared with the same period a year earlier, China’s General Administration of Customs said, well below analyst forecasts of an 0.4 per cent fall, according to a poll conducted by Reuters.Imports performed better than expected, however, down 4.5 per cent year on year, compared with analysts’ expectations of an 8 per cent fall. This left the country’s monthly trade surplus at $65.81bn, down 16.1 per cent and below forecasts.Some economists said the better than expected import figure indicated that the post-Covid recovery in China’s domestic economy remained on track despite the slowing of the powerful export sector. Imports had declined 7.9 per cent year on year in April, while exports had climbed 8.5 per cent, falling back from an unexpected jump in March.Julian Evans-Pritchard, head of China economics at Capital Economics, wrote in a research note that, accounting for a lower base of comparison from last year and changes in import prices, May import volumes actually increased 8.5 per cent in seasonally adjusted month-on-month terms, the fastest pace in more than a year.“Import volumes rose to their highest in 18 months, supporting our view that the reopening recovery remains on track,” said Evans-Pritchard.

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Trade provided a lifeline for China’s economy during the pandemic, but has dragged in recent months as global demand for the country’s exports has declined. The manufacturing sector has underperformed services since Covid controls were unwound last year.A series of economic indicators in recent weeks has pointed to an uneven economic recovery that, while still in train, is starting to slow, with falling industrial production and profits, factory activity and credit growth.While services activity has picked up this year, there are also signs that it is beginning to lose some of its early rapid gains since the stringent Covid curbs were lifted. China’s customs administration said trade with the US fell 5.5 per cent during the first five months of the year compared with a year earlier, with its trade surplus with the world’s largest economy dropping 14.5 per cent. Trade with Japan declined 3.5 per cent year on year.

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China’s biggest trade partner during the first five months of the year was the Association of Southeast Asian Nations, with which total trade increased by 9.9 per cent, followed by the EU, with which trade increased 3.6 per cent. Evans-Pritchard projected China’s exports would fall further as the impact of sharp interest rate increases filtered through in developed economies later this year. “As for imports, we think they will continue to recover over the coming quarters as the boost from reopening continues to feed through,” he wrote. More

The time is ripe for countries to get their public finances into better shape, the new chief economist of the OECD has said, with the coronavirus pandemic and energy crisis fading into the background. Speaking to the Financial Times in Paris ahead of presenting the international organisation’s global forecasts on Wednesday, Clare Lombardelli said the world economy was set to expand by 2.7 per cent in 2023 and 2.9 per cent in 2024.The better backdrop meant it was now time for governments to rebuild their fiscal buffers, helping to fight high inflation and putting countries in a better position to deal with the costs of an ageing population. “We have seen understandable and necessary fiscal support in response to the [Ukraine] war and the pandemic . . . [but] now is the time that blanket fiscal support needs to be withdrawn,” she said.Lombardelli, who joined the OECD from the UK Treasury, said offering support only “for people who really need it” would also be more consistent with central banks’ rate rises. The US and European countries have ratcheted up spending since the start of the pandemic. They now face far higher bills to finance that support following the surge in global borrowing costs. Lombardelli said there was “no expectation” about when economies would lower their debt burdens. “We don’t want forever more to be ratcheting up levels of debt. That does make countries less resilient.”

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Lombardelli said that while a few countries might have exceptional circumstances, “on average, we do need to get debt levels down”.The OECD’s main forecasts show the global economy weathering the squalls of earlier this year, when banks failed on both sides of the Atlantic. The US will avoid a recession, Germany will recover from the recent contraction in its output and China’s growth will meet Beijing’s 5 per cent target for the year, the OECD has forecast.“The global economy is growing and unwinding from the shocks we’ve seen over the past couple of years,” she said, while pointing out that this year is expected to be weak by historical standards. The immediate priority should be ensuring that inflation returns to its target levels of about 2 per cent in most advanced economies, Lombardelli said, adding that this would require interest rates to remain at their recent high levels for some time or rise slightly higher.“Forecasters, both national and international, have got the persistence of inflation wrong. That is why you might need to see more tightening of monetary policy.”She said that central bankers would have to watch wages particularly closely for signs of inflation becoming entrenched. OECD chief economist Clare Lombardelli: ‘The global economy is growing and unwinding from the shocks we’ve seen over the past couple of years’ © Magali Delporte/FTAs part of its Economic Outlook, the OECD looked at nine countries to see whether companies had driven inflation higher by increasing margins. It found only modest evidence of higher profits, with most of this concentrated in mining and energy companies.It was still worth remaining vigilant about “greedflation”, Lombardelli said, as companies could still try to defend profit margins should workers call for wage rises.“The effects are not massive,” she said. “But there is something there. Labour costs are increasing, profits are increasing, but we don’t think [greedflation] is going to be an ongoing thing.”The one country with a more troubling immediate inflation problem was the UK, which she said had a “particular issue about the labour market”. The size of the workforce had fallen after the pandemic, raising pressure on companies to pay people more, she said.The other global economic issue preoccupying policymakers in recent months has been trade with China. Led by the US seeking to “de-risk” its relationship with Beijing, the G7 has stressed the importance of resilience in global supply chains without seeking to “decouple” the North American, European and Japanese economies from China.

For the OECD, traditionally a supporter of free trade, the renewed desire for national security to trump economic efficiency has been tough. Lombardelli said she wanted to make sure everyone still understood the case for liberalised commerce and exchange of goods and services. “Trade is a benefit to people around the world. It brings huge benefits in terms of choice, prosperity and [lower] prices. It’s perfectly sensible and reasonable for countries to think about supply chains . . . but what’s important is to think about it in a way that doesn’t undermine the wide rules-based global trading system.”In its outlook, the OECD noted the US had significantly cut the proportion of its trade with China, even though the overall level of trade had increased since 2018. European countries had increased the proportion of their trade with Beijing. Lombardelli said she wanted to focus her efforts on using the OECD’s “best in the world” resources to provide the data needed to steer economic change and boost long-term growth prospects. “Everyone gets very excited about monetary policy and the short-term stuff, but what enables economies to grow and what changes peoples’ wellbeing . . . are these structural things. The OECD can bring the weight of its intellectual analysis to these questions.” More

Ruto nominated Kamau Thugge, a former senior Treasury official who has also worked as a presidential adviser, last month to replace Patrick Njoroge, who is retiring after serving two terms as central bank governor since 2015.A parliamentary report dated June 6 said: “Having considered the suitability, capacity and integrity of the nominee … the Departmental Committee of Finance and National Planning recommends that the National Assembly approves the nomination of Dr Kamau Thugge, CBS as Governor of the Central Bank of Kenya”.Ruto’s party controls parliament so Thugge is now all but guaranteed to become Njoroge’s successor at the central bank.Thugge, who has also worked for the International Monetary Fund in Washington, will face challenges including a long-running slide in the shilling currency and a heavy debt load that has strained government finances.Economic growth slowed to 4.8% last year, down from 7.6% in 2021. But the World Bank expects growth to edge up to 5.0% in 2023, underpinned by a recovery in agriculture. More

Michael Pettis is a senior fellow at the Carnegie-China centreThe US dollar, analysts often propose, is the latest in a 600-year history of global reserve currencies. Each of its predecessor currencies was eventually replaced by another, and in the same way the dollar will eventually be replaced by one or more currencies. The problem with this argument, however, is that there is no such history. The role of the US dollar in the global system of trade and capital flows is unprecedented, mainly because of the unprecedented role the US economy plays in global trade and capital imbalances. The fact that so many analysts base their claims on this putative history only shows just how confused the discussion has been. It’s not that there haven’t been other important currencies before the dollar. The history of the world is replete with famous currencies, but these played a very different role in the flow of capital and goods across international borders. Trade before the days of dollar dominance was ultimately settled in gold or silver. A country’s currency could only be a “major” trade currency to the extent that its gold and silver coins were widely accepted as unadulterated or, by the 19th century, if the convertibility of its paper claims into gold or silver was highly credible. This is not just a technical difference. A world in which trade is denominated in gold or silver, or in claims that are easily and quickly convertible into gold and silver, creates very different conditions from those today. Consider the widely-held belief that sterling once ruled the world in much the same way the dollar does today. It simply isn’t true. While sterling was indeed used more than other currencies in Europe to settle trade, and the credibility of its conversion into gold was hard-earned by the Bank of England after the Napoleonic wars, whenever sterling claims rose relative to the amount of gold held by the Bank of England, its credibility was undermined. In that case foreigners tended to reverse their use of sterling, forcing the Bank of England to raise interest rates and adjust demand to regain gold reserves.¹This does not happen to the US dollar. Trade conditions under gold- or silver-standards are dramatically different from those in a dollar world in at least three important ways. First, trade imbalances in the former must be consistent with the ability of economies to absorb gold and silver inflows and outflows. This means that while small imbalances were possible to the extent that they allowed wealthier economies to fund productive investment in developing economies, this was not the case for large, persistent trade imbalances — except under extraordinary circumstances.² Second, and much more importantly, as trade imbalances reverse, the contraction in demand required in deficit countries is matched by an expansion in demand in surplus countries. That is because while monetary outflows in deficit countries force them to curtail domestic demand to stem the outflows, the corresponding inflows into the surplus countries cause an automatic expansion of domestic money and credit that, in turn, boosts domestic demand. Under the gold- and silver-standards, in other words, trade imbalances did not put downward pressure on global demand, and so global trade expansion typically led to global demand expansion.And third, under gold and silver standards it was trade that drove the capital account, not vice versa as it is today. While traders chose which currency it was most convenient in which to trade, shifting from the use of one currency to another had barely any impact on the underlying structure of trade.None of these conditions hold in our dollar-based global trading system because of the transformational role played by the US economy. Because of its deep and flexible financial system, and its well-governed asset markets, the US — and other anglophone economies with similar conditions, eg the UK, Canada, and Australia — are the preferred location into which surplus countries dump their excess savings.Contrary to traditional trade theory, in which a well-functioning trading system might involve small, manageable capital flows from advanced, capital-intensive economies to capital-poor developing economies with high investment needs, nearly 70-80 per cent of all the excess savings — from both advanced and developing economies — is directed into the wealthy anglophone economies. These in turn have to run the corresponding deficits of which the US alone typically absorbs more than half. As I have discussed elsewhere, this creates major economic distortions for the US and the other anglophone economies, whose financial sectors benefit especially at the expense of their manufacturing sectors.It is only because the US and, to a lesser extent, the anglophone economies, are willing to export unlimited claims on their domestic assets — in the form of stocks, bonds, factories, urban real estate, agricultural property, etc — that the surplus economies of the world are able to implement the mercantilist policies that systematically suppress domestic demand to subsidise their manufacturing competitiveness. This is precisely what John Maynard Keynes warned about, unsuccessfully, in 1944. He argued that a dollar standard would lead to a world in which surplus and deficit countries would adjust asymmetrically, as the former suppressed domestic demand and exported the resulting demand deficiency.The point is that dollar dominance isn’t simply about choosing to denominate trading activities in dollars the way one might have chosen, in the 19th century, between gold-backed franc, gold-backed sterling, or Mexican silver pesos. It is about the role the US economy plays in absorbing global savings imbalances. This doesn’t mean, by the way, that the US must run permanent deficits, as many seem to believe. It just means that it must accommodate whatever imbalances the rest of the world creates.In the fifty years characterised by the two world wars, for example, the US ran persistent surpluses as it exported savings. Because Europe and Asia at the time urgently needed foreign savings to help rebuild their war-torn economies, it was the huge US surpluses that put the dollar at the centre of the global trading system during that period.By the 1960s and 1970s, however, Europe and Asia had largely rebuilt their economies and, rather than continue to absorb foreign savings, they wanted to absorb foreign demand to propel domestic growth further. Absorbing foreign demand means exporting domestic savings, and because of its huge domestic consumer markets and safe, profitable and liquid asset markets, the obvious choice was the US. Probably because of the exigencies of the cold war, Washington encouraged them to do so. Only later did this choice congeal into an economic ideology that saw unfettered capital flows as a way to strengthen the power of American finance.This is why the end of dollar dominance doesn’t mean a global trading system that simply and non-disruptively shifts from denominating trade in dollars to denominating it in some other currency. It means instead the end of the current global trading system — Ie the end of the willingness and ability of the anglophone economies to absorb up to 70-80 per cent of global trade surpluses, the end of large, persistent trade and capital flow imbalances, and, above all, the end of mercantilist policies that allow surplus countries to become competitive at the expense of foreign manufacturers and domestic demand.The end of dollar dominance would be a good thing for the global economy, and especially for the US economy (albeit not, perhaps, for US geopolitical power), but it can’t happen without a transformation of the structure of global trade, and it probably won’t happen until the US refuses to continue absorbing global imbalances as it has for the past several decades. However it happens, a world in which trade isn’t structured around the dollar will require a massive transformation of the structure of global trade — and for surplus countries like Brazil, Germany, Saudi Arabi, and China, this is likely to be a very disruptive transformation.Nor was sterling even the leading trade currency in the 18th and 19th centuries. More widely used in much of Asia and the Americas were Mexican silver pesos, whose purity and standardisation were much valued by traders and so formed the bulk of trade settlements.One can argue that the closest comparison to today was 17th century Spain, when Spain ran large, persistent trade deficits, but of course these were the automatic consequences of huge inflows of American silver, and Spain didn’t accommodate foreign imbalances so much as create them, to the benefit especially of England and the Netherlands. In a recent conversation George Magnus also noted how the famous sterling balances of the 1940s illustrated another — very different — example in which the structure of trade could not be separated from the use of its underlying currency. More

Australia’s trade minister has warned the EU that he will not sign off on a trade deal unless the bloc opens its market to more Australian farm products — while hailing the thawing relations between Canberra and Beijing. Don Farrell told the Financial Times ahead of talks in Brussels that an agreement with the bloc was only achievable if the EU backed down on its demands not to expose its farmers to competition. Australia, meanwhile, had extended an “olive branch” to China on its trade disputes, he said.“We’re going to be a renewable superpower,” he said. “The Europeans have to play ball. Do they want to be part of the future or do they want to stick their head in the ground and remain part of the past?”Among the specific EU demands is a reduced use of protected products such as parmesan and prosecco by Australian producers and a luxury car tax of 33 per cent on imports.“We want to make sure they’re part of this growth thing, but they’ve got to stop their blinkers,” Farrell said. “They just say, ‘oh, jeez, we’ve got a problem with the French farmers, a problem with Italian winemakers’. They’ve got to think big. Now is their opportunity.”Among his demands are better access for Australian beef, lamb and wine — with the EU offer on beef not being “ambitious” enough, he said. As for the car tax, he argued that it was difficult to reduce it as it would require the approval of the six states. However, he hinted that the threshold, of A$79,950 for a standard vehicle and A$89,332 for fuel-efficient vehicles, could be raised which would make EU marques more affordable.He also rejected an EU request not to offer domestic buyers cheaper prices for minerals such as lithium. While hopeful of an agreement, Farrell said he was willing to walk away, pointing out that Canberra was pursuing a deepening of its recent trade deal with India and was in the US-led Indo-Pacific Economic Framework. The UK has successfully applied to a pan-Pacific trading bloc that includes Australia. “We’re not short of dance partners at the moment and the Europeans have to make a decision,” Farrell said.The EU and Australia are both seeking to diversify their trade because of a reliance on China. Beijing blocked from May 2020 the import of Australian goods worth around A$20bn (US$13.3bn) annually, including coal and wine, after a series of security and trade disputes. However, Farrell said relations with China had warmed under the Labor government that took office a year ago. Two-way trade hit record levels of A$300bn last year. A block on citrus and stoned fruits was lifted this week and Farrell said he was still working to reopen access for Australian crayfish exporters to China. “We didn’t blink on national security or national interest issues,” he said but held out an “olive branch” on trade disputes by suspending a WTO case on barley imports, he added.

“So we’ve tried to show some goodwill, and I think that’s been reciprocated by the Chinese.” He has met his counterpart Wang Wentao three times in the two years and will soon host him at his vineyard in South Australia. “In the previous four years, there had been no meeting between Australia and China. I mean, we couldn’t get the Chinese to answer our phone calls, much less a face-to-face meeting.” While the EU wants to “de-risk” its exposure to China, Australia favours “stabilising”, he said. “We’re not de-risking or decoupling. We want to continue to sell our products to China.”He also denied that Australia was blocking Chinese investment except on very stringent security grounds. There were 270 projects by Chinese companies approved in the latest financial year. “And if you extended that to commercial property arrangements, that’s another over 2,000 transactions between Chinese citizens and Australians. So we welcome Chinese investment. “We’ve got to get more trade, not less, with them. We think we can both re-establish our trading relationship with China, but diversify.”  More

The eurozone economy is heading for a symbolically important reversal on Thursday, when economists expect official growth figures to be downgraded to show output slightly contracted for the past two quarters.The shift would take some shine off the recent performance of the eurozone economy, which has done better than many economists feared when the bloc was hit by an energy and cost of living crisis triggered by Russia’s full-scale invasion of Ukraine last year.The downgrade could also change the mood among policymakers at the European Central Bank, who are due to meet next week in Frankfurt. ECB rate-setters have pointed to the recent “resilience” of the eurozone economy as a reason to keep raising interest rates.“While these changes wouldn’t be a big deal from a macroeconomic perspective, at the margin they may change the narrative and discussion at the ECB council meeting,” said Oliver Rakau, an economist at research group Oxford Economics. Eurostat, the EU’s statistics agency, is due to publish a revised estimate of first-quarter gross domestic product in the 20-country single currency bloc on Thursday. The latest figures from Eurostat show the bloc’s economy expanded 0.1 per cent in the first quarter from the previous quarter, having stagnated in the final three months of last year. Mark Cus Babic, an economist at UK bank Barclays, told the Financial Times that a “mechanical aggregation” of the latest eurozone GDP figures published by member states pointed to a likely downgrade into contraction for both quarters.Barclays forecast a quarter-on-quarter decline of 0.1 per cent for both three-month periods, which would meet some experts’ definition of a recession. But Cus Babic said there was some uncertainty as “the growth rate that Eurostat reports for the euro area as a whole can deviate from the growth of the sum of the individual countries by a few basis points”.Several members of the single currency area have cut their first-quarter GDP estimates in the weeks since Eurostat’s initial estimate was published in late April, including Germany, Ireland and Finland.“There is a high chance that the eurozone economy has actually fallen into a winter recession after all,” said Carsten Brzeski, head of macro research at Dutch bank ING. “A contraction in the first quarter is highly likely and a downward revision to the fourth quarter is not impossible.”He added that figures from the Netherlands were not included in Eurostat’s initial estimate, and these were likely to add to downward pressure after the Dutch statistics agency last month announced its GDP shrank 0.7 per cent in the first quarter.Italy is one of the few countries to have upgraded its first-quarter GDP forecast, lifting it last week to 0.6 per cent growth, up from its preliminary estimate of 0.5 per cent. Holger Schmieding, chief economist at German bank Berenberg, said Italy’s upgrade may mean the eurozone stagnated rather than contracted in the first quarter. Greece is yet to report first-quarter GDP figures, which could also offset some of the gloom.

If the eurozone economy shifts from slight growth to a mild contraction, it would make it harder for the ECB to “send a clearly hawkish message” especially after inflation fell more than expected last month at the headline and core level — which excludes energy and food prices — said Rakau at Oxford Economics. ECB president Christine Lagarde signalled a further rate rise was likely next week by saying on Monday that “price pressures remain strong” in the eurozone and economic activity “is being supported by lower energy prices, easing supply bottlenecks and fiscal policy support to firms and households”.On Tuesday, economic data for the bloc at the start of the second quarter came in weaker than expected. Eurozone retail sales stagnated in April, when economists had expected 0.2 per cent growth, while German factory orders for the same month fell 0.4 per cent, confounding forecasts of a 3.8 per cent increase. More

UK migration policies have rarely won much praise in recent times. The dramatic arrivals of migrants in small boats have generated plenty of headlines but little support for the government, with critics on both sides of the migration argument launching attacks.Meanwhile, Brexit opponents complain how restrictions on movement to and from the EU have burdened people and businesses — and even Brexit supporters struggle to identify the benefits of the new controls.So it comes as something of a surprise to find the OECD, the developed countries’ club, lauding the UK over immigration policy — specifically the approach to highly skilled workers. It writes in a regular migration policy review of its 38 member states, published this year, that Britain has seen “the largest improvement in the ranking” since the last report in 2019. That’s due, it says, mainly to abolishing quotas for highly skilled workers and for migrants’ success in getting jobs in the UK. That puts Britain in the top 10, a pack led by New Zealand, Sweden, Switzerland and Australia.

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However, the value of the OECD’s survey lies not in the ammunition supplied for political battles but in the focus it brings to particular types of economically valuable migrants: entrepreneurs, start-up founders and students as well as highly skilled workers. The report ranks countries by what it calls “attractiveness to newcomers”, looking at different dimensions ranging from quality of life and work opportunities to tax and spousal immigration rules, mostly represented via measurable data sets, such as migrant unemployment rates or visa refusal percentages.There is as much art as science in putting together these rankings, but the results bear food for thought. In broad terms, there are few shocks. The Nordic countries do well, as do Australia, New Zealand and Canada. The US is less good for skilled workers than might be expected given its economic potential because it has tough visa rules. But it is top for university students and second (behind Canada) for start-ups.Low tax rates, which many well-paid workers and entrepreneurs might find appealing, do not alone result in high rankings in the OECD table if other factors such as education standards and infrastructure are poor.Health quality matters, too, in the OECD’s view. The Nordic countries, Austria, Belgium, Germany, Italy and the Netherlands all do well on this score. Estonia, Hungary, Latvia and Portugal are otherwise attractive countries for workers, students and entrepreneurs alike, but are held back by their low health scores. So, notably, is the US.It is striking how the countries that appeal to migrants entering via official routes as highly skilled workers, students and entrepreneurs are also those that draw large numbers of undocumented migrants, including refugees from war and oppression.

As the OECD argues, migration policies are choices. Japan and South Korea are economically successful states offering a good quality of life. Yet both have opted for restrictive immigration strategies that not only limit access to foreigners, they also hold back domestic development by controlling labour supply. Other countries low down the migration tables have a host of problems to tackle beyond immigration policies per se: Turkey, for example, and Mexico.The world doesn’t stand still, though. Countries are in competition with each other for skilled workers, students and entrepreneurs. Over time, some of today’s leaders will lose ground and laggards catch up, as the former Communist states of eastern Europe have done.For potential migrants, the best approach is to keep an eye on changes in everything from the political environment to details of migration law. And spread your bets, if you can, by living, studying and working in different countries so that you’re well placed to move again, if you have to or want to.Stefan Wagstyl is the editor of FT Wealth and FT Money. Follow Stefan on Twitter @stefanwagstylThis article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment More

UK hopes of securing a quick deal to deepen digital trade ties with the US have run into the diplomatic sands amid growing resistance to such pacts in Washington, technology industry insiders have warned.The sector’s frustrations emerged as Prime Minister Rishi Sunak landed in Washington for a meeting with President Joe Biden at which the two leaders are expected to seek closer economic ties.Tech groups have been hoping for London and Washington to forge ahead towards a deal to boost digital transactions, even if they have ruled out talks on a more comprehensive free trade agreement for now. In April last year in Aberdeen, Scotland, the US and the UK had agreed to set out an “ambitious road map” to deepen trade ties, including “harnessing the benefits of digital trade”.But critics say the Biden administration is now soft-pedalling the prospects of a digital deal with the UK, as some lawmakers on the left side of the Democratic party increasingly balk at provisions that would benefit big technology companies. “The reality is that nothing has happened since the joint statement in Aberdeen because the US has been unwilling to engage substantively in digital trade negotiations for domestic political reasons,” said Sabina Ciofu, the head of the International Policy and Trade Programme at the lobby group TechUK. Under former president Donald Trump, the US included sweeping provisions to boost digital trade in the USMCA agreement with Mexico and Canada, and struck a standalone digital trade deal with Japan. These deals included provisions to provide legal certainty on data flows, ban restrictive practices such as requiring data localisation and formalise co-operation between regulators.Biden has proposed a digital trade chapter in the Indo-Pacific economic framework, his plan to boost US economic ties in the region. But in a poor omen for proponents of a pact with the UK on digital trade, US business groups raised concerns that Biden is now “wavering in its promotion of high standard rules for digital trade” in IPEF, according to a letter sent last month.Biden has been taking heat from the left for even considering more open digital trade around the world. Last month US Senator Elizabeth Warren, an influential Democrat from Massachusetts, accused the White House of allowing “Big Tech” companies to skew digital trade rules in a way that would restrict the US government’s ability to promote competition and regulate the sector. “While we appreciate your commitment that digital trade negotiations will not conflict with the federal government’s active work on tech policy, we remain concerned that Big Tech companies are advocating for an approach to digital trade that will do just that,” Warren wrote in the letter, which was signed by six other Democratic lawmakers. The US trade representative and the White House’s National Security Council declined to comment. One US official disputed any link between pressure from lawmakers and the Biden administration’s stance. “I would strongly push back on the notion that we are resisting a digital trade deal with the UK just because of Congress,” the official said. Moreover, the US is not ruling out that some deeper digital ties could still be discussed in the coming months as the Biden and Sunak trade officials begin to shape specific areas for improvements in their economic relations.Nigel Huddleston, the UK international trade minister, told reporters on the fringes of a Commonwealth trade ministers meeting in London this week that “constructive conversations” were still occurring on the digital trade. One tech insider suggested that the UK could still secure an agreement from the US on digitising trade paperwork, for which legislation is already passing through the UK parliament. It is also possible that the US and UK could agree on deeper co-operation with regards to addressing the rise of artificial intelligence.

But these would fall far short of a digital trade agreement — leaving technology and trade lobbyists on both sides of the Atlantic alarmed at the lack of movement. “[This] is yet another example of the [Biden] administration’s discouraging hands-off approach to trade. A US-UK trade agreement would be a timely opportunity to establish a new global benchmark for modern, comprehensive, and digitally focused trade in the 21st century,” said Jason Oxman, the chief executive of ITI, the Washington-based US tech lobby group.Jake Colvin, president of the National Foreign Trade Council, a lobby group in Washington, said: “It’s no secret that the Biden administration is facing pressure to abandon US leadership on digital trade,” warning that such a position would only lead to “discrimination” against US companies “from Brussels to Beijing”. More