Ahead of a planned visit to the US to meet with lawmakers, UK prime minister Rishi Sunak decried the country's “subsidy races” in which it has spent billions of dollars to enhance its national manufacturing capability.
One example is the US Inflation Reduction Act (IRA), which offers subsidies to firms that manufacture key commodities within the US. The Act is worth an estimated $500bn and has been largely viewed as a bid to reduce America's reliance on China.
When asked if he agreed with US president Joe Biden that resilient economies sometimes require “protectionist” policies to protect critical commodities and sectors, Sunak told journalists: “I’d point you to the language in the G7 communique, which makes it very clear that G7 countries don’t believe in protectionism as the answer to this challenge and also don’t believe in subsidy races that are zero sum.”
The prime minister plans to use this visit to advocate for joint action to safeguard against “external threats” to the economy, to strengthen supply chains and support critical industries, according to the prime minister’s office.
In a statement, the office said the world has seen “an increasing number of examples of hostile states using economic coercion to their advantage”.
“From Putin driving up European energy prices, to China’s extensive use of sanctions to punish individuals and government who speak out against human rights abuses,” it said.
“While our traditional security remains paramount, those who seek to do us harm are increasingly targeting other domains. They are manipulating global markets, withholding crucial resources and trying to establish a stranglehold over the industries that will define our future.”
Therefore, it argued, the UK and US need increased collaboration “to protect key industries and safeguard supply chains against threats”. Economic collaboration, it said, is as important as cooperation on traditional security.
Sunak said: “The UK and US have always worked in lockstep to protect our people and uphold our way of life. As the challenges and threats we face change, we need to build an alliance that also protects our economies.
“Just as interoperability between our militaries has given us a battlefield advantage over our adversaries, greater economic interoperability will give us a crucial edge in the decades ahead.
“By combining our vast economic resources and expertise, we will grow our economies, create jobs and keep our people safe long into the future.”
The American Institute for Economic Research said lowering protectionist trade barriers would “raise the prosperity of both the British and the Americans”, adding that such a move "would be a win-win”.
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