The United Kingdom and U.S.-UK Relations
Derek E. Mix
Analyst in European Affairs
May 5, 2014
Congressional Research Service
7-5700
www.crs.gov
RL33105
The United Kingdom and U.S.-UK Relations
Summary
Many U.S. officials and Members of Congress view the United Kingdom (UK) as the United
States’ closest and most reliable ally. This perception stems from a combination of factors,
including a sense of shared history, values, and culture, as well as extensive and long-established
cooperation on a wide range of foreign policy and security issues. In the minds of many
Americans, the UK’s strong role in Iraq and Afghanistan during the past decade reinforced an
impression of closeness and solidarity.
Upcoming 2015 Elections
British politicians and their parties have begun to maneuver in preparation for the next general
election, expected to take place on May 7, 2015. The 2010 election resulted in the country’s first
coalition government since the Second World War. The Conservative Party won the most votes in
the election, and Conservative leader David Cameron became prime minister. To command a
parliamentary majority, however, the Conservatives were compelled to partner with the Liberal
Democrats, who came in third place, and Liberal Democrat leader Nick Clegg became deputy
prime minister. The Labour Party, now led by Ed Miliband, moved into opposition after leading
the UK government since 1997.
Economic and fiscal issues have been the central domestic challenge facing the coalition. Seeking
to reduce the country’s budget deficit and national debt, the coalition adopted a far-reaching
austerity program early in its tenure. A double-dip recession in 2012 put the government and its
austerity strategy under considerable pressure and criticism, but economic growth has improved
significantly in 2013-2014. Nevertheless, austerity has continued to heighten social tensions and
cause political friction between the coalition partners. Although the coalition arrangement went
smoothly during its first year, the Conservatives and Liberal Democrats have subsequently
disagreed about a series of issues. The Conservatives have also felt pressure from their political
right flank with growing popular support for the UK Independence Party (UKIP).
EU Membership
The topic of Europe has been a source of tension. The UK has long been one of the most skeptical
and ambivalent members of the 28-country European Union (EU). While the Conservative Party
remains a stronghold of “euro-skeptics,” and UKIP advocates withdrawal from the EU, the
Liberal Democrats are the UK’s most pro-EU political party, and Labour is also generally
supportive of the EU. The Eurozone crisis deepened the currents of British antipathy toward the
EU, fueling calls to reclaim national sovereignty over issues where decisionmaking has been
pooled and integrated in Brussels. Some analysts believe that a British departure from the EU is a
growing possibility. If reelected, Prime Minister Cameron intends to renegotiate some of the
terms of membership and put the UK’s relationship with the EU to a national referendum in 2017.
Adding another note of uncertainty to the British political landscape, Scotland plans to hold a
referendum on September 18, 2014, on whether to separate from the UK and become an
independent country.
U.S.-UK Relationship
In recent years, some observers have suggested that the U.S.-UK relationship is losing relevance
due to changing U.S. foreign policy priorities and shifting global dynamics. An imbalance of
power in favor of the United States has occasionally led some British observers to call for a
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reassessment of their country’s approach to the relationship. Despite such anxieties, most analysts
believe that the two countries will remain close allies that choose to cooperate on many important
issues such as counterterrorism, efforts to curb Iran’s nuclear activities, global economic
challenges, and the future of NATO.
Given its role as a close U.S. ally and partner, developments in the UK and its relations with the
United States are of continuing interest to the U.S. Congress. This report provides an overview
and assessment of some of the main dimensions of these topics. For a broader analysis of
transatlantic relations, see CRS Report RS22163, The United States and Europe: Current Issues,
by Derek E. Mix.
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Contents
Introduction ...................................................................................................................................... 1
The UK’s Coalition Government ..................................................................................................... 1
Austerity and the UK Economy ....................................................................................................... 2
Domestic Political Dynamics ........................................................................................................... 4
The UK and the European Union .............................................................................................. 5
Will Scotland Remain Part of the UK? ...................................................................................... 8
U.S.-UK Relations ......................................................................................................................... 10
Political Relations .................................................................................................................... 10
Defense Relations .................................................................................................................... 11
Austerity and the Defense Budget ..................................................................................... 13
Afghanistan ....................................................................................................................... 14
Intelligence and Counterterrorism Cooperation ...................................................................... 14
Economic Relations ................................................................................................................. 16
Conclusion ..................................................................................................................................... 16
Tables
Table 1. May 2010 UK General Election Results ............................................................................ 2
Contacts
Author Contact Information........................................................................................................... 18
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Introduction
The modern U.S.-UK relationship was forged during the Second World War. It was cemented
during the Cold War, as both countries worked together bilaterally and within the North Atlantic
Treaty Organization (NATO) to counter the threat of the Soviet Union. The United States and the
UK are two of the five permanent members of the United Nations Security Council, and both are
founding members of NATO. In the early 1990s, the UK was an important U.S. ally in the first
Gulf War, and the two countries later worked together in stabilization and peacekeeping
operations in the Balkans. The UK was the leading U.S. ally in the 2003 invasion of Iraq and
subsequent stabilization operations, the largest non-U.S. contributor to the NATO-led mission in
Afghanistan, and a leading participant in alliance operations in Libya in 2011. It is also an
important U.S. partner in efforts to pressure Iran over its nuclear activities, and to combat
international terrorism. The UK is the seventh-largest economy in the world and a major financial
center. The United States and the UK share an extensive and mutually beneficial trade and
economic relationship, and each is the other’s largest foreign investor.
U.S. and UK officials, from the cabinet level down, consult frequently and extensively on many
global issues. American and British diplomats report often turning to each other first when
seeking to build support for their respective positions in multilateral institutions or during times
of crisis, as in the immediate aftermath of the 9/11 attacks on the United States. British input is
often cited as an element in shaping U.S. foreign policy debates. Some observers assert that a
common language and cultural similarities, as well as the habits of cooperation that have
developed over the years, contribute to the ease with which U.S. and UK policy makers interact
with each other. The term “special relationship” has often been used to describe the high degree
of mutual trust between the two countries in cooperating on diplomatic and political issues. The
special relationship also encompasses close intelligence-sharing arrangements and unique
cooperation in nuclear and defense matters.
The UK’s Coalition Government
The UK general election of May 6, 2010, resulted in a hung parliament, an outcome in which no
single party wins a majority of seats in the House of Commons. The Conservative Party, led by
David Cameron, won the most seats but fell 19 short of the 326 needed to form a majority
government on its own. The Labour Party suffered substantial losses in the election and finished
in second place. Labour had won the three previous elections and had led the UK government
since 1997, first under Tony Blair (1997-2007) and then under Gordon Brown.
Shortly after the election, the Conservatives reached an agreement on forming a coalition
government with the Liberal Democrats, led by Nick Clegg, who finished third in the voting.
With this deal reached, Gordon Brown resigned as prime minister and David Cameron became
the new prime minister of the United Kingdom. Cameron appointed five Liberal Democrats to
serve in his cabinet, including Nick Clegg as deputy prime minister. Ed Miliband, who served as
energy and climate change secretary in the Brown government, was chosen to replace Brown as
the new leader of the Labour Party, making him also leader of the parliamentary opposition.
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Table 1. May 2010 UK General Election Results
Party
# of Seats
Net # of Seats +/–
% of Vote
Conservatives 307 +97 36.1%
Labour 258
-91
29.0%
Liberal Democrats
57
-5
23.0%
Al Others
28
-1
11.9%
Source: “Election 2010,” BBC News, http://news.bbc.co.uk/2/shared/election2010/results/.
Before the 13-year run of Labour government from 1997 to 2010, the Conservatives had led the
UK government for a stretch of 18 years, first under Margaret Thatcher (1979-1990), followed by
John Major (1990-1997). The Conservatives, who are often also called the Tories, are generally
considered to be a party of the center-right, although some elements of the party also tend to be
more right-wing than centrist. While critics charge that the Conservative Party remains dominated
by the interests of the country’s social and economic elites, David Cameron, who became the
party leader in 2005 and prime minister at the age of 43, has sought to portray the party as more
modern and inclusive.
The Liberal Democrats were formed by the 1988 merger of the Liberal Party and the Social
Democratic Party. The Liberal Democrats are considered a centrist party, and members often
describe themselves as progressive and as social and economic liberals. Since their formation, the
Liberal Democrats have been the UK’s “third party,” struggling to assert their voice alongside
Labour and the Conservatives. Nick Clegg, who became the party leader in 2007 and deputy
prime minister at the age of 43, campaigned on the themes of fairness and social equality,
portraying the Liberal Democrats as the alternative to both of the larger parties.
Austerity and the UK Economy
After a prolonged slump from 2008 to 2012, the UK economy now appears to be growing at a
stronger pace. Economic growth for 2013 is estimated to have been 1.8%, and forecasts for 2014
expect growth to be 2.8%.1 This improved performance takes place in the context of a nascent
recovery in the global economy, especially the United States, as well as stabilized conditions in
the Eurozone. Although longer-term forecasts expect the UK’s economic growth to average 2%
per year between 2015 and 2018, concerns remain about the sustainability of the country’s
economic recovery.
The economy has been by far the most pressing issue facing the coalition. Between 1993 and
2008, the British economy enjoyed an unprecedented period of sustained economic growth. The
country was severely impacted by the global financial crisis, however, and entered a deep
recession in 2008. The economy contracted by 5.2% in 2009. After a slow recovery with weak
growth of 1.7% in 2010 and 1.1% 2011, the British economy was in recession for much of 2012
and finished the year with 0.3% growth.
During the years of economic expansion, the UK developed a large structural budget deficit as
spending outpaced tax revenues and growth. The financial crisis and recession greatly
1 Economic statistics are from Economist Intelligence Unit, Country Report: United Kingdom, April 2014.
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exacerbated this situation: the government budget deficit grew from 5% of gross domestic
product (GDP) in 2008 to 11.3% in 2009. Public sector debt has increased from approximately
52% of GDP in 2008 to more than 90%.
In response to these trends, the coalition government began a five-year program of budget
austerity with the original goal of reducing the deficit to below 1.5% of GDP by 2015. The plan
relies on large spending cuts in areas such as governmental department expenditures and a range
of social welfare benefits. It also increased the value added tax (VAT), capital gains tax, and
national insurance contributions. The country’s sluggish economic growth led the government to
miss deficit targets, however, and in late 2013 the government announced that the austerity
program would be extended to run through 2018. Despite missing its initial targets, the austerity
strategy has gradually reduced the budget deficit, to an expected 5.4% of GDP for 2014, and
analysts suggest the deficit could decrease to 1.8% of GDP by 2018.
The austerity effort remains the signature initiative of the coalition government. Supporters have
praised the government’s approach as necessary in order to put the UK back on the path of
financial sustainability. Opponents have argued that the government’s approach is ideologically
driven, unduly targets the poor and disabled, and affects society in ways that are unequal and
unfair. Critics have also charged that the austerity measures are too aggressive, hurt the
economy’s growth prospects, and erode public services. The country’s weak economic
performance in 2011 and 2012 fueled such charges that austerity was backfiring,
The economy’s improved growth therefore comes as a political boost to Prime Minister Cameron.
As the 2015 general election draws closer, analysts note that the government has made an
exception to the overarching theme of austerity with measures to stimulate the property market,
an important component of the UK economy. The housing market has been uplifted by “Help to
Buy” mortgage subsidies and a “Funding for Lending Scheme” that encourages mortgage and
business lending by allowing banks to borrow from the Bank of England at cheaper than market
rates.2
In addition, the Bank of England has held interest rates at a historically low level after dropping
its rate from 5% in late 2008 to 0.5% in 2009. Over the course of the crisis and the UK’s
subsequent economic struggles, the Bank of England has also employed a £375 billion
(approximately $623 billion) “quantitative easing” program of purchasing financial assets from
commercial banks. The program is intended to stimulate the economy by raising asset prices,
stabilizing market sentiment, and holding down borrowing costs.
Many analysts credit a large extent of the UK’s stronger economic growth to improved external
conditions and the government’s intervention in the property market. Despite the positive trend in
the growth outlook, skeptics question whether the recovery is sustainable, and especially whether
strong economic growth can be sustained while substantially reducing the deficit.
Analysts point to a number of ongoing, long-term weaknesses in the UK economy, including high
private sector debt, low capital spending, and lagging investment in infrastructure and job skills.
In addition to propping up the housing market, government support of the financial sector
remains considerable in the wake of the 2008-2009 financial crisis. While bank reforms and
2 See https://www.gov.uk/government/policies/making-it-easier-to-set-up-and-grow-a-business--6/supporting-
pages/getting-banks-lending.
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reprivatization continue, the state still holds large stakes in banks such as Lloyds and the Royal
Bank of Scotland.
Lastly, in the belief that the UK economy has grown overly dependent on government spending
and debt-financed consumption, one of the central economic aims of the Cameron government
has been to rebalance the economy towards exports, manufacturing, and private sector
investment. Analysts assert, however, that this type of restructuring has not come about and does
not appear imminent.
Domestic Political Dynamics
Given ideological differences between the Conservatives and the Liberal Democrats, analysts
asserted that the two parties were an unlikely pairing for the UK’s first coalition government
since World War II. Adding up the numbers, however, this was the only combination positioned to
deliver a solid parliamentary majority after the 2010 election, a fact that seems to have provided a
strong argument for ideological compromise. The two parties reached an initial policy agreement
with a swiftness and ease that surprised some observers, with both parties apparently willing to
give ground on some issues. Both parties strongly backed the austerity program, and the coalition
functioned relatively smoothly in its first year.
Over the past three years, however, the Conservative-Liberal coalition has developed a number of
significant strains. The coalition partners have been at odds over proposed changes to the
country’s voting system, boundary reform (redistricting), reform of the House of Lords, and press
regulation in the wake of a media phone-tapping scandal. In addition, the Liberal Democrats, in
particular, have suffered from public backlash to austerity. Many members of the party base
appear to feel that the party has betrayed its core social principles. The party has felt pressure to
assert a more distinct identity within the coalition, and some Liberal Democrats have increasingly
argued for an easing of the government’s austerity strategy.
On top of the pressures of coalition relations and economic issues, Prime Minister Cameron has
also faced considerable pressure from some members of his own party on issues such as
immigration and relations with the EU. In addition, the UK Independence Party (UKIP), a party
opposed to immigration and to British membership in the EU, has had a notable rise in the polls.
One major poll conducted April 22-23, 2014, shows the opposition Labour Party with 37%
support, the Conservative Party with 32%, UKIP with 15%, and the Liberal Democrats with
10%.3 Many analysts believe that the 2015 election is likely to again result in a hung parliament,
with no absolute majority for any party. Such observers suggest that coalition governments are
likely to become the new norm in British politics.
Although not necessarily regarded as an accurate indicator of likely general election results, the
European Parliament (EP) elections scheduled for May 22, 2014, offer a significant reflection of
public sentiment. Polls indicate that UKIP is likely to finish at least second in the voting for the
UK’s 72 EP seats, and could surpass the Labour Party to finish in first place.4 UKIP has gained its
support largely from disaffected Conservatives, from among the traditional working class, and
3 YouGov/The Sun poll, April 24, 2014, http://yougov.co.uk/news/categories/politics/.
4 See the YouGov European Voting Intention poll, http://yougov.co.uk/news/categories/politics/.
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from the over-65 demographic. Analysts note, however, that dissatisfaction with the mainstream
parties, rather than immigration or the EU, is the leading motivation cited for supporting UKIP. It
remains unclear to what extent the party’s recent rise will have an enduring and transformative
effect on British politics.
The UK and the European Union
Europe has been a central point of disagreement between the coalition partners and a major
source of domestic political tension. Both at home and abroad, many aspects of UK policies are
set in the context of the country’s membership in the European Union. The other 27 member
countries of the EU are among the UK’s closest political and economic partners, and over half of
British trade is conducted with its fellow EU members. Partners such as NATO and the United
States play an important role in the UK’s diplomatic and security affairs, but many elements of
British foreign policy also have an EU dimension.
Nevertheless, historically many British leaders and citizens (perhaps most notably including
former Prime Minister Margaret Thatcher) have been skeptical about the EU, and the relationship
between London and Brussels has often been marked by ambivalence. Fearing a loss of national
sovereignty and influence, the UK stood aside in the 1950s when the six founding countries
(Belgium, France, Italy, Luxembourg, Netherlands, and West Germany) launched the first steps of
European integration. The UK finally joined the precursor of the modern-day EU in 1973, largely
in order to derive the economic benefits of membership but also to have a political voice on the
inside as integration took shape.
British observers, however, frequently express frustration that the EU tends to focus far too much
on internal treaties and process, rather than taking a pragmatic approach to priorities such as
boosting economic competitiveness, promoting a common energy policy, or improving European
defense capabilities. Many British euro-skeptics assert that EU bureaucracy and regulations stifle
the UK’s economic dynamism, and that the UK’s contributions to the EU budget are too
expensive. They also argue that the EU lacks democratic legitimacy and accountability because
many of its decisions are made behind closed doors by non-British and/or unelected officials.
The UK has “opted out” of several major elements of European integration. Most significantly,
the UK retains the pound sterling as its national currency and is therefore outside the group of 18
EU member countries that use the euro as their common currency (i.e., the Eurozone). The UK
also does not participate in the Schengen Agreement that establishes a passport-free zone among
most EU countries.
Many members of the Conservative Party are highly critical of the EU and believe the UK has
surrendered too much national sovereignty to Brussels. Many British citizens have long wished
for a referendum on the UK’s EU membership. Prior to the 2010 UK election, the prevalence of
such “euro-skeptics” among the Conservative ranks had many wondering how a Conservative-led
government would manage the UK’s relations with the EU. In summer 2009, David Cameron
pulled the British Conservative Members of the European Parliament out of the main center-right
political group to caucus with much smaller “euro-skeptic” parties. The Conservatives also
opposed ratification of the Lisbon Treaty, the EU reform treaty that took effect in December 2009.
As leader of the opposition, Cameron had suggested that the UK should hold a national
referendum on the treaty instead of approving it by parliamentary vote.
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The Liberal Democrats, by contrast, are the most pro-EU of the British political parties,
advocating closer integration with Europe, and having campaigned in favor of the UK adopting
the euro. The policy agreement announced at the formation of the Conservative-Liberal Democrat
coalition indicated that the two parties had agreed to a compromise on Europe under which the
UK would be a “positive” participant in the EU. The coalition ruled out any moves toward
joining the euro during the lifetime of the current Parliament, and pledged to hold a referendum
on any future EU proposals that would transfer additional power or sovereignty to Brussels.5
The coalition compromise on Europe initially established what some observers described as a
“pragmatic” approach, but the Eurozone crisis that began in Greece in 2009 both highlighted pre-
existing tensions in the UK-EU relationship and created new ones. British leaders have stressed
that a stable and successful Eurozone is greatly in the UK’s interest, but the Cameron government
pointedly declined to participate in numerous elements of the EU’s crisis response efforts,
including by contributing to the EU sovereign “rescue funds,” and has zealously safeguarded the
UK’s financial sector from attempts to extend EU regulation. The UK declined to participate in a
new “fiscal compact” treaty which calls for greater central surveillance over national budgets and
the adoption of a balanced budget requirement in national constitutions. The UK was also a
leading voice of opposition against proposals to increase the EU budget.
At the same time, the UK has been anxious to maintain a seat at the table and to protect its
interests in the functioning of the EU single market (comprised of all 28 EU members). British
leaders have supported tighter integration within the Eurozone on fiscal and banking issues as a
necessary solution to the crisis, but have been concerned about the prospect of being sidelined by
new intergovernmental institutions in which decisions taken among the 18 Eurozone countries
affect the interests of all 28 EU members.
The Cameron government has acted on pressures to reclaim some aspects of national sovereignty
from Brussels, starting with the area of “justice and home affairs” (EU police and judicial
cooperation). The UK has also irritated some of its EU partners by essentially vetoing initiatives
to develop a stronger EU Common Security and Defense Policy (CSDP). In 2011, the UK
blocked a proposal to consolidate the command structure for EU military missions under a single
permanent operational headquarters.
In 2010-2012, debates over the EU’s reaction to the crisis kept Europe in focus as a central
domestic political issue in the UK, pressuring Prime Minister Cameron to define a proposed
course of action with regard to the country’s EU future. In 2013, the prime minister outlined his
intention to negotiate a “new settlement” with the EU, a prospect likely to include talks about
additional “opt outs” that repatriate elements of decisionmaking from Brussels back to London.6
If reelected in 2015, Prime Minister Cameron intends to put the terms of a renegotiated
relationship to the British public in an “in-or-out” referendum by the end of 2017.
5 Vaughne Miller, The Government's Policy on Europe, House of Common Library, February 7, 2011,
http://www.parliament.uk/briefing-papers/SN05854.
6 “David Cameron’s EU speech in full,” The Daily Telegraph, January 23, 2013,
http://www.telegraph.co.uk/news/worldnews/europe/eu/9820230/David-Camerons-EU-speech-in-full.html.
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In anticipation of these events, the Cameron government has been conducting a comprehensive
review of the UK’s relationship with the EU. The reports published thus far have concluded that
membership in the EU is, on balance, beneficial to the UK.7 In 2013, the government published
the chapter of its review of relations with the EU covering the effects of membership in the
“single market,” finding that membership made the UK an attractive destination for foreign
investment and that access to the European market gave British firms more opportunity to grow.
Additionally, numerous observers have pointed out that a British departure from the EU would
mean the UK losing out on the benefits of the prospective Transatlantic Trade and Investment
Partnership (TTIP) under negotiation between the EU and the United States.
According to British euro-skeptics, the Eurozone crisis illustrates that the continent can only drag
the UK down. Such observers argue that the UK would be better off freed from the EU’s rules
and regulations, and consequently better able to focus on forging expanded ties to growing and
dynamic emerging economies elsewhere. In contrast, advocates of remaining in the EU maintain
that membership is essential for the UK’s economic fortunes and influence. In addition to the fact
that half of the UK’s exports go to the EU “single market,” the president of the Confederation of
British Industry has asserted, for example, that membership in the EU serves as a “launchpad” for
the UK’s global trade.8
Should a British referendum on EU membership occur, its outcome is difficult to predict. Polls
have been shifting toward support for remaining in the EU: one recent survey indicated 40%
would vote to stay in the EU and 38% to leave, with 17% undecided.9 The Conservatives have
already begun campaigning that their reelection is the only way to ensure a referendum. Prime
Minister Cameron has sought to portray his approach of working to bring about a reformed and
more flexible EU as the rational middle ground between what he considers the radical anti-EU
approach of UKIP, on the one hand, and the radical pro-EU approach of the Liberal Democrats,
on the other. The Labour Party, should it win the 2015 election, appears unlikely to support
holding a referendum on EU membership unless there is a new proposal in the EU to transfer
significant additional powers from national capitals to Brussels, although Labour leaders would
likely continue to face strong political and public pressure to hold the vote.
Another key consideration is that even if the Conservatives are reelected, many observers have
doubts about the willingness of EU countries to agree to significant new concessions for the UK.
Analysts observe that Cameron’s potential leverage to negotiate a “new” relationship is to a large
extent predicated on the assumption that the EU treaties will be amended during the next several
years in order to formally incorporate changes to institutional architecture arising from the
Eurozone crisis. Major changes to the EU treaties require the assent of all member states,
effectively giving the UK veto leverage. It is unclear whether this process will occur, however.
There is widespread reluctance in the EU to open up an institutional treaty process again, and
some officials and experts maintain that the necessary changes can be made in ways that do not
require national approval from each member state.
7 Benjamin Fox, "New UK reports back EU powers, enrage eurosceptics," euobserver.com, February 13, 2014,
http://euobserver.com/news/123132.
8 "CBI chief warns UK against EU exit vote," The Daily Telegraph, November 19, 2012.
9 YouGov, Europe (Referendum) poll, April 21-22, 2014, http://yougov.co.uk/news/categories/politics/.
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Will Scotland Remain Part of the UK?
The question of Scottish independence has risen to the forefront of British politics. The crowns of
England and Scotland were joined in 1603 and their parliaments were merged in 1707. In 1998,
the British Parliament passed an act allowing the creation of a regional Scottish Parliament and
Executive with devolved powers over local issues. The Scottish National Party (SNP), which has
long advocated separation from the UK, won a majority in the Scottish Parliament in 2011 and
increased its push for a referendum that could grant Scotland more devolved powers or even
outright independence. Scotland’s population is 5.3 million, approximately 8.3% of the UK total.
In October 2012, Prime Minister Cameron and Scottish First Minister Alex Salmond, who leads
the SNP and is the chief advocate of independence, agreed on the terms for a single-question, in-
or-out Scottish referendum on independence from the UK. The date of the vote has been set for
September 18, 2014. Polls indicate that a majority of Scots are likely to vote to remain part of the
UK, but the margin has been narrowing. According to numerous polls conducted in April 2014,
the lead for the status quo “no” vote on independence has fallen into the single digits.10
Advocates of independence assert that it would allow Scotland to fully implement its preferences
in areas such as taxation and spending, social policy, and climate change, preferences that they
argue are considerably more left-leaning and social democratic than the prevailing ideology in
England.11 Supporters point out that with a per capita GDP similar to the UK average, and well
above the UK average with oil and gas revenue included, an independent Scotland would be a
wealthy country with a dynamic and sustainable economy. They further argue that Scotland
possesses some of Europe’s largest oil reserves and large renewable energy potential in the form
of wind and wave power, and that the country also occupies a strategic geographic position in
terms of shipping, transportation, fisheries, and energy.12
According to statements by First Minister Salmond, if voters choose independence his
government would renegotiate Scotland’s terms of EU membership over the ensuing 18 months,
allowing Scotland to enter the EU around the same time it gains formal independence, in March
2016. A Scottish parliamentary general election is planned for May 2016. Additionally, under
Salmond’s plan, an independent Scotland would convene a constitutional convention to develop a
written constitution. Salmond’s preferred monetary plan is to continue using the pound sterling in
a currency union with the rest of the UK, with monetary policy remaining under the Bank of
England. In Salmond’s view, an independent Scotland would also take a relaxed attitude toward
citizenship, allowing Scots who choose to retain dual citizenship with the UK to do so.13
Salmond has proposed an initial defense budget similar to the European per capita average, in
Scotland’s case approximately £2.5 billion (approximately $4.15 billion), and negotiating the
immediate removal of the UK’s nuclear weapons from Scottish territory would be a top priority.
10 http://ukpollingreport.co.uk/scottish-independence-referendum.
11 For example, following the 2010 general election, the 59 House of Commons seats representing Scottish
constituencies are held by 41 Labour MPs, 11 Liberal Democrats, 6 SNP, and only one Conservative. The Scottish
Parliament has 65 SNP members, 38 Labour, and 15 Conservatives.
12 For the SNP’s full argument in favor of independence, see Scotland’s Future, November 26, 2013,
http://www.scotland.gov.uk/Publications/2013/11/9348/0.
13 Alex Salmond, Scotland as a Good Global Citizen, speech at The Brookings Institution, Washington, DC, April 9,
2013, http://www.brookings.edu/events/2013/04/09-scotland-salmond.
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Salmond would also prefer that an independent Scotland remain a member of NATO, although he
would seek to include safeguards on the use of Scottish troops in the new national constitution.
Proponents of maintaining the union, including all three major UK political parties, have
campaigned vigorously against Scottish independence and levelled criticism at the SNP’s plans
from numerous angles. Many advocates and observers have argued that the SNP’s economic
vision is unrealistic. In February 2014, Chancellor George Osborne and officials at the British
treasury essentially ruled out any possible agreement on a currency union with an independent
Scotland, a sentiment that was backed by all three of the major parties.14 According to British
officials, the Eurozone crisis demonstrates that fiscal rules are not enough to ensure stability in a
currency union of sovereign states with differing preferences and priorities. Salmond has
subsequently indicated that his currency “Plan B” would be to unilaterally keep the pound,
although he has thus far resisted pressure to describe in greater detail plans for an alternative to
formal currency union.
Critics have pointed out that such a “Plan B” would mean an independent Scotland having no
control over monetary policy, no central bank, and no lender of last resort. This prospect has led
banking, financial services, and other business leaders to warn of a potential corporate exodus
from an independent Scotland, putting thousands of jobs at risk. The financial services sector
accounts for 12.5% of the Scottish economy, holds assets equal to 12 times Scotland’s GDP, and
employs nearly 150,000 people.15 Supporters of the union campaign have also pointed out that
citizens of an independent Scotland face losing their UK state pension due to the need to separate
the national insurance systems.
EU officials including European Commission President José Manuel Barroso have cast doubts on
Salmond’s timetable for EU accession, indicating that legal opinion in the EU on a “fast track”
for Scotland is mixed, and that the procedure, including the need for unanimous approval by all
28 member states, could be “difficult, if not impossible.”16 NATO officials have indicated that an
independent Scotland would be treated as a new applicant, likewise requiring the approval of all
28 current member states to join the alliance. Some observers have questioned whether the SNP’s
strong stance against the UK’s Trident deterrent would put an independent Scotland at odds with
NATO’s strategic concept under which member states accept the alliance’s nuclear doctrine and
allow nuclear vessels into their waters. The SNP has previously indicated that it would ask NATO
to accept the country’s nonnuclear status as a condition of joining the alliance.17 In addition, UK
officials have characterized the SNP’s defense plans as unrealistic and insufficient, arguing that
an independent Scotland would be unable to generate and pay for the armed forces and
capabilities outlined in the plans.18 Observers have also expressed doubts about Scotland’s ability
14 Andrew Black and Aiden James, "Scottish independence: "Yes" vote means leaving pound, says Osborne," BBC
News, February 13, 2014, http://www.bbc.com/news/uk-scotland-scotland-politics-26166794.
15 Belinda Goldsmith, "Scotland's finance sector at risk in breakaway vote – Darling," Reuters, February 10, 2014,
http://uk.reuters.com/article/2014/02/10/uk-scotland-independence-darling-idUKBREA191T720140210.
16 Benjamin Fox, "Joining EU 'difficult if not impossible' for Scotland, Barroso warns," euobserver.com, February 17,
2014, http://euobserver.com/news/123159.
17 Severin Carrell, "Nato rejects Alex Salmond claim over Scottish membership," The Guardian, April 10, 2013,
http://www.theguardian.com/politics/2013/apr/10/nato-alex-salmond-scottish-membership.
18 Simon Johnson, "Philip Hammond: SNP defence plans compromise UK's safety," The Daily Telegraph, March 14,
2013, http://www.telegraph.co.uk/news/uknews/scotland/9634239/Philip-Hammond-SNP-defence-plans-compromise-
UKs-safety.html.
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to create new security and intelligence agencies and warned that an independent Scotland would
leave the whole of Britain more vulnerable to security threats.19
U.S.-UK Relations
Political Relations
The UK’s “special relationship” with the United States has been a cornerstone of British foreign
policy, to varying degrees and with some ups and downs, since the 1940s. The UK is often
perceived to be the leading allied voice in shaping U.S. foreign policy debates, and observers
assert that the UK’s status as a close ally of the United States has often served to enhance its
global influence. British support, in turn, has often helped add international credibility and weight
to U.S. policies and initiatives, and the close U.S.-UK partnership has benefitted the pursuit of
common interests in bodies such as the UN, NATO, and other multilateral institutions.
The U.S.-UK political relationship encompasses an extensive network of individuals from across
the public and private sectors. Relationships between the individual national leaders, however, are
often analyzed by some observers as emblematic of countries’ broader political relations.
Former Prime Minister Tony Blair established a close personal relationship with both President
Bill Clinton and President George W. Bush. The degree to which the UK subsequently influenced
U.S. policy choices in the war on terrorism, Iraq, and other issues has been a topic of much debate
on both sides of the Atlantic. Some observers contend that Blair played a crucial role in
convincing the Bush Administration to initially work through the United Nations with regard to
Iraq; that the priority Blair placed on resolving the Israeli-Palestinian conflict helped keep that
issue on the Bush Administration’s radar screen; and that the UK was instrumental in pressing for
a meaningful international peacekeeping presence in Afghanistan, which resulted in the creation
of the NATO-led International Security Assistance Force (ISAF).
Critics, however, charge that Blair and the UK got little in return for their support of controversial
U.S. policies, pointing out that Blair was unable to prevent the United States from abandoning
efforts to reach a comprehensive international consensus regarding Iraq; that little progress was
made on the Israeli-Palestinian conflict; and that the U.S. response to Blair’s initiatives on issues
such as African development and climate change was tepid at best. Impressions of U.S.
preponderance formed in 2002-2003 have caused many to characterize the UK as the “junior”
partner in the relationship, and to note that the relationship has often appeared to be more
“special” to the UK than it is to the United States.
Blair paid a high political price with the British public and within his own Labour Party for his
close alliance with President Bush. The Blair-Bush years also launched debate in the UK about
whether future British prime ministers might think twice about boldly supporting controversial
19 Ben Riley-Smith, "Scotland 'more vulnerable' after independence under Alex Salmond's security plans," The Daily
Telegraph, March 13, 2014, http://www.telegraph.co.uk/news/uknews/scottish-independence/10694022/Scotland-
more-vulnerable-after-independence-under-Alex-Salmonds-security-plans.html and Lord George Robertson, An
Independent Scotland? The International Implications of the Referendum, speech at The Brookings Institution,
Washington, DC, April 7, 2014, http://www.brookings.edu/events/2014/04/07-scottish-referendum-international-
implications.
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U.S. policies or whether they might make more explicit demands of the United States as the price
for support. Some British observers became anxious to assert that British national interests come
first in deciding British policy, that these interests are not always identical to U.S. national
interests, and that the UK should not be overly deferential to the United States in foreign policy
issues.
Upon taking over as prime minister in 2007, Gordon Brown attempted to maintain the “special
relationship” and made no major substantive changes in relations with the United States: he
maintained the UK’s commitment to a strong counterterrorism policy and to the mission in
Afghanistan, even if he proceeded with the planned withdrawal of British forces in Iraq, which
raised some questions and concerns among U.S. policy makers.
Prime Minister Brown pursued close relations with President Obama, but sensing that some
aspects of Brown’s initial reception by the U.S. President seemed ambivalent, critics speculated
about how much enthusiasm Obama felt about the bilateral relationship. Subsequently, some
observers continued to comment on what they perceived as President Obama’s lukewarm attitude
toward the British. Some observers have argued that Obama is the first post-war U.S. President
with no sentimental attachments to Europe: as U.S. foreign policy priorities focus increasingly on
the Middle East and Asia, some maintain that Europe, including the UK, faces a growing struggle
to remain relevant in U.S. eyes. In 2009 and 2010, media reports that Brown had been “rebuffed”
in numerous attempts to meet with Obama over the course of the year heightened anxiety in the
UK about the future of the “special relationship” and how it was viewed by the Obama
Administration. At the same time, some observers asserted that certain sources—in particular the
British media—tend to read too much into the appearance of personal relations between the
individual leaders, noting that the functional aspects of the U.S.-UK political relationship run
much broader and deeper.
Some of the anxieties about the relationship were dissipated during President Obama’s state visit
to the UK in May 2011, during which he repeatedly reaffirmed its importance.20 Prime Minister
Cameron came to the United States in March 2012 in a visit designed to reaffirm U.S.-UK ties
and the personal relationship between Cameron and Obama. The two leaders discussed
cooperation on a broad range of international issues and President Obama hosted the prime
minister at a state dinner. Prime Minister Cameron returned to the United States and visited with
President Obama at the White House again in May 2013.21 The two leaders have cooperated
closely and sought to align their countries’ positions in forums such as the United Nations,
NATO, the G-8, and the G-20, and on issues such as Syria, Iran, the Middle East Peace Process,
Afghanistan, Ukraine, and the Transatlantic Trade and Investment Partnership (TTIP).
Defense Relations
U.S. defense planners view the UK as one of the most capable European allies—if not the most
capable, alongside France—in terms of well-trained combat forces and the ability to deploy them.
Observers also note that the United States and the UK tend to have similar outlooks on issues
20 Gordon Rayner, "Barack Obama in London: president pays tribute to 'enduring bond'," The Daily Telegraph, May
24, 2011.
21 The White House, Office of the Press Secretary, Remarks by President Obama and Prime Minister Cameron of the
United Kingdom at a Joint Press Conference, May 13, 2013, http://www.whitehouse.gov/the-press-
office/2013/05/13/remarks-president-obama-and-prime-minister-cameron-united-kingdom-joint-.
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such as the use of force, the development of military capabilities, and the role of NATO. Beyond
the political bonds of similar interests and values, some experts suggest that the United States has
been more inclined to listen to the UK than to other European allies because of the UK’s more
significant military capabilities and willingness to use them against common threats.
During the Cold War, the UK served as a vital base for U.S. forces and continues to host about
9,000 U.S. military personnel as well as airbases, equipment, radar sites, and intelligence-
gathering installations. U.S. and British forces have also established extensive liaison, training,
and exchange arrangements with one another, with British officers routinely seconded to, for
example, the Pentagon, U.S. Central Command Headquarters in Tampa, FL, and U.S. Naval
Headquarters in Norfolk, VA. British sources reportedly often have access and input into U.S.
defense planning and efforts such as Quadrennial Defense Reviews.
A 1958 U.S.-UK Mutual Defense Agreement established unique cooperation with regard to
nuclear weapons, allowing for the exchange of scientific information and nuclear material. The
United States has leased to the UK the missile delivery systems for some of its nuclear warheads
since 1963. The UK’s nuclear deterrent consists of several Vanguard class submarines, each
armed with up to 16 Trident missiles.
The United Kingdom and the United States are also key partners in terms of defense industry
cooperation and defense sales. The two countries are engaged in more than 20 joint equipment
programs, including the F-35 Joint Strike Fighter (JSF). Most major U.S. defense companies have
a UK presence and, led by BAE Systems, numerous British companies operate in the United
States. British defense companies’ U.S. operations tend to be part of a larger supply chain, with
sales consisting mostly of components and niche equipment, rather than entire platforms. U.S.
foreign military sales (government-to-government) agreements with the UK were $652 million in
FY2012.22 Shipment of U.S. direct commercial sales (contractor-to-government) to the UK
totaled nearly $406 million in FY2012.23
In 2007, in an effort to address long-standing British concerns about U.S. technology-sharing
restrictions and export controls, the countries signed a Treaty Concerning Defense Trade
Cooperation. The U.S. Senate passed a resolution of advice and consent to ratification of the
treaty in September 2010.24 The treaty eliminates individual licensing requirements for certain
defense articles and services controlled under the U.S. International Traffic in Arms Regulations
(ITAR). The agreement is reciprocal and is intended to cover defense equipment for which the
U.S. and UK governments are the end-users. It also calls for the creation of “approved
communities” of companies and individuals in each country with security clearances to deal with
technological transfers.25
22 Defense Security Cooperation Agency, Fiscal Year Series,
http://www.dsca.mil/sites/default/files/fiscal_year_series_-_30_sep_2012.pdf.
23 U.S. Department of State, Section 655 Annual Military Assistance Reports,
https://www.pmddtc.state.gov/reports/documents/rpt655_FY12-report.pdf.
24 The treaty is numbered 110-7.
25 The full text of the treaty can be accessed at http://www.state.gov/t/pm/rls/othr/misc/92770.htm. Also see Claire
Taylor, UK-US Defence Trade Co-operation Treaty, House of Commons Library, International Affairs and Defence
Section, February 17, 2009, http://www.parliament.uk/briefing-papers/SN04381.
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Austerity and the Defense Budget
In 2013, the UK had the world’s fifth-largest military expenditure (behind the United States,
China, Russia, and Saudi Arabia), spending approximately £38.6 billion (about $64 billion). The
UK is also one of the few NATO countries that exceeds the alliance’s tacit defense spending
benchmark of 2% of GDP (the UK’s defense spending was 2.4% of GDP in 2013).26
In 2010, the UK government released a Strategic Defense and Security Review (SDSR), the
country’s first such review since 1998, that set out the future structure of British military forces.27
The SDSR outlined a vision for a restructured British military by the year 2020 that is smaller but
highly flexible, maintains a high degree of readiness, and offers the full range of needed
capabilities. Fiscal pressures have had a substantial impact on the British military, however: the
SDSR called for an 8% decrease in the UK’s defense spending over the period 2011 to 2015.28
The SDSR instructed the Ministry of Defence to cut 25,000 civilian jobs over the period, to close
or sell off some of its facilities, and to renegotiate some contracts with private industry.
Cuts have also affected each branch of the British military:29
• The British Army is being reduced by 7,000 personnel, down to 95,500 personnel
by 2015. The army’s tank force will be reduced by 40% and heavy artillery by
35%. By 2020, the army is expected to shrink to 82,000 regulars.
• Royal Navy personnel are being reduced by 5,000, to a total of 30,000 by 2015.
The navy decommissioned the aircraft carrier Ark Royal four years ahead of
schedule and phased out its Harrier jump jets. Two new aircraft carriers are
expected to be completed by the end of 2019, but it remains unclear whether both
will enter into service.30 Due to the costs of operation, one of the new carriers
might be placed on “extended readiness.” The navy has acquired six new Type 45
destroyers, but the surface fleet of destroyers and frigates has dropped from 23
ships to 19. The navy is expected to finish acquiring a new fleet of Astute-class
attack submarines.
• The Royal Air Force is losing 5,000 personnel, decreasing to 35,000 by 2015. In
addition to recently-acquired EuroFighter Typhoons and plans to procure F-35s,
the RAF intends to acquire 12 new Chinook helicopters. Plans to replace Nimrod
surveillance aircraft have been cancelled.
26 NATO Public Diplomacy Division, Financial and Economic Data Relating to NATO Defence, February 24, 2014,
http://www.nato.int/nato_static/assets/pdf/pdf_topics/20140224_140224-PR2014-028-Defence-exp.pdf.
27 HM Government, Securing Britain in an Age of Uncertainty: The Strategic Defence and Security Review, October
2010,
http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_191634.pdf?
CID=PDF&PLA=furl&CRE=sdsr.
28 The 8% decrease is in real terms (inflation-adjusted).
29 "Defence review: Cameron unveils armed forces cuts," BBC News, October 19, 2010,
http://www.bbc.co.uk/news/uk-politics-11570593. See also Caroline Wyatt, "Has Britain's defence budget been cut too
much?" BBC News, February 24, 2014, http://www.bbc.com/news/uk-26271018.
30 Alan Tovey, "Britain's largest warship HMS Queen Elizabeth nears completion," The Daily Telegraph, March 26,
2014, http://www.telegraph.co.uk/finance/newsbysector/industry/defence/10723164/Britains-largest-warship-nears-
completion.html.
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• The government intends to maintain the UK’s submarine-based Trident nuclear
deterrent, but to reduce the total UK warhead stockpile from 160 to under 120,
and to decrease the number of warheads on each submarine from 48 to 40. After
being repeatedly delayed, a decision on replacing Trident submarines is to be
taken in 2016, after the next election.
The cuts to the defense budget are not expected to affect ongoing British military operations,
which are funded separately by a treasury reserve. Nevertheless, current and former U.S. officials
have expressed concerns about the impact of the UK’s defense cuts on transatlantic cooperation
and burden-sharing.31 Following the release of the SDSR, a 2011 report by House of Commons
Select Defence Committee also raised alarms about the impact cuts would have on the UK
military’s ability to carry out operations, stating that “We are not convinced, given the financial
climate and the drawdown of capabilities arising from the SDSR, that from 2015 the Armed
Forces will maintain the capability to undertake all that is being asked of them.”32
Afghanistan
The UK has been the second-largest troop contributor to the NATO-led International Security
Assistance Force (ISAF) mission in Afghanistan. As of April 1, 2014, the UK had 5,200 troops
deployed to ISAF.33 Most British forces have been based in the province of Helmand, where they
have engaged in frequent combat with insurgents. The UK military has suffered nearly 450
combat deaths in Afghanistan, which is more than twice the number of casualties the UK had in
Iraq. Packing up equipment and preparing for the full withdrawal of combat troops by the end of
2014 is well underway. UK forces in Helmand have almost completed the process of closing or
handing over to Afghan forces the 137 frontline bases and outposts they had previously manned
outside their main base, Camp Bastion.34 Post-2014, the UK intends to continue spending
approximately £70 million (approximately $117 million) per year training and equipping Afghan
forces.
Intelligence and Counterterrorism Cooperation
Most analysts and officials agree that U.S.-UK intelligence and counterterrorism cooperation is
close, well-established, and mutually beneficial. UK agencies routinely cooperate with their U.S.
counterparts in the sharing of information, and U.S. and British law enforcement and intelligence
agencies regularly serve as investigative partners. Although many of the details and achievements
remain secret, U.S.-UK intelligence and counterterrorism cooperation has reportedly disrupted
multiple terrorist operations against both countries in recent years, including a plot against the
New York Stock Exchange and World Bank in 2004, a major plot against transatlantic aviation in
31 See, for example, "Military cuts mean ‘no US partnership’, Robert Gates warns Britain,” BBC News, January 17,
2014, http://www.bbc.com/news/uk-25754870.
32 Defense Committee – Sixth Report, The Strategic Defence and Security Review and the National Security Strategy,
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmdfence/761/76102.htm.
33 NATO, ISAF placemat, April 1, 2014, http://www.nato.int/nato_static/assets/pdf/pdf_2014_04/20140331_140401-
ISAF-Placemat.pdf.
34 "Afghanistan: 'history will judge us' as British toops pull back from Helmand," The Daily Telegraph, March 16,
2014, http://www.telegraph.co.uk/news/uknews/defence/10701313/Afghanistan-all-but-one-British-frontline-base-pull-
out.html.
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2006, and a cargo airplane bomb plot in 2010.35 In addition to efforts seeking to disrupt terrorist
attacks against U.S. and European targets, U.S. and UK officials work together with regard to
developments in countries such as Afghanistan, Pakistan, Somalia, and Yemen.
Although the overall intelligence and counterterrorism relationship is overwhelmingly positive,
there have been some occasional tensions. The relationship was damaged by public accusations of
British complicity in U.S.-led renditions and the alleged torture of terrorist suspects between 2002
and 2008. Related court cases sought the release of intelligence documents and raised concerns in
the intelligence community about the risk of confidential information entering the public domain
through the British legal system. In part to preserve the integrity of UK intelligence-sharing with
the United States, the British government introduced a new Justice and Security bill to permit
evidence to be heard in secret on national security grounds in all civil courts; this bill became law
in April 2013.
There have also been some tensions about extradition arrangements. Although the UK extradited
radical Islamist cleric Abu Hamza al-Masri to the United States in October 2012 to face trial on
terrorism-related charges, U.S. officials were frustrated that the process took eight years after the
original U.S. request. British officials have rejected other U.S. extradition requests on human
rights grounds and UK courts have blocked some U.S. extradition requests for terrorist suspects
because of insufficient or inadmissible evidence. Nevertheless, some UK legal experts and human
rights activists criticize the terms of the current U.S.-UK extradition treaty as being more
favorable to the United States. U.S. officials counter that an independent review commissioned by
the UK government concluded in 2011 that the treaty is fair and balanced, with U.S. and UK
evidentiary standards being the same in practice.36
In 2013, reports based on leaked, classified documents obtained from a former U.S. National
Security Agency (NSA) contractor focused on surveillance operations allegedly conducted by the
NSA and the UK’s Government Communications Headquarters (GCHQ, the UK’s signals
intelligence agency). Under the Tempora program, which has not been acknowledged by GCHQ,
the UK has reportedly tapped into undersea transatlantic fiber-optic cables that carry international
telephone and Internet traffic. Media reports have suggested that the NSA and GCHQ worked
together on at least some aspects of collection operations, and have shared information gathered
from these programs with each other.
UK civil liberty and privacy groups have questioned the legality of GCHQ’s reported Tempora
program and have claimed that GCHQ circumvented UK law by using the NSA’s PRISM
program to access the content of private communications of UK citizens. British officials have
denied such allegations and asserted that all intelligence-sharing with the United States takes
place within the law. The British government has been largely silent in public about the alleged
NSA and GCHQ activities, asserting that it does not comment on intelligence matters. The UK
Parliament’s Intelligence and Security Committee has launched an inquiry into the extent of UK
surveillance activities and is reviewing whether current laws on “state snooping” on private
35 See British Prime Minister’s Office, US and UK Counterterrorism Cooperation,
http://www.number10.gov.uk/news/counterterrorism-cooperation/. See also Sandra Laville, "MI5 chief says 34 UK
terror plots disrupted since 7/7 attacks,” The Guardian, November 7, 2013, http://www.theguardian.com/uk-
news/2013/nov/07/mi5-chief-34-uk-terror-plots-disrupted.
36 For more information, see “Frequently Asked Questions on the U.S.-UK Extradition Relationship,” Embassy of the
United States to the United Kingdom, April 2013, http://london.usembassy.gov/gb176.html.
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communications are still adequate to regulate British security services in light of advances in the
Internet and electronic communications.
Economic Relations
The U.S.-UK bilateral investment relationship is the largest in the world. In 2012, U.S. foreign
direct investment (FDI) in the UK was nearly $598 billion. Total U.S. corporate assets in the UK
exceeded $5.1 trillion in 2012, representing almost one quarter of total U.S. corporate assets
abroad. UK corporate assets invested in the United States stood at more than $2.2 trillion in 2012,
with UK FDI in the United States at almost $487 billion for that year. UK affiliates employed
about 986,000 U.S. workers, and U.S. firms employed over 1.3 million people in the UK.37
The 2008-2009 global financial crisis and recession had a significantly negative impact on world
trade and investment flows. Both the United States and the UK are home to major world financial
centers, and the U.S.-UK economic relationship was affected. British banks suffered massive
losses from their exposure to asset-based securities linked to the U.S. sub-prime mortgage market.
Transatlantic FDI flows fell sharply from 2007 to 2009, but rebounded strongly afterwards.
Tourism and trade are also important pillars of the economic relationship. In 2012, U.S. residents
made approximately 2.5 million trips to the UK and in 2013 there were 3.8 million British visitors
to the United States.38 In 2013, U.S. exports of goods to the UK were worth approximately $47.4
billion, and U.S. imports from the UK were worth approximately $52.6 billion.39
The European Commission negotiates a common EU trade policy on behalf of its member states,
and therefore UK trade policy is formulated within an EU context. Although most of the U.S.-EU
economic relationship is harmonious, some tensions persist. Current U.S.-EU trade disputes focus
on poultry, aircraft subsidies, hormone-treated beef, and genetically modified (GM) food
products. The UK has been a consistent supporter of U.S.-EU efforts to lower transatlantic and
global trade barriers, and to reach an agreement in the Doha Round of multilateral trade
negotiations. UK officials and business leaders have reacted with strong support to the prospect
of the Transatlantic Trade and Investment Partnership (TTIP) under negotiation between the
United States and the EU.
Conclusion
Most analysts agree that the U.S.-UK political relationship is likely to remain close; that the
“special relationship” will remain strong on many vital issues in which the UK is a crucial U.S.
ally; and that the two countries will remain key economic partners. Observers also assert that the
main dimensions of the U.S.-UK relationship are deep and enduring in that they go beyond the
personal dynamics of individual leaders and are not subject to sudden moves or policy shifts by
37 Daniel S. Hamilton and Joseph P. Quinlan, Center for Transatlantic Relations, Johns Hopkins University School of
Advanced International Studies, The Transatlantic Economy 2014: Volume 1, pg. 23 and Volume 2, pg. 65.
38 http://travel.trade.gov/outreachpages/download_data_table/2012-US-to-Europe.pdf and
http://travel.trade.gov/outreachpages/download_data_table/Fast_Facts_2013.pdf.
39 U.S. Department of Commerce, United States Census Bureau, Trade in Goods with United Kingdom,
https://www.census.gov/foreign-trade/balance/c4120.html.
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either country. Analysts observe that many concerns and assertions about an impending break-up
of the “special relationship” tend to be exaggerations.
Nevertheless, many analysts believe that some reassessment of the “special relationship” may be
in order. Despite its dominant themes of continuity, the relationship is changing primarily because
its geopolitical setting has been changing. The U.S.-UK relationship often remains uniquely close
and capable of projecting a considerable degree of power and influence, but there are questions
about whether the relative influence and centrality of the relationship is facing a decline. Both
countries have sought to adjust their foreign policy approaches to deal with new global challenges
and emergent geopolitical trends that are often perceived as the “rise of new powers” or the
diffusion of power away from “the West.” In many cases, responses to global challenges continue
to reinforce not only the relevance of U.S.-UK cooperation, but the still-frequent role played by
the two countries working together to drive international action. In an increasingly “G-20 world,”
however, the UK may not be viewed as centrally relevant to the United States in all of the issues
and relations considered a priority on the U.S. agenda.
Similar to the United States, the key long-term foreign policy challenges for the UK are likely to
revolve around how to define its relationships with emerging powers; how to maintain global
influence and relevant capabilities given limited resources; and how to maximize existing
partnerships and multilateral frameworks (including NATO, the EU, and the United Nations).40
Meanwhile, many observers assert that a significant degree of the UK’s international influence
flows from the success and dynamism of the British economy, further raising the stakes on
whether the UK can sustain stronger economic growth while continuing to pursue ambitious
fiscal consolidation.
The management of the UK’s relations with the EU will also bear watching over the next several
years. Some analysts argue that life on the margins of an EU more integrated around the
Eurozone need not be disastrous for the UK. Both the positive and the negative aspects of a
prospective life outside the EU are more difficult to foresee, however. Envisioning an EU without
the UK, many analysts observe that British participation is widely regarded as essential for efforts
to develop more robust EU foreign and defense policies. Analysts also assert that the departure of
the UK could change the economic character of the EU because the UK generally acts as a
leading voice for economic liberalism in EU debates about trade and the single market.
As has been reportedly expressed in conversations between President Obama and Prime Minister
Cameron and related bilateral discussions between U.S. and UK officials, these considerations are
of central interest to U.S. policy makers who are concerned about a potential UK departure from
the EU. With the UK commonly regarded as the strongest U.S. partner in Europe and a partner
that commonly shares U.S. views, senior Administration officials have reportedly conveyed their
concerns that a UK break from the EU would reduce U.S. influence in Europe, weaken the EU’s
position on free trade, and make the EU a less reliable partner on security and defense issues.
40 See HM Government, A Strong Britain in an Age of Uncertainty: The National Security Strategy, October 2010.
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Author Contact Information
Derek E. Mix
Analyst in European Affairs
dmix@crs.loc.gov, 7-9116
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