MICHAEL WHITE: Trump’s trade war could fundamentally change the political weather
PUBLISHED: 00:01 12 March 2018 | UPDATED: 14:45 13 March 2018
MICHAEL WHITE on why the prospect of Trump trade wars takes away all the icing
In yet another crowded contest we can each pick our most significant Brexit Development of the Week.
Optimists may opt for the German coalition agreement which takes Angela Merkel back from the brink.
Pessimists may point to Italian voters preference for jumping over the brink and shouting “bunga, bunga” at the high-minded priesthood of the European Commission.
Realists could easily lump the two together on the grounds that Chancellor Merkel has achieved no more than a reprieve after six months of paralysis in Berlin and at great potential cost to the hollowed-out CDU/SPD centre of yet another major EU state.
The iron law of elective politics dictates that things always go wrong after eight to 10 years. Mutti Merkel has had 12 and counting. Presidents Putin and Xi have abolished counting.
On a more frivolous note I have been enjoying this week’s rapid advance of cake-based nouns in honour of the British approach to the Brexit negotiations. We must look forward to “cakeism” appearing in the Oxford English Dictionary’s 2018 list of Words of the Year. “Cakeismo” could soon be its Italian counterpart as whichever populist coalition in Rome promises the earth plus tax cuts. After all (not many people know this), the phrase “bunga, bunga” originated not in Silvio Berlusconi’s bedroom, but in Weymouth.
Such lapses into flippancy can be defended as justifiable escapism. Your columnist has just ploughed through all the week’s Brexit speeches – Theresa May’s at the Mansion House, of course, but also those “national interest” interventions from Tony Blair and John Major (pause for hisses) urging a Brexit rethink. Not forgetting – as one easily can – Jeremy Corbyn’s dance of the seven veils over a (not the) customs union and Liam Fox’s exhortation to Brits to lead the charge for global free trade.
A box set of speeches is tough going, but this one was more rewarding and revealing than many such dross-filled exercises have been since the 2016 referendum.
May’s speech was still full of cakeism, but she finally offered Brussels a more recognisable recipe for the cake she actually wants to bake-and-eat, as she might more sensibly have done pre-Article 50 at Lancaster House. The timing of the international trade secretary’s rival recipe – his cake contains more tasty fat and sugar – was particularly unfortunate. It is a speech to which we will return.
Why? Because hindsight may conclude that President Trump’s impulsive imposition of 25% tariffs on imported steel and aluminium (10%) was the Brexit Development of the Week that mattered most. It has the potential to reduce the rest of the week’s dramas – Russian missile macho and suspected spy poisoning in Salisbury included – to mere footnotes.
Suddenly there is talk of trade wars, a fearful scenario with echoes of the cumulative horrors they unleashed in the 1930s. Since 2008 the collective memory of beggar-my-neighbour protectionism of the “low dishonest decade” that followed the Great Crash of 1929 has kept that spectre away from the feast until now. In doing so we have all avoided the worst of its excesses, including a major war.
But the last global free(r) trade round stalled in Doha while non-tariff barriers to imports have rapidly increased. Thus Japan’s rejection of European skis (they have different snow) and of cheaper foreign rice (ditto) are only well-known examples. Single market or no, it’s hard to sell Silver Cross prams in France because they are deemed unsafe, though they don’t kill babies elsewhere.
But the public mood changes. As it hardens almost everywhere, it allows assorted panacea populists – Five Star, Syriza, the AfD or Le Pen, Podemos in Spain – to whip up anger. Suddenly these niggling non-tariff hypocrisies about snow or pram safety become affronts to national pride which must be addressed by retaliation. Catching this mood Brussels responded more impetuously to Trump’s provocation than did wary China. The US, of course, was a major protectionist force in the 1930s, FDR little better than President Hoover.
In such volatile times it’s worth noting that Trump is fast-losing his White House trusties (“surrogate daughter” Hope Hicks quit last week) who have kept the show more-or-less on the road. This past week he has winged it on gun control, siding with key Democrat positions to the rage of the powerful National Rife Association (NRA), as well as blindsiding the
State Department, Treasury and Pentagon over steel tariffs – Republican senators and his economic adviser, Gary Cohn, too.
In the process he also seems to have snubbed President Xi’s top economic adviser, Liu He, who was in Washington to discuss trade relations. Xi has just seized power and despite the cheers the Chinese military is unhappy. It’s a delicate moment at which a powerful Chinese may remember being seen to lose face.
Can the US constitution contain Trump Unchained? We hope so, but it needs more public spirited officials than Robert Mueller’s Russian-links inquiry team to do so. Democrats are over-eager to condemn him, Republicans too reluctant. Both stances are too partisan.
By the same light it will take more courage than successive UK governments have shown standing up to Russian interference when Russian exiles are apparently poisoned in gentle Salisbury and key elections tampered with by cyber warfare. Putin’s more conventional Cold War missile boasting may be just bravado, but a New Yorker article this week sets out – at daunting length – the scale of the Kremlin’s cyber-assault on democratic procedures in France, Italy and Germany as well as the UK and US. Boris Johnson threatens retribution. Are you scared yet, Vlad?
Into this international vortex last week stepped the frail figure of May at the Mansion House, gamely repeating her five tests (copyright G Brown) and much else from the same speech in the Commons earlier in the week – to Tory delight and Labour disdain.
In what looked like a coordinated strike arranged by Open Britain, Tony Blair and Sir John had pre-empted her by invoking the risks which face Brexit Britain and urging a rethink at the right moment. Both were misreported and – of course – abused as disgraced hypocrites by obsequious bullies like Mailman Quentin Letts. There are MPs and editors who still fail to grasp that toxic levels of populist abuse have the power eventually to destroy them too. That is the lesson of Italy’s election for those slow to grasp what has been happening elsewhere for 20 years. Even when the populist cult of the personality has been harnessed by a mainstream politician the success usually proves short-lived.
As he squares up to France’s powerful rail unions, France’s Emmanuel Macron may ponder that. Mario Renzi, his once-popular fellow-technocrat in Rome, is now as discredited and marginalised as Blair, struggling for relevance. At least Blair got 10 years.
Blair’s main thrust this past week was actually directed at Europe. The Brexit vote should have been a “wake-up call” to Brussels to reform EU institutions in ways that address populist grievances – “British scepticism is not unique” – and minimize the damage which a hard Brexit will do to EU economies, security and global status as well as to Britain’s.
Even the potent immigration question can be fixed, he said (again). That may be a pious hope given Merkel’s treatment of David Cameron in his 2015 renegotiation when she was busy admitting a million refugees and sealing her own doom too. Dare I say that’s all a detail.
Blair reminds us all that in 2000 EU member states dominated the top 10 economies. By 2016 India’s was almost equal to the UK and France. By 2030 it may have overtaken Germany and Japan. China will be Number 1. Reject fatalistic acceptance of Brexit and fight to reverse it or future generations will not forgive you, Blair warned. That’s the big picture, the one not seen through Liam Fox’s rose-tinted specs.
Blair always marshals a good argument and I remain a fan despite everything. But I also see how toxic the fallen hero’s reputation has become. Just 2% view him “very favourably” against 51% “very unfavourably” according to one YouGov poll (2016). He is the Bradley Wiggins of politics. Unfair perhaps, but like Sir Brad he has done much to bring it on his own head. People just don’t listen and the polls barely shift.
Uncharismatic John Major’s position is stronger, but not much. His success at Maastricht in keeping Britain out of the euro and Schengen is now derided by cynical Tory tabloids because he never gave voters a referendum in 1992. His “reality check” warnings against excessive optimism about Brexit are derided by, well, by the excessive optimists like Fox.
But it is hard to deny Major’s claim – the “betrayal” school do deny it – that the 52%’s champions have treated the 48% with dismissive contempt – happy to “shout down legitimate dissent” and the views of the sovereign parliament lest it vote to soften or reverse June 23’s vote.
Coming so soon after the Commission published the first legal draft of the divorce terms, May’s own speech did well not to waste much time on Irish border provocations except to reject both land and watery options.
Where she made progress was in educating her supporters and admitting there would be trade-offs between market access and freedom to trade elsewhere.
The EU court would retain both direct and indirect influence on future cooperation, whatever arbitration mechanism emerges to resolve disputes.
No Norway model? Too many obligations. No Canada model? Too restrictive, though when she spoke to MPs on Monday she foolishly cited the US-Canada border as a model arrangement. Hmm. She still wants cakeism on closely aligned standards while retaining the right to diverge
and on customs streamlined/trusted trader options.
No wonder port operators and exporters on the French and Dutch trade corridors – interviewed this week by BBC Radio 4 – think the politicians still don’t get it. There will be no passporting rights for the City, May conceded. But will Brussels really let her get away with associate or even full membership of regulatory agencies that govern key UK industries like medicine, aviation and chemicals?
There are contradictions in the EU’s position too, May reminded the 27 and all trade agreements are forms of cherry-picking. She might have added that, despite its formal rigidity, Brussels often cuts anomalous political deals and looks the other way. French and German breaches of budget rules imposed on smaller states, are always a good place to start. And why pick on Polish authoritarianism while ignoring Hungary’s?
With one exception, most responses to Mansion House May were predictable, frostier in Brussels, warmer from the Tory Moggsters who managed to put up a united front with the Soubry-ite “saboteurs” and “traitors” on their own side. Fleet St mostly fawned. Rare to report, the false response note was struck by that old fox – 85 this month – Michael Heseltine.
“There are Conservatives who feel strongly enough about the European issue they would rather risk a Corbyn government than see Britain make this calamitous mistake,” he declared. Wow! That’s a formula that will not resonate well, either among Remain Tories (they don’t trust Corbyn on Europe and rightly so) or among Brexit colleagues. They can now call Hezza a traitor to his party as well as to his country, though it is hard to imagine the Bradley Wiggins of the Tory party on a bike.
But in the real world of deteriorating power bloc politics, Heseltine’s false note was of little consequence compared with Liam Fox’s performance at Bloomberg. There he painted a very rosy picture of a world palpably eager to deepen trade relations with booming Britain.
Booming? Yes, a large, successful economy with “record employment,” high skills and low taxes, well-regulated, with an admired legal system and universities. Our R&D is cutting edge, our financial services a world leader. We are even blessed with a time zone that suits Asian and US markets, not to mention fluency in the global language.
There’s enough truth and half-truth in that description to cheer us up, though it prompts the question which May ducked when asked by a German reporter in Mansion House: If we’re doing that well inside the EU, is Brexit going to be worth it? May had the chance to say “yes,” but being a truthful vicar’s daughter answered a different question. She is in the odd position of trying to be Churchill while privately supporting Neville Chamberlain’s appeasement policies.
But when Fox moved on he got into deeper water. Is it true that British exports rose by 11% in value in 2017? Yes, but mostly because the pound’s value declined by a similar amount. Is the UK getting record foreign direct investment (FDI) because of confidence in Brexit – or because a devalued pound offers January sale prices? Are Nissan and Siemens opening plants simply to secure their UK sales base? Are the plants mere assembly lines? Yes, 90% of future world growth is likely to come from outside ageing Europe – Blair made a similar point – but does that make it wise for a medium-size economy to go it alone in an age of growing protectionism?
Dominic Grieve was quick to make that connection for much the same reasons that John Major had before May spoke and Trump hit UK and EU steel. Nato and the EU have been the anchors of British stability for two generations, both now shaky. Is it wise to leave the EU and become over-dependent on the US when we have so many disagreements – China, Israel, free trade, climate change – not all just with Donald Trump, either?
The Financial Times is already reporting US plans to offer British firms, BA and Virgin Atlantic a worse “open skies” deal at US airports than they currently enjoy as part of the EU/US deal. Should we be surprised? Is that trend likely to get worse? Probably even if it is shown to be self-defeating. Remember, populists act to make their supporters feel better, not necessarily to enjoy a better life, especially if it costs tax money.
Blair hankers for a second referendum. Major wants parliament to be prepared to vote down a bad deal. The Tory Moggsters satisfaction with May’s latest speech suggests they think she is stumbling towards their preferred hard Brexit, though she loudly insists she’s not. Other Remainers think an extended Article 50 transition phase may currently be the best bet.
But the prospect of a US-led trade war, promoted by an unchained president who has always been as gut-protectionist as Corbyn, is the first substantial development – as distinct from Tweet – I have witnessed that may be capable of bringing about a fundamental change in the political weather on Brexit, the kind that Blair just can’t fix – even if he campaigned in shirt sleeves in every city in Britain (he should do that anyway, if he ever wants redemption).
Couple escalating trade clashes with Russian adventurism in Europe and the Middle East, with Chinese assertiveness in the South China Sea (its territorial equivalent of Ukraine), with cyber-warfare all round and very soon European folks will be getting nervous and feeling marginalised, lonely even.
That’s what happened when the last major globalisation of 1870-1914 came to a grinding halt amid rising nationalism before the First World War when “bunga bunga” was briefly a fashionable phrase, though not as an Italian sex party. That happened in 1910 after Virginia Woolf and posh pals passed themselves off as a royal party from Abyssinia to inspect the mighty battleship, HMS Dreadnought, anchored in Weymouth Bay.
At every engineering marvel they were shown by the captain the Bloomsbury clever-clogs chortled “bunga bunga”. When the story got out the phrase went viral. HMS Dreadnought missed the Battle of Jutland and was later sold for scrap. It could happen to all of us if we’re not careful.
We must look forward to ‘cakeism’ appearing in the Oxford English Dictionary’s 2018 list of Words of the Year. ‘Cakeismo’ could soon be its Italian counterpart as whichever populist coalition in Rome promises the earth