When it comes to trade, Donald Trump and Brexiteers are not as far apart as you might expect

They both share a visceral rejection of multilateralism, or working in concert with other nations, as an equal, to achieve a mutually beneficial end

Ben Chu
Economics editor
Sunday 04 March 2018 11:14
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Like the President, liberal Brexiteers harbour a temperamental hostility to the very principle of multilateralism, even if it delivers the ends they purport to want
Like the President, liberal Brexiteers harbour a temperamental hostility to the very principle of multilateralism, even if it delivers the ends they purport to want

When it comes to trade, liberal Brexiteers are cut from a very different cloth from Donald Trump. Or so we’re led to believe.

Trump wants protection. But Brexiteers want more trade, even unilateral tariff cancellations on imports to the UK.

Trump has a pinched and paranoid vision of “America First”. Yet Brexiteers nourish an expansive and open-minded dream of “Global Britain” signing major new deals with emerging market superpowers.

Trump is in the mould of his late 19th century predecessor, William McKinley, who proclaimed: “Protection is but the law of nature, the law of self-preservation, of self-development.” Brexiteers such as Liam Fox, Boris Johnson and Michael Gove, by contrast, walk in the enlightened footsteps of John Bright, Richard Cobden and the Anti-Corn Law League.

Donald Trump unveils new tariffs on steel and aluminium imports to US

But are Trump and the liberal Brexiteers as different as that rhetorical divergence suggest?

As he unveiled his new tariffs on steel and aluminium last week, Trump articulated his philosophy on trade to Twitter.

“When a country is losing many billions of dollars on trade with virtually every country it does business with trade wars are good, and easy to win,” he explained.

“Example, when we are down $100bn with a certain country and they get cute, don’t trade anymore – we win big. It’s easy.”

One can hear an echo of that “we can’t possibly lose” perspective in the Brexiteers’ misplaced confidence that, because the European Union has a trade in goods surplus with the UK, the Europeans will ultimately be desperate to sign a post-Brexit free trade deal.

“Within minutes of a vote for Brexit the CEOs of Mercedes, BMW, VW and Audi will be knocking down Chancellor Merkel’s door demanding that there be no barriers to German access to the British market,” the now Brexit Secretary, David Davis, famously predicted before the referendum.

What both the Brexiteers and Trump fail to understand is the nature of trade deficits.

Trump is deluded to believe, as he clearly does, that a bilateral trade deficit is evidence of a country “losing” in trade and a surplus, correspondingly, evidence of “winning”.

And the Brexiteers are deluded, albeit in a slightly different way, to believe we are, like a customer in a charity shop, somehow doing EU companies a favour in buying their exports – and that we could simply stop doing so without inflicting any harm on ourselves.

But, even accepting all that, Brexiteers would never advocate crude Trump-like tariffs, would they?

Perhaps not. Yet leaving the EU single market and customs union are, nevertheless, inherently trade-destroying policies for Britain; perhaps the most destructive since the Second World War.

No credible study has found any grounds for believing that hypothetical future trade deals between the UK and the likes of China and Australia could, arithmetically, compensate for leaving the EU’s free trade institutions (which, let us remember, the Thatcher government helped to shape).

It’s also worth delving a little more into the Trump position. On Twitter he embraces bellicose talk of a trade war. But speaking in Davos in January, the tone from Trump and his economic team was rather different. All they wanted, they said up in the Swiss Alps, was “fair trade”, reform of a system “rigged” against America.

“The US is prepared to negotiate mutually beneficial bilateral trade agreements with all countries,” Trump told delegates of the World Economic Forum.

This might get us closer to the underlying substance of the Trump position. What we have is a visceral rejection of multilateralism, or working in concert with other nations, as an equal, to achieve a mutually beneficial end.

America will only negotiate with other countries one on one. For Trump, trade is really about power. It’s an ideological view on the appropriate nature of international relations.

One of the most pointlessly destructive elements of Brexit when it comes to trade is that the UK will automatically fall out of the coverage of the 50 or so trade deals signed between the EU and a host of other countries, ranging from South Korea and Mexico to Chile and South Africa.

We will have to scramble to recreate those deals after 2019 merely to avoid damage to our own exporters who have come to rely on them. The net economic benefit of this upheaval is quite elusive.

Moreover, we might ask, what is the objection, if the Brexiteers feel the EU has not been proactive enough in seeking to strike new trade deals with emerging markets, to remaining in the bloc and pushing for change from within, working with similarly pro-free trade allies such as the Netherlands and Sweden?

The obvious answer is that liberal Brexiteers, like Trump, harbour a temperamental hostility to the very principle of multilateralism, even if it delivers the ends they purport to want. It’s a hostility that overrides any rational cost-benefit judgement.

Working through the EU to enhance the export opportunities of our firms and reduce import costs for consumers would not enable these political narcissists to feel, on a personal level, that they had taken back control.

Despite their rhetoric, for liberal Brexiteers, leaving the EU is less about new trade opportunities, than power. And, as with Trump, the power in question is not really their country’s but their own.

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