Trump talking tough on trade ahead of G7 meetings in Canada
● White House is expecting a chilly reception from it’s ‘oldest allies’
Before US president Donald Trump sits down with a third generation North Korean autocrat, he will face what may well turn out to be a tougher crowd – some of America’s oldest allies.
With his new tariffs increasing US isolation, Mr Trump heads to Canada today for a meeting of the Group of Seven industrialised nations. The White House is expecting a chilly reception from Canada and West European nations, already frustrated over Mr Trump’s withdrawal from the Paris climate accord and the Iran nuclear agreement.
German chancellor Angela Merkel previewed the dynamics on Wednesday, telling the German parliament that “it is apparent that we have a seritrump ous problem with multilateral agreements here, and so there will be contentious discussions.”
Mr Trump signalled a tough tone via Twitter yesterday, saying: “Getting ready to go to the G7 in Canada to fight for our country on Trade (we have the worst trade deals ever made).”
Anticipating a tense two days in Quebec, Mr Trump has complained about having to attend the summit, particularly since it comes just before his high-stakes meeting in Singapore with North Korean leader Kim Jong Un. But the White House has indicated no change in plans.
“The president wants to go on the trip,” said Larry Kudlow, Mr Trump’s top economic adviser. “The president is at ease with all of these tough issues. There may be disagreements.”
He added. “I regard this as much like a family quarrel.”
Mr Trump is also set to hold a series of one-on-one meetings, including with Canadian prime minister Justin Trudeau and French president Emmanuel Macron. Mr is unlikely to back away from the nationalistic policies that have frustrated and unnerved allies but which he sees as key promises to his most loyal voters. He has highlighted his efforts on Twitter, writing on Monday: “The US has made such bad trade deals over so many years that we can only WIN!”
Mr Kudlow said allies should understand that Mr Trump “will do what is necessary to protect the US, its businesses and its workforce,” adding that Mr Trump “has always said, and I agree, tariffs are a tool in that effort”.
Mr Trump announced in March that he was imposing tariffs on imports of steel and aluminium, but he temporarily granted a waiver to US allies including Canada, Mexico and the European Union, and also to China, as his administration said trade talks were continuing.
Mr Trump ended that temporary relief this month, seeking to put pressure on the other countries to cut new trade agreements with the US. Japan was never granted a waiver, despite prime mininster Shinzo Abe’s pleas.
Asked if the administration will respect decisions from the World Trade Organisation on tariffs, Mr Kudlow said that “international multilateral organisations are not going to determine American policy. I think the president’s made that very clear”.
This will be Mr Trump’s second summit of the G7, an informal gathering that meets every year under a rotating chairmanship.
Mr Kudlow was vague on whether the summit will produce a joint decision or a clear outcome on trade or other issues, saying “let them meet first”.
The meeting comes after a gathering of G7 finance ministers concluded last week with a message of “concern and disappointment” to Mr Trump from the other six countries. Describing the tense three days, Bruno Le Maire, France’s finance and economy minister, said it was “far more a G6 plus one than a G7”.
It’s nearly 20 years since a rare Saturday morning at home was disturbed by the rich Donegal tones of Columba Reid, who ran a Borders cashmere firm called Clan Douglas, and was calling to advise me that its survival was threatened – by bananas.
I was UK Trade Minister at the time, which largely involved living on aeroplanes and promoting British exports. Trade policy, the World Trade Organisation (WTO) and all that stuff was a much more complex side of the job. Over the next six months, I got to know a lot about trade diplomacy and the politics of bananas.
As the White House’s capricious occupant threatens sanctions against the EU, Canada and Mexico, there are lessons from that episode worth recalling. The main ones are not particularly uplifting: in trade wars, might, rather than right, generally wins; “might” tends to mean the United States and “free trade” does not equate to fair trade.
The most urgent memo to all concerned should be about collateral damage. Once tit-for-tat sanctions begin, they immediately move away from the original dispute.
Ostensibly, Trump wants to protect American steel and aluminium producers from foreign imports. Those from China were the original target. Slapping tariffs on other countries looks like fight-picking rather than a genuine search for economic redress. US industry and construction need the imports and American consumers will pay. However, that will take time to filter through and, meanwhile, it’s the political grandstanding that counts.
Twenty years ago, the Banana Wars arose from the efforts of the EU, prompted mainly by the UK, to maintain preferential treatment for bananas from poor Caribbean countries. This was bitterly contested by the big American firms, Chiquita and Dole, who grew bananas mainly in Colombia and Ecuador.
The leading lobbyist for Chiquita was an awful man named Trent Lott, a senator from Mississippi who was forced to resign as the Republican leader in the Senate in 2002 because of his racist opinions. Lott had Scottish ancestry and was the main promoter of Tartan Day in Congress. However, he did not allow tartan to stand in the way of his Chiquita pay cheque.
When the US Government’s Trade Department weighed in, they were supported by the WTO which authorised sanctions to the value of losses claimed by the American banana companies. That is where the “hit list” came in. An eclectic selection of products from EU countries were to have punitive tariffs imposed.
There was nothing random about this. Every product was chosen to create political pressure and, in the case of cashmere knitwear, this certainly had the intended effect. In the face of apocalyptic predictions about jobs, particularly in the Borders, ministerial minds were concentrated wonderfully.
I was quite proud of the solution we found to protect the cashmere industry; all the more so when I learned retrospectively that I was the reason for a high-profile Scottish product appearing on the list. We underwrote the excess tariff so that cashmere companies could carry on taking orders as usual.
Eventually, the WTO reduced the value of approved retaliation and cashmere came off the list. By then, the EU had more or less thrown in the towel and the preferential treatment of Caribbean bananas was phased out with disastrous consequences for the tiny Windward Islands economies.
Many small farmers turned to crops for the drugs trade and the big boys of that industry moved in. Since most of the end product went to the US, Chiquita’s gain was paid for on the streets of American cities. It certainly didn’t do the impoverished banana pickers in Colombia and Ecuador any good.
Unless Trump backs off, the EU will produce its own tit-for-tat list. That means damage to industries in politically sensitive corners of the US – bourbon, jeans and peanut butter are being mentioned. The greater danger will emerge if Trump then escalates the conflict and bigger fish are dragged in with ripple effects around the world.
Chinese steel is already looking for new markets, which will drag down the price. Once these conflicts start, there is no certainty where they will end up – which is why it makes little sense to start them in the first place.
The argument for free trade is that consumers benefit, but at what cost? The Fairtrade Foundation website states that the average price of a banana has dropped from 18p to 11p over the past decade. Shareholders in Chiquita are doubtless delighted, and nobody thinks too much about how this saving has been paid for in human terms. Or do we? According to Fairtrade, one in three bananas sold in the UK now carry its label, signifying that the people who grow and pick them get a civilised return for their labours. If we can afford these few extra pennies, we should pay up and enjoy our bananas with clear conscience.
The United States, long before Trump, has a history of flexing its political muscles through trade. Potentially more damaging to some UK companies are sanctions now being imposed on Iran. The US government is entitled to tell its own companies who they can trade with, but there is no basis in international law for them punishing foreign businesses whose governments take a different political view.
That doesn’t stop them, as people trying to do business with Cuba found out to their cost in previous decades. No international body has the power to stop them or to protect this aspect of free trade. Trump is following in a long tradition – whatever suits America is how the world should be run, and to hell with victims and consequences.