Issue of the week: the trade-deal stalemate
Old trading relationships are dissolving globally – but can the turmoil take some of the sting out of Brexit?
Blessed are the cheesemakers – that, at least, seems to be the view of Trade Secretary Liz Truss. The UK and Japan were poised last week to sign a landmark free-trade deal, said Lizzy Burden in The Sunday Telegraph – “the first Britain has negotiated independently of the EU in 47 years”, and of vital importance to big industries such as car-making. But, at the eleventh hour, “a wedge was driven between negotiators”. It transpired that “the talks had stalled over a commodity that represents just 0.007% of total UK exports”: stilton.
Trade experts are optimistic that a deal with Japan will nonetheless be concluded soon. But the episode rams home the potentially devastating impact of tit-for-tat trade spats on local industries. A prime example, said Lex in the FT, is Scotch whisky. Last October, the US – irked by the subsidies meted out to Airbus at the expense of its own aviation champion, Boeing – responded by imposing 25% tariffs on single malts. According to the Scotch Whisky Association, “exports to the US have since dropped by almost a third”. That’s a big blow north of the border “at a time when Boris Johnson is looking to shore up the Union”: Scotch is the UK’s biggest food and drink export and America is by far its largest market. The industry employs 11,000 people, but now several brands and distillers are under threat and, with the US heading into presidential elections in November, “the window for resolving the dispute is a short one”. At the same time, news that Brexit talks are set to stall again – this time because of a dispute over the access of British truckers to the EU – does little to change the impression that negotiators are fiddling while Rome burns.
The broader background to these local disputes is, of course, “America’s confrontation with China”, which is still “escalating dangerously”, said The Economist. Not least because China’s economy has proved to be “less harmed by the tariff war” than the Trump administration predicted. “When a familiar and comfortable situation changes dramatically, the human instinct is to believe that things will soon get back to normal,” said Gideon Rachman in the FT. “After 40 years of ever-deeper integration between China and the US, it is hard to imagine a real severance of ties.” But although many business executives have faith that politicians in Washington and Beijing “will patch up their differences when they realise the true implications of ‘decoupling’ the world’s two largest economies”, they may be disappointed. The old world is “fast disappearing”. The one silver lining for the UK, according to the boss of India’s vast Tata conglomerate, is that it remains “attractive”, despite Brexit. Global trade turmoil, as he observed, is now so universal, it’s the “new normal”.