Trade war fear overblown

WhENEvER there are warnings of a global trade war, the spectre of the 1930s, beggarthy-neighbour policies and the Great Depression is simmediately raised.

Donald Trump has done just that with his threat of a 25pc tariff on steel and 10pc on aluminium. There has been alarmist reaction from the US’s northern neighbour Canada and Mrs May felt the need to call her pal in the White house.

There is a risk that unilateral action by an irascible president could spin horribly out of control.

Trade is one of the bedrocks of global economic growth and after several years in the doldrums it picked up sharply in 2017 to a 3.4pc expansion. It would be a pity if that were undermined. But we shouldn’t kid ourselves that all is sunny in the garden.

It is only two years ago that Britain dearly would have liked to block cheap Chinese steel imports to the UK that threatened to close down Port Talbot.

Britain was prevented from taking unilateral action because we had to wait for Brussels to spring to our defence. We are still waiting, and Tata Steel weakness at Port Talbot handily has made it easier for Germany’s Thyssenkrupp to come to the rescue. It is fashionable to attack Trump’s protectionism. however, as renowned trade guru Professor Dani Rodrik of harvard observes, Trump’s rhetoric may be overdone but many working families in the US and around the world have been ‘devastated by low-cost imports from China, Mexico and elsewhere’. Indeed, economists have found it all but impossible to measure gains from recent free-trade agreements and areas.

The fact that the shares of car companies in Germany tanked in early trading is no accident. America is almost tariff free when it comes to car imports with a 2.5pc charge. The EU demands a 10pc tariff for US produced vehicles. EU retaliation against American steel and aluminium barriers could be an act of self-harm for us and our Continental partners.

Asset strippers

FUND managers ought to be the first line of defence against fat-cat pay. It is hard to have much faith in their effectiveness as protectors of stakeholder interests when they are so greedy in their own right. The merger of British fund manager henderson with Janus of the US was hailed as a good thing as active management came under siege from passive managers such as vanguard.

As in the all-UK merger between Standard Life and Aberdeen. the Janus henderson link-up has done nothing to stop outflows.

Redemptions were $10.2bn (£7.3bn) in 2017 and the trend continued in January. That did not stop former henderson chief Andrew Formica pocketing a tripled pay packet of £5.1m.

The remuneration of Formica may not be in the league of Blackrock’s Larry Fink who collected £18m in 2017-18. In the most recent financial year, he and his colleagues captured an extra £277m in pay and bonuses. It is hard to have much faith in the willingness of big battalion investors to fight the good fight against boardroom excess when they are at it themselves.

Indeed, big shareholders including Old Mutual and Standard Life Aberdeen have (until now, at least) stood four square behind the board of Melrose, seeking to buy GKN, even though the top three executives headed by Chris Miller have creamed off millions in the last few years by achieving private equity-style returns for investors.

In comparison with other parts of the financial sector even these eye watering pay-outs might look modest.

At the rapacious US private equity group Blackstone, the co-founder Steve Schwarzman collected £569m according to Bloomberg, potentially making him the best-paid executive anywhere. In Britain Blackstone has never been forgiven for stripping care homes group Southern Cross to the bone before dumping it on unsuspecting shareholders. The care homes firm ended in administration.

All of which prompts one to ask who will guard the guards.

Pensions warning

AhEAD of today’s GKN-Melrose Commons hearings, a useful intervention from The Pensions Regulator. It cautions that the leverage involved in a Melrose takeover would likely have a ‘detrimental’ effect on the covenant – guarantee – provided by the company.

After BhS, Carillion, Toys R Us and all the rest, the Government will not want to be hoist on that petard.