‘Trump is a game-changer for Brexit Britain’
And even the elites at Davos are falling for The Donald’s mantra of fair trade before free trade
Theresa May insists that the UK is leaving the EU to pursue free trade and “Global Britain”. So determined is she to get the message across that the Government has hired an advertising agency to help sell the brand internationally, as if this might be all that is needed to make the vision reality.
Yet if Brexit is about pursuit of free trade, it’s an idea – to judge by what the concentration of global wealth and power at the World Economic Forum in Davos this week are saying – that still struggles to be heard internationally. It’s an odd form of free trade that starts by leaving the world’s largest free-trade zone, people keep telling me here in Davos.
Instead, Brexit continues to be seen quite widely as a nativist and deeply negative pushback against globalisation and international cooperation, a backward-looking rebellion out of much the same playbook as Donald Trump.
It’s true that there are common elements; both votes were spawned by some of the same frustrations – stagnation in living standards, mass migration, and loss of faith in the ability of established, technocratic government and business to deliver solutions. In neither case could the nobler purpose of reclaimed sovereignty have won but for this sense of alienation and economic progress going into reverse.
But back in London, we like to emphasise the differences, unwilling as we are to tar Brexit with the same apparently nationalistic brush as Trumpism. And certainly, as pursued by Mrs May, Brexit is notably different, not least because she continues to favour multilateralism and international cooperation over Trump’s self-interested unilateral approach to trade, tax and international affairs. She doesn’t wholly reject the EU, and aims to remain as close to it as possible. She supports international institutions and a consensually driven, common approach to shared challenges. She fully buys into the welfare state.
Yet listening to the hypocrisy around the debate on some of these issues in Davos this week, I found myself wondering whether fundamentally the differences are as great as made out.
By making the US internationally tax competitive once more, and adopting a strongly deregulatory agenda, Mr Trump has rolled a massive great rock into the pond which changes everything. The business world thinks it has died and gone to heaven.
The US has put on an impressive show at this year’s event, fielding its largest contingent ever, including approaching half the Trump cabinet. The great narcissist himself is here in the flesh. This is not obviously the approach of an administration about to turn its back on the rest of the world. Indeed, the message they want heard is much the same as that of Mrs May’s “Global Britain” – that America is “open for business”, and with its newly competitive tax regime, to international investment. It’s proving a rather more effective sell than the one from our diminished Government.
We worry about the threat to Britain’s pre-eminent position in finance from leaving the EU, and aim for regulatory “equivalence” with Europe to defend it. But with the Trump tax cuts, the much bigger danger is from America. It might even be said that if we had stayed in the EU and still had the new tax regime, it would be a much bigger threat to the City than what we have today, when at least a post Brexit UK will have the flexibility to cut taxes and adjust regulation to answer the US assault.
Trump’s cuts have made the City seriously tax uncompetitive with the US. If we stick close to Europe, it will be denied regulatory flexibility, too. Trump is a game changer; a world which aimed for regulatory and fiscal convergence is being transformed into a new dynamic where it’s everyone for themselves. Wilbur Ross, Trump’s Commerce Secretary, has made quite a splash in Davos, refusing to countenance all allegations of protectionism. Free trade, but also fair trade, is his mantra. “China and others have been superb at talking free trade while practising the opposite. Our country has been terrible at telling people that we are the least protectionist on the planet.”
He’s right about the hypocrisy. While European leaders warn of the dangers of Trump-inspired protectionism, they crack down on America’s digital giants, and China shuts them out of its markets.
Europe, meanwhile, imposes a tariff of 10 per cent on American car imports; the tariff on imports from Europe is just 2.5 per cent. If America were to raise its tariffs to European levels, it would be accused of protectionism. If Europe were to reduce its tariffs to those of the US, Trump might ironically even be thought a free-trade champion.
My guess is that Trump’s gamble will pay off, and we’ll end up with a purer form of free trade than we have now. For Brexit Britain, this would be a great result. Brexit and Trump may seem to us to be very different, but they have more in common than we care to admit.