If the EU plays hardball with May, we could end up on Planet Trump
People feel they are working longer, but are less secure,” the Prime Minister said. “They feel the rules are changing and they never voted to change them. They feel, in a word, powerless. This is producing a pessimism that is pervasive and fearful because there seems no way through, or at least a way under our control.”
Theresa May at the World Economic Forum in Davos on Thursday? It could have been. No, it was Tony Blair at the TUC conference in 2006. He got some things wrong, but Blair called this one right, spotting that the traditional left-right divide was being eclipsed by one between “open and closed” as countries responded to the interlinked problems of globalisation, immigration and terrorism.
The moment has now arrived for Britain to decide whether it remains an open, outward-looking nation with close trading links to its EU neighbours, or joins Donald Trump in the closed camp, with tough curbs on immigration and a trade war and low tax competition against its former EU partners.
It is a choice of two futures, a fork in the road. So will the UK build bridges or walls?
May’s rhetoric suggests she will make the right call and go for open. The Prime Minister wants a “truly Global Britain” to be a “global champion of free trade”, which is “open for business” while helping those “left behind” by globalisation at home. Ministers tell me the UK can remain in Europe’s liberal mainstream economically and socially, while striking lucrative trade deals with the rest of the world.
Yet May’s big speech on Brexit unnecessarily raised the prospect of taking the wrong fork in the road. She warned that she would walk out of the EU negotiations if a bad deal were on offer and change the UK’s economic model – a threat to pursue aggressive tax cuts for business to undercut EU countries, a rather strange way to be what she called their “best friend and neighbour”.
May aides insist the threat is needed because David Cameron’s failure to talk tough when he renegotiated Britain’s membership terms resulted in his feeble new deal and referendum defeat. Yet one rule of negotiating is to divide your enemies, and one senior EU figure said: “Pointing a gun to the head of the 27 will just bring them closer together. They will fight even harder to save the EU, and against the threat of a tax haven on our doorstep. May will discover that this is counterproductive.”
In Davos, May rightly told business leaders to pay their “fair share” of tax and “play by the same rules.” Yet if Britain tries to become Singapore, it could spark a race to the bottom; the losers would be the world’s poorest countries, already struggling to get their “fair share” because of tax avoidance. Hardly a way to make globalisation fairer.
There are other ominous signs that May could take the wrong road. The missing piece of her Brexit jigsaw is immigration. There is an unresolved debate in the Cabinet about how to get “control” of EU migration. But May’s instincts point to a “closed” approach that would be more Trump than European mainstream.
Ministers insist they will meet their target to reduce net migration below 100,000 a year. Doing that would undermine the “open Britain” message and the drive for trade deals. Students from foreign countries will probably be restricted, another damaging signal. The mad plan to force companies to disclose their number of foreign workers, although swiftly dropped, further damaged Britain's image around the world.
Perhaps unintentionally, May is gravitating towards the right wing of her party, which wants out of all the EU’s works to escape its sclerotic bureaucracy. It’s an illusion; leaving most of the customs union will create more rather than less red tape for business.
Building metaphorical walls, cutting taxes and a trade war with a big bloc would take Britain closer to Planet Trump. It might well boost the prospects of a trade deal between the UK and the United States, but at a heavy price. Our biggest export market on our doorstep would suffer. So would our economy; we can hardly afford to lose billions of tax revenue when the public finances already face a crisis because of demographic change. How on earth would we fund health and social care? Jeremy Corbyn has rightly warned about a “bargain basement Britain”, pointing up the threat to vital public services could not only unite Labour when it is in disarray over Brexit, but also widen the party’s appeal to voters still waiting for their £350m-a-week “Brexit NHS dividend”.
The Prime Minister might want Britain to be open rather than closed, but there is a real danger that we end up on Planet Trump by default.