Jeremy Warner: It seems Trump shares the EU’S love of tar­iffs

The Sunday Telegraph - Money & Business - - Front page - JEREMY WARNER

Think big, pro­tect against the down­side, use your lever­age, fight back, de­liver the goods, con­tain the costs, and last but not least, have fun. These are just some of prin­ci­ples of busi­ness suc­cess that Don­ald Trump lists in his best­seller, The Art of the Deal. He aims, pre­sum­ably, to bring the same mindset to his pres­i­dency, and more par­tic­u­larly, given that this pro­vides the lat­est dis­play of py­rotech­nics from Trump’s tweet-a-minute White House, to his trade pol­icy.

These ap­proaches can work in busi­ness, fi­nance and real es­tate; that in­deed is how a lot of deals get done – threat and counter-threat, walk­out, walk back in, con­ces­sion and with­drawal, fol­lowed by a sweet­heart deal on the side, and the fi­nal clincher, so if you re­ally must, yes, the chief ex­ec­u­tive can keep the pri­vate loo af­ter all. But is it the way of in­ter­na­tional di­plo­macy and trade?

Once again, Mr Trump has shocked the world by go­ing ahead and do­ing ex­actly what he said he would do, im­pos­ing tar­iffs for the pur­pose of pro­tect­ing US in­dus­try. Out­rage. Rarely do elected politi­cians ac­tu­ally keep their cam­paign prom­ises. In this de­part­ment at least, Trump is be­ing as good as his word. It is al­most of­fen­sive that he should. Like some Sil­i­con Val­ley start-up, he prom­ises to “dis­rupt” the es­tab­lished global or­der and re­write its rules. If he con­tin­ues in last week’s vein, he will cer­tainly suc­ceed. Re­gret­tably, how­ever, it seems most un­likely to be a good way – ei­ther for the US or any­one else.

The jus­ti­fi­ca­tion given for im­pos­ing new tar­iffs on steel and alu­minium – na­tional se­cu­rity – is so ob­vi­ously spu­ri­ous as to be laugh­able, es­pe­cially as the main vic­tims of the pol­icy – the Eu­ro­pean Union (in­clud­ing Bri­tain), Canada, Mex­ico and Ja­pan – are some of the US’S key al­lies. Trump’s com­merce sec­re­tary, Wil­bur Ross, says it’s not about de­stroy­ing free trade, but se­cur­ing fair trade, and on some level, he may have a point. The US has good rea­son for griev­ance in a num­ber of in­stances – with China, Ja­pan, and even the Eu­ro­pean Union, which if Trump es­ca­lates the trade war to cars, stands to be the big­gest loser from his pos­tur­ing.

Yet in the round, the EU is no more pro­tec­tion­ist than the US. Both have myr­iad dif­fer­ent tar­iffs and non tar­iff bar­ri­ers to trade. State sub­sidy, overt and hid­den, is also rel­a­tively com­mon in both ju­ris­dic­tions. True enough, on a sim­ple av­er­age of “Most Favoured Na­tion” tar­iffs, the EU is a bit more pro­tec­tion­ist than the US at 5.71pc against 3.56pc. But fac­tor­ing in coun­tries with which these two trad­ing blocs have trade deals, the EU turns out to have a lower tradeweighted tar­iff than the US. The US also uses a lot more tem­po­rary trade re­stric­tions. In the round then, the two seem pretty sim­i­lar.

There is no point in im­pos­ing higher tar­iffs to bring jobs back to the rust belt if it re­sults in re­tal­ia­tory ac­tion that destroys jobs else­where in the econ­omy. What is more, tar­iffs on steel and alu­minium im­pose di­rect costs on man­u­fac­tur­ing fur­ther down­stream, rais­ing prices and dam­ag­ing the econ­omy in the round. Mr Trump says trade wars are easy to win; the re­al­ity is that there are no win­ners from this kind of non­sense, only losers.

Two fur­ther points seem worth mak­ing. Whichever way this goes, it’s go­ing to end up un­der­min­ing the World Trade Or­gan­i­sa­tion, the sup­posed in­ter­na­tional ar­biter in trade dis­putes. If the WTO finds some way of ac­com­mo­dat­ing the na­tional se­cu­rity ex­cep­tion claimed by Trump, it only fur­ther dis­cred­its it­self by seem­ing to be Amer­ica’s patsy. But if it de­clares the tar­iffs il­le­gal, the US will sim­ply walk out, en­trench­ing the idea that the US no longer plays by the in­ter­na­tional rule book it was piv­otal in es­tab­lish­ing. Post-war his­tory has been de­fined by the spirit of mul­ti­lat­er­al­ism, or in­ter­na­tional co-op­er­a­tion. But that era seems to be draw­ing to a close. You need a par­tic­u­larly op­ti­mistic frame of mind to think this will work out well. The other point is to do with our old friend Brexit. That the world’s largest econ­omy is turn­ing in on it­self, and that it is pre­pared to use bully boy tac­tics in its trade ne­go­ti­a­tions, does not bode well for the UK Prime Min­is­ter’s pur­suit of “Global Bri­tain”.

Mr Trump’s ap­proach is “Art of the Deal” brinkman­ship and one­up­man­ship, in which for every win­ner there must be a loser. That’s not what free trade is sup­posed to be about. Which way should the UK be jump­ing; to­wards the US, or back into the EU’S em­brace? Pick your poi­son, seems to be the an­swer.

Tidal power neme­sis

The best thing that could be said for the £1.3bn plan for a tidal power la­goon in Swansea Bay was that per kilo­watt-hour, it stood a good chance of com­ing in some­what cheaper than Hink­ley Point C, the nu­clear white ele­phant be­ing built across the Bris­tol Chan­nel in Somerset.

Well, now it won’t get that chance. Min­is­ters have been threat­en­ing to pull the plug on this lit­tle piece of Welsh Assem­bly hubris – de­scribed by Greg Clark, the Busi­ness Sec­re­tary, as “an un­tried tech­nol­ogy with high cap­i­tal costs and sig­nif­i­cant un­cer­tain­ties” – for months, and have now plucked up the courage to refuse the fund­ing.

Wales claims to be a pioneer in tidal power, but it’s been far from plain sail­ing. The com­pany be­hind the plans for a mas­sive tur­bine in Ram­sey Sound in Pembrokeshire went into re­ceiver­ship more than a year ago af­ter devel­op­ing a fault in one of the sen­sors de­signed to shut the thing down when wildlife came too close. Since the sound is a thor­ough­fare for such wildlife, it al­ways seemed likely the tur­bine would be more off than on.

Pro­mot­ers of these home-grown tech­nolo­gies nev­er­the­less de­serve some sym­pa­thy. Bri­tish con­sumers will be pay­ing through the nose for decades to come for the priv­i­lege of al­low­ing EDF and its Chi­nese part­ners to per­fect and show­case their nu­clear tech­nolo­gies at Hink­ley and be­yond. Tidal power is by con­trast a pre­dictable, safe and clean form of en­ergy that would be en­tirely made and de­vel­oped in Bri­tain. So much for Mr Clark’s shiny new “in­dus­trial strat­egy”.

‘Mr Trump says trade wars are easy to win; the re­al­ity is that there are no win­ners from this non­sense, only losers’

A worker packs coils for de­liv­ery at a Ger­man steel com­pany, the EU has be­come the main vic­tim of Trump’s new steel tar­iffs, de­spite be­ing a close ally

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