Category Archives: European Union

Britain, China, Economic, Europe, European Union, Government, Politics, Society, United States

UK-China relations: The Brexit dilemma

BRITAIN-CHINA

Intro: Trump’s trade wars have exasperated the Eurosceptic model, which is more outdated than ever

WHEN the transatlantic alliance was more functional than now, there was never a united view of China. Beijing has always been perceived as a commercial rival and potential security threat, and a common wariness has existed. For hawks in Washington, however, the idea of an alternative superpower closing in on economic and technological parity feels existential. More dovish Europeans have been openly compromising and readier to leaven caution with engagement.

Britain has veered between the two poles. In 2015, David Cameron promised a “golden era” of open trade with China. In 2020, under pressure from the US, Boris Johnson banned Huawei, a Chinese telecoms company, from UK 5G infrastructure.

In opposition, Conservative politicians have become increasingly hawkish against Beijing. Keir Starmer’s Labour government has tilted back towards cooperation. Several Labour ministers have visited China, including the chancellor. Other ministers, including the business secretary, will go there later this year, to revive a trade commission that has been dormant since 2018. Despite being manifestly frustrated with the Chinese owners of British Steel during the recent dash to keep Scunthorpe’s blast furnaces operating, the UK government has retreated from intimations of deliberate sabotage.

At some point, a reckoning has to be made. The pursuit of economic growth and investment will inevitably come into conflict with a national security interest in keeping China at arm’s length. The question is where to draw the line. The official line is that judgment is deferred pending a Whitehall “audit” of relations with Beijing. That is due in June.

A UK government decision is also imminent on China’s status under the foreign influence registration scheme – a system for keeping tabs on international organisations and companies exercising political influence in Britain. China is not expected to be named in the “enhanced tier” of risky states, alongside Russia and Iran, but some Chinese institutions might have that designation.

Calibrating these judgments – choosing when to prioritise security over commerce – is much harder with Donald Trump in the White House. What used to be a difference of emphasis between the US and Europe looks like an irreparable fracture in the west.

Trump has started a ferocious trade war with Beijing without a convincing strategic rationale. His officials have told Europeans they will have to choose a side when it comes to vital communications technology. Yet, what we see is a US president who has become routinely aggressive in his rhetoric towards the EU, dismissive of NATO, and reliably emollient towards Putin’s Russia.

From that pattern it is clear in Brussels and other continental capitals that Washington is no longer a reliable ally and the trajectory must be “strategic autonomy” for Europe. That is changing the calculus of risk and potential benefit from a more pragmatic China policy. The authoritarian character of Xi Jinping’s regime hasn’t changed, but it presents itself as a more predictable force in international affairs while US democracy declines in harsh and sporadic spasms.

Such changes illuminate a crisis of international orientation for Britain that has been building since Brexit. Economic detachment from Europe was promised on a model of the UK as a lone sovereign agent in an open, free-trading globalised world. That concept has aged very poorly, and it stands more of an outdated concept now than it ever has. Britain is not alone in struggling to navigate relations with China in the turbulent new geopolitical climate, but choosing loneliness and isolation in a world of rival continental blocks is making the struggle much harder.

Standard
Britain, Economic, European Union, Government, Politics, Society, United States

EU reset: No time for UK passiveness

EUROPEAN REALIGNMENT

FANATICS of Britain’s departure from the European Union have struggled to quantify the Brexit dividend and what benefits it brought, but when Donald Trump unveiled his schedule of global tariffs they finally had a number to point towards. It was the difference between the 20% levy imposed on all continental exports and the 10% baseline figure payable on British goods.

A week later the gap closed leaving Brexiteers melancholic and dejected when Mr Trump reversed his plans. What the tariff schedules will look like at the end of the 90-day “pause” is no more predictable than any other feature of current US policy. There is no obvious concession from the UK government that might induce Washington to lower its 25% barrier against car exports, and the 10% rate on everything else looks non-negotiable.

Meanwhile, dialogue with the EU about closer cooperation continue apace. The UK hopes to have a framework agreement in place in time for a summit in London in May. The primary focus is security, but that is intended to be a forerunner to closer trade alignment.

As an indication of accelerating rapprochement, Rachel Reeves, the Chancellor, has just attended a meeting of EU finance ministers in Warsaw. Plans have been announced for a pan-European defence procurement fund with the UK expressing an interest to be included. There are hurdles still to be overcome but also strong will on both sides to make it happen. It is a measure of how much more constructive diplomacy has become under Labour. No Tory government would have sought such collaboration. Regime change in Westminster made a closer EU-UK relationship possible, then Mr Trump’s rampage of destruction through the norms of transatlantic security and global trade made it urgent.

The Brexit withdrawal treaty and subsequent trade and cooperation agreement were deliberately shaped by Boris Johnson’s government to impede reintegration on any level. Irreversible divergence was the whole point. But, while there is no great appetite in Brussels to revisit the terms of Brexit that damaged British businesses and interests more than the EU, recognition of a mutual strategic interest and a more constructive disposition are necessary. The long-term economic rational is being hampered as the UK continues to operate within red-lines drawn by domestic electoral imperatives.

European leaders fully understand that democratic politicians must defer to public opinion. But with Sir Keir Starmer having earned goodwill through his diplomatic advances, the prime minister’s reluctance to ever challenge the fallacious premises of Brexit, even after winning a landslide general election victory last year, raises doubts about the true scale of his ambition when it comes to the EU reset. That misgiving is magnified whenever British ministers talk enthusiastically about their dealings with Mr Trump, who doesn’t hide his hostility to the European project. Sir Keir insists it is not a binary choice, but it will become one as soon as concessions to the White House threaten to destroy trust in Brussels or further impede access to the single market.

The claim that the UK can be equidistant between Europe and the US may feel like keeping options open, but in Brussels it looks like a reversion to typical British Eurosceptic ambivalence. Sir Keir faces a stark strategic dilemma, and his options get worse the longer he defers the choice.

Standard
Britain, Economic, European Union, Government, International trade, Politics, Society, United States

Trump’s tariffs: a deliberate and revengeful choice

WORLD TRADE

DONALD TRUMP’S revisionist structure of world tariffs against an already embattled trading system is as though an asteroid has crashed into the planet, devastating everyone and everything that previously existed there. The comparison is useful but there is this important difference. If an asteroid struck the Earth, the impact would at least have been caused by ungovernable cosmic forces. The assault on world trade, by contrast, is a completely deliberate act of choice, taken by one man and one nation.

The US President’s decision to impose tariffs on every country in the world is a shocking and momentous act of folly. Unilateral and unjustified, it was expressed in indefensible language in which Mr Trump described US allies as “cheaters” and “scavengers” who “looted”, “raped”, and “pillaged” the US. Many of the calculations on which he doled out his punishments are perverse, not least the exclusion of Russia from the condemned list. The tariffs – imposition of direct taxes – mean prices are certain to rise in every economic sector – in the US and elsewhere – fuelling inflation and very likely recession. Trump will presumably respond as he did when asked about foreign cars becoming more expensive: “I couldn’t care less.”

The tariffs – a minimum of 10% on all imports to the US, with higher levels on 60 nations that have been dubbed the “worst offenders” – throw a hand-grenade into the rules-based global trading order. These are large hikes, even for nations like Britain that have escaped the higher tariffs. They are indiscriminate between sectors, highly discriminatory against nations, even to the extent of penalising uninhabited islands in Antarctica. Foul.

The world trading system established under US leadership at Bretton Woods after the Second World War has been overturned. In effect, the nation that has underpinned the global economy for the last 80 years has expelled itself from the trading system it always led. That system’s cardinal principle – that countries in the World Trade Organisation should treat one another equally – has been blown apart.

The ceremony on which Trump made his announcement conveyed the thrill he derives from bullying and domination. A month after shutting down US development aid, his retribution list embodies special contempt for the world’s poor – 47% tariffs on Madagascar, the world’s ninth poorest country, for instance, or 44% on devastated Myanmar. While much pre-announcement rhetoric was directed at China, some of the toughest tariffs have been inflicted on countries such as Cambodia, Vietnam, Thailand, and Laos. The impact on US soft power is likely to be devastating.

In the UK, the government is trying to remain stoic. Like its trustworthy trading allies, Britain must do what it can to maintain the rules-based trading system by keeping calm. But economic war is clearly beckoning. The UK is now said even to be preparing a list of reciprocal tariffs on US goods. It is particularly vital that Britain defends its interests in food and health systems, and against the powerful digital tech giants.

Any kind of notion that Britain is some kind of winner in these circumstances, thanks to Brexit, is nonsensical. This country’s supposedly closest ally, the US, has just hiked the cost to British exporters by 10%, with an even greater rise of 25% in the case of steel, aluminium, and cars. The consequences of Trump’s tariffs will not be restricted to world trade but will impact on the global economic system more generally. This is a momentous macro moment. It will require macro responses.

Standard