Tag Archives: Trade Policy

Britain, Economic, European Commission, European Union, Government, Politics

UK-EU trade deal: a logical step forward

BRITAIN

Intro: The agreement made with the European Union will have limited tangible gains, but at least the tone set by the prime minister is a positive one

MUCH is being made of Sir Keir Starmer’s deal with the EU, but many things still remain to be worked out. The agreement which was announced in London should be regarded as a staging post rather than a final destination. It was, in effect, a commitment to have more meetings at which negotiators will try to make more deals.

On the issue of visa for young people and the UK’s mooted return to the Erasmus university-exchange scheme, there is little clarity beyond the rebranding of “youth mobility” as “experience”. A decision on the level of fees that European students must pay has also been kicked into the long grass. So have some details of how the UK will work with the bloc on policing and security, including the use of controversial facial-recognition technology in tackling drug and people smuggling across borders.

Increased cooperation on defence is significant and timely, given the ramping up of geopolitical instability under Donald Trump – although British arms manufacturers will have to go on pushing for access to the EU’s £150bn fund. On food and fishing, terms have been decided. Fewer checks on exports, including meat, will benefit UK food producers, particularly the smaller ones that were worst affected by Brexit. For Europeans, mainly the French, the big win is a 12-year agreement on fishing in British waters.

The 41% of UK goods exported to the EU, worth £385bn, are more than is sent to the US and India combined – making this by far the most important trade deal so far. Though the UK remains outside the customs union, and regulations governing other goods including medicines have not been relaxed, the new measures mark a significant easing of trade.

By contrast, the new dispensation for UK travellers to join European passport queues, and looser rules about pets, are more about style than substance. But while conveniences like these will not bring the economic benefits that the PM seeks, they do send a signal. For ministers, any hint of an interest in rejoining the EU remains taboo. Instead, this modest scaling back of Tory-erected barriers is designed to show voters that Sir Keir is operating a rational and responsible government that puts the interests of British businesses and consumers first.

It should not have taken nine years since the referendum to reach this point. A group of around 60 Labour MPs is rightly pushing for the government to be more ambitious, emboldened by polling showing that most voters now think Brexit was a mistake. Free movement, however, remains a red line, and one inked in all the more vividly after the strong showing of Reform UK in recent local elections and national polls. This was also Starmer’s real chance to counter anti-immigration sentiment, not capitulating to it. He may yet come to rue his decision on this.

Among disappointing omissions is the lack of a mechanism to make touring by our creative artists, like musicians, easier. Nonetheless, the agreement is a much-needed step forward, even though the actual gains for the UK have been overstated.

Ursula von der Leyen, the European Commission president, was more accurate when she spoke of the deal as “framing” an improved future relationship. If Sir Keir wants to reverse the damage done to the country since Brexit, he will require to paint a picture of why an outward-looking, interconnected UK is more likely to succeed. Not one that has become an insular nation under Brexit.

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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.

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