"TRADE wars are good, and easy to win.” With one tweet Donald Trump cut straight to the heart of the Brexit delusion. Far from being a free trade enthusiast keen for a deal with dear old Blighty, his instincts instead lead him to confrontation, protectionism and isolation.
First published in The National, 9 March 2018.
There is more to be said about this than simply the idiocy of any policy relying on the good will of Trump. It also serves as an illustration of how trade can work and how it can go wrong. Crucially, this is not a trade “war”. A war would be something that was outwith the law and in this case there is a legal process to follow. The US can impose tariffs if it wants though they may be open to challenge at the WTO. Such cases are complex and take time, but the WTO gives a large amount of flexibility, as a friend who knows Geneva well commented to me: the WTO is the World Trade Organisation not the World Free Trade Organisation.
Trump’s actions show what some see trade as. Not to help others but instead as a way to bully others and his decision to add 25 per cent on to steel imports and 10 per cent on to aluminium will have a series of consequences that will need to be responded to. It would divert cheap steel imports from the US to other areas of the world such as Europe, so not only would EU steel producers face tariffs in the US they would also face increased competition at home.
This would be hugely damaging, which is why the European Commission has been preparing for this for months and their response was swift. If the US does impose these tariffs then the EU will put tariffs on US steel (obviously) but also because alone that would be of little deterrent, on Bourbon, jeans and Harley-Davidson motorbikes worth around €2.8 billion and of course highly symbolic. As an aside, bad news if you’re middle-aged white man planning a mid-life crisis in the next few years. These are not only to deter economically but politically as they target vulnerable Republican-run states in the run up to the US midterms. The US has responded in turn threatening car imports from Europe.
The point I am making is that this is a no-win scenario. It is why good trade policy moves at a slow pace, because by doing so the impact can be managed and thoroughly thought through. Nobody wins when major nations start talking about “wars” or making snap trade decisions. An independent Scotland wants to be a part of existing EU trade policy and rightly so. It is tried and tested and clearly in our best interests.
That is why there are plenty of folk in America, including in the Republican party, who think Trump’s policy is madness. In part the reason is that we have been here before. In 2002 George W Bush implemented similar tariffs and one year later was forced to back down. The EU responded as it is now planning to by targeting industries and sectors in the run up to the US presidential election and Bush gave in.
Brexit Britain simply cannot challenge the US in such a way. Right now, we will have to simply take what the US offers because the UK Government is so desperate for trade deals. Theresa May has politely requested to Trump not to implement these tariffs and well ... you can guess the response.
This is part of a bigger picture. international trade is complex and often controversial. I remember the strength of feeling people in Scotland had about EU trade policy when TTIP was in the headlines but remember that because of political pressure from civil society and MEPs the talks collapsed. We had a say, and the EU, because of its size, can afford to stand up to the other economic superpowers of the world.
Nobody wins in a so-called trade war but the only way to respond to threats such as Trump’s is to work with our neighbours and allies.
What mattered then matters now. Does Scotland have a say? If the UK were to go about trade policy in the right way, then technically we could. The Canadian federal structure gives the provinces and territories a real say over policy, but do we think Scotland will be given such a position within the UK? If their track record on Brexit so far is anything to go by then we won’t but even if we did have a say, the UK will be so desperate it may not mean very much. As an independent country in the EU, with a seat at the council we will have a say and not only will we have a voice that matters, we will be influencing a trading bloc that is large enough to change trade policy on the international stage.