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Friday, June 01, 2018

Trump is the wild card that gives the lie to the Brexiteers dreams

The announcement by US President, Donald Trump yesterday that new tariffs will be imposed on steel (25 per cent) and aluminum (10 per cent) imports from the EU (including Britain), Canada and Mexico has underlined one of the central arguments for voters being given a second-chance to vote on Brexit. There is now no doubt that we can rely on the USA to bail us out with a preferential free trade deal.

As the New Statesman argues, “America First” means Britain second (at very best). Trump’s protectionist rhetoric has now been matched by action. Our isolation is further reinforced by the very robust EU reaction to these tariffs. The EU is a major trading bloc with the power to hurt the US with it retaliatory action. On its own the UK is a small fly buzzing around the hide of a rhinoceros.

George Eaton in the New Statesman sums it up:

Theresa May’s government is left to feebly protest that it is “deeply disappointed” (in the words of a No 10 spokesman), Liam Fox, the Trade Secretary, and the cabinet’s most devout Atlanticist (who previously described the move as “absurd), has learned that his friendship counts for little.

Trump’s actions will strengthen those MPs pushing for Britain to remain part of an EU customs union. A global trade war, to put it mildly, is not the best time to sever relations with your closest partner.

The likes of Fox and Boris Johnson have long argued that exit from the customs union would herald the birth of a freewheeling, buccaneering “global Britain”. Rather than being shackled to Brussels, the UK would be liberated to strike valuable trade deals with China, India and “the Anglosphere” (the US, Canada, Australia and New Zealand).

The ideological and sentimental appeal of this project to Conservatives is obvious. But the economic appeal is not. As Robert Chote, the head of the Office for Budget Responsibility, emphasised when I interviewed him earlier this year, “most of the work that trade economists have done” suggests that "the reduction in openness likely with the EU [the destination of 44 per cent of British exports] is likely to outweigh any increase elsewhere." Indeed, the government's own analysis suggests that the UK would lose between 2 per cent and 8 per cent of GDP over 15 years from a “hard Brexit” (withdrawal from the single market and the customs union), while new deals with the US and others would add no more than 0.6 per cent.

And what would a trade deal with the US involve? Would we be in a position to resist chlorine-washed chicken, hormone-injected beef and acid-washed pork as Michael Gove believes? What about the more fundamental principles? Imagine the rows if the US demands protections for its multinationals and access to the NHS. A Eaton says, Britain's inexperience of trade negotiations (the preserve of Europe for 44 years) and its large trade surplus with the US mean it starts from a position of unambiguous weakness.

This is the mess the Brexiteers have condemned us to if Theresa May gets her way and delivers a hard Brexit. Surely it is time to say enough is enough?
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