It’s often said that we live in a world of “rules-based” international relations. We no longer have kings and imperial states laying down the law, forcing people to obey. We don’t settle international disputes by war, as countries did almost routinely in the 19th century. We have laws, conventions and treaties to govern the interactions of nation states. Or at least, we did. Sadly, we appear to be reverting to an era of juvenile international relations, based not on rules, but on might is right.
We still have legally enforceable rules like the European Convention on Human Rights, and we have comprehensive trade agreements, like the European Single Market, and the World Trade Organisation to establish common regulations and prevent trade wars. But these institutions are vulnerable. Independent arbitration bodies, like the World Trade Court and the European Court of Justice only work if everyone recognises them. If countries behave like egotistical children, no-one gets what they want.
Now, a selfish bigot in the White House, with a big red button, thinks the only rule should be “America First, America First”. So he throws his weight around and does things like slapping a 25 per cent tariff on steel imports, triggering a whole series of reactions across the trading networks of which the US is a part. There is now a full-blown trade war emerging between America and China as the latter imposes 25 per cent tariffs on 128 American products including pork and wine.
Trump has separately attempted to impose $50bn tariffs on Chinese hi-tech goods because he claims they have stolen US intellectual property. China has denied this and has suspended some of its obligations under the World Trade Organisation. The European Union responded to the Trump trade war by threatening to impose tariffs on a range of US products including Harley Davidson motorbikes, boats, corn and beans. Donald Trump responded by threatening to quadruple tariffs on BMW and Mercedes cars.
Trump’s argument, like that of the bigger child determined to get his way, is that might is right. The US President shocked the world with one of his trademark tweets which revealed an attitude to international relations unseen at least since the middle of the last century. “When we are down $100 billion with a certain country,” Trump tweeted with all the subtlety of a cage-fighter, “and they get cute, don’t trade anymore – we win big. It’s easy!” Yet, no one can win a trade war – as history has demonstrated time and time again. This a war of all against all, a bizarre replay of the “beggar thy neighbour” policies of the 1930s.
Britain has tried to do something similar with Brexit. The attitudes of the hard Brexiteers, like the trade secretary Liam Fox, is like Trump without the tweets. The only problem is that, unlike America, we don’t have a big red button and we are not stronger than everyone else. The only people who don’t appear to realise this are the neo-imperialists and English nationalists who have hijacked the UK Government. People like Jacob Rees-Mogg have an essentially 19th-century vision of international relations, based on what used to be called “Splendid Isolation”. Britain didn’t need to bother herself co-operating with the “continent”, or getting involved in their alliances, because we are special. We have the navy, the pound and the Empire on which the sun shall never set.
Except that it did set, the British navy is no more and the pound ceased to be a reserve currency the 1960s, which is one reason we joined the European Economic Community. These arguments were all fought and lost half a century ago. But they are having to be lost all over again as the UK lurches into the past. Brexit will be a painful reality check on Britain’s place in a world. No country, not even America, can do splendid isolationism in the era of globalisation. We can’t get our own way all the time, and nor can we make empty threats to leave trading institutions upon which depend the livelihoods of millions of British citizens.
Not even America, with all its wealth and military might, can practice selfish isolationism in the modern global village. When Trump threatens European car imports, he forgets about all those BMW and Volkswagen factories located in America that manufacture many of the cars. He also ignores the fact that most of America’s growth exports are not in physical goods – stuff crossing borders – but in services and intellectual property. Think Google, Goldman Sachs, Microsoft, IBM. In these areas, the US has a trade surplus, yet regulatory retaliation by the EU or China could wreck these industries without a single tariff being imposed.
The President of the United States clearly has no understanding about how the American economy works. He thinks America is in the metal bashing industry, forgetting that most manufacturing has been out-sourced to the very countries he is attacking. A bullying New York property developer, Trump has clearly never had to deal with complex supply chains, but you wonder why his advisers haven’t told him how most US computer component are made in Guangdong. Or how China owns most of the US debt pile.
80% of the UK economy is in services and has nothing to do with physical tariffs or lorry parks at Dover. It is all about ensuring that countries have common standards on things like intellectual property, professional standards, data transfer. Activities like production design and legal services require freedom of movement. Britain’s huge financial services sector requires common financial regulation that only the European Union single market can provide. Theresa May knows this, vaguely, which is why she has argued for all these regulatory standards should remain the same even as Britain is leaving the single market.
She wants a “multifaceted”, “bespoke” and “tailored approach” giving the UK frictionless access to the single market we just left. We will stay in all the agencies like Euratom and the Aviation Safety Agency because we want to. And we will have “reciprocal and binding commitments” and “mutual recognition of regulations” overseen by the European Court of Justice, whose decisions will be final, except when we don’t want them to be. She wants no border in Northern Ireland even as she is busy erecting one. But that’s apparently the EU’s fault.
The hard Brexiteers of the Tory European Research Group, and the free market economists supporting them, want Britain to cut ties completely and slash all tariffs unilaterally. Britain would become a low-tax, low-regulation regime like Singapore (which actually is a rather high regulation economy in which 80 per cent of the population live in government-built flats). This is pure fantasy. Britain could never have cut itself adrift because all those companies based here, like Japanese car manufacturers and American banks, would be outta here. We’re now in the humiliating position of having to beg to get access to the institutions we abandoned. Those were the “hard facts” May outlined in her Mansion House speech last month but which she seems to have forgotten in her post-Salisbury triumphalism.
At best Britain is trying to reinvent the wheel: making the argument for remaining in a trade organisation we have just left. But British policy is shot through with naïve exceptionalism about having our cake and eating it. It as if Britain and Trump’s America were in some kind of coalition of the ignorant against economic realities. Perhaps they think that this is what their voters want: a return to the certainties of a bygone age when Britain ruled the waves and America ruled the world. But these post-imperial fantasies are hugely self-destructive. Like Imperial Japan before the Second World War, Britain and America are living in the past, and face an imminent, and decidedly unpleasant collision with reality.