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Brexit and Trump: an unholy alliance

Tags: TRADE protectionism EU US Brexit TTIP TPP

Since my last blog post, we have seen something that had loomed over us all for some time — the first few days of the Trump administration. While many commentators had speculated that he would be moderated by power, or that his promises were ‘campaign rhetoric’ — something that campaign managers call lies that voters like. However, for those of us who had observed the instability of Trump the candidate, Trump the President was exactly as chaotic as we had assumed.

So in his first few days, he implemented a ban on migrants and refugees from seven Muslim-majority countries, has pulled out of the Trans Pacific Partnership (TPP) and has plans to place tariffs on Mexican imports in order to build a wall along the Mexican border. So let us make no mistake — this is not a pro-enterprise President, this is a protectionist President fixated with nationalism. In this context, what can we expect when he says that the United Kingdom is ‘front of the queue’ for a trade deal?

President Trump’s America First rhetoric is likely to lead him to want to seek a trade deal that would tip the balance sharply towards the USA, and disadvantage Britain — maybe a deal on the basis that the UK economy is opened up to the USA for a period before the reverse happens, or a deal that would be politically unpalatable for Prime Minister Theresa May, such as opening up public services to American corporations.

Given the President’s past on negotiations and willingness to play brinkmanship, he might well gamble on the fact that Mrs. May has very little leeway given her country’s departure from the European Union (EU), and might well gamble herself with the fact that a deal with the USA — seen as a renewing of the special relationship — might well lead to a softer Brexit on terms closer to her own, as the European Union wish to maintain the transatlantic bridge — and might see the UK as a better vehicle in which to do this than Canada. The considerations at play here will include the fact that American-German relations have become frostier since the departure of President Obama, who enjoyed a warm relationship with Chancellor Merkel, who has already been critical of some of President Trump’s rhetoric.

However, let us assume that Theresa May holds out — and deals with President Trump on a less fevered basis, whilst also conducting bilateral negotiations with the European Union. At this point, President Trump will be forced to consider whether or not he gives an inch on his domestic America First policy, or whether he sacrifices his anti-European foreign policy. After all, a European Union that enjoys a strong relationship with post-Brexit United Kingdom is not one that will feel immediately weakened, regardless of the internal reforms that will without a doubt be in its near future, and now without an overwhelmingly eurosceptic Member State as a spanner in the works.

Balancing these considerations, it seems to me that something closer to the first scenario seems more likely. The negotiation strategy set out by Theresa May seems somewhat confused and does not seem to be set out in the context of what has been said already by European leaders publicly, or with the political reality of how the Single Market mechanisms work. This confusion will hinder bilateral EU-UK talks, and domestic considerations — pressure from the Conservative right as well as a public wishing to see the Remain-supporting Prime Minister deliver on the Leave campaign’s promises of more trade with Anglosphere countries, thus forcing her into the arms of President Trump. The lack of leverage the UK will possess, as well as the already complicated premiership that Theresa May is presiding over, could force an expedited trade negotiation — largely on American terms.

I will dedicate a future blog to exploring getting trade deal balances right — but suffice it to say I do not see any part of these coterminous processes ending well for either the United Kingdom or its government.

 

Please note that the views of our guest bloggers do not necessarily reflect the views or position of the Alliance for Responsible Commerce and ARC.trade.

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