I’m pleased Theresa May has been talking directly with Donald Trump about the UK-US free trade deal. Everyone with the best interests of the British economy at heart should also be positive – whether they back Remain or Leave and whatever they think of the 45th President.
The US is, on most measures, the biggest economy on earth. Much maligned, sometimes deservedly so, America remains the world’s commercial, technological and financial powerhouse – to say nothing of its military strength.
President Obama said pointedly that a post-Brexit Britain would “be at the back of the queue” when it comes to negotiating a US trade deal. Having voted to leave, we’re now “at the front of the line”.
Those suspicious of free trade should open a history book. Since the Second World War, global trade volumes have risen ten-fold. The last 70 years has, for the most part, seen relatively free flows of goods and services across international borders – certainly compared to the protectionist madness of the 1930s.
It’s no coincidence that, despite some nasty regional conflicts, deepening commercial ties – facilitated by the World Trade Organization, which exists to keep protectionism in check – have helped deliver not just rising global prosperity, but also relative peace.
That’s not to say “free-trade” shouldn’t sometimes be tempered. Globalisation has, over recent decades, reduced inequality between countries – look at the growing wealth of China and India. But it has increased inequality within countries – not least across the West, as business leaders and entrepreneurs have flourished while blue- and increasingly white-collar workers have felt the heat of foreign competition.
The answer isn’t to throw up trade barriers – which cosset inefficiency and penalize our consumers. Instead, we must make sure our people have the skills and adaptability to compete, while maintaining decent workers’ rights and helping those struggling.
I also fully accept that if we do strike a US trade deal, some want to keep Britain’s stricter rules on food standards and GM crops. Others worry about opening up the NHS to competition from US medical companies. These are legitimate issues to be discussed.
But now we can discuss them – and that’s the point. For the last 40 years, the UK has relied on “Europe” to negotiate our trade deals. Such deals have been few and far between and we’ve had very little say.
Despite years of trying, the EU hasn’t forged a trade deal with either America or China – the world’s two largest economies. The objectives of the 28 EU members often conflict, after all. The EU is also an inward-looking protectionist bloc – imposing a Common External Tariff on all imports from the 85pc of the world economy beyond.
Much is made of the 53 free-trade agreements the EU has struck. But these are mainly with tiny countries – the nations involved comprise less than a tenth of global GDP. If the UK can strike a deal with America and China – both realistic aims – that would cover a third of the world economy.
Consider, also, the trade deals Brussels has struck are far from UK-oriented. The EU’s negotiating approach has long been to “gold plate” agriculture and protect it at all costs. Yet agriculture is just 0.6pc of the UK economy, less than a third that of France. As one of 28, the UK’s requirements when EU-level trade deals are struck – the promotion of trade in services, for instance – have never figured highly.
So Britain can now negotiate a trade deal with the US – and a host of other nations – on our own terms. And we do so from a position of strength – not least as our economy is holding up quite well, whatever the Remain doom-mongers say. Preliminary figures show UK GDP expanded 0.6pc during the final three months of last year – and a relatively buoyant 2pc during 2016 as a whole. The latest PMI surveys show our manufacturing sector at 56.1 – with 50 signifying growth – with services registering 56.2.
Another reason we have cards to play is that Trump used his “America First” inauguration speech to reassure his rust-belt supporters he will act to protect US markets. Yet the President also has an all-powerful business lobby to keep happy – not just in Congress, but across the country as a whole – which want America to keep banging the free-trade drum.
While acting to protect blue-collar US workers from cheaper Chinese and Mexican goods, Trump will need to demonstrate he isn’t taking American down a protectionist cul-de-sac. A UK trade deal could fit the bill.
Britain is fully entitled to strike trade deals while we remain in the EU, as long as they aren’t enforced until we’ve left. Such deals only make sense if we’re outside both the single market and the customs union – otherwise we have no control over our domestic laws and must keep imposing EU tariffs on our non-EU trade partners.
The reality is, though, that while trade deals are important, even without a deal, the US is currently the UK single biggest export destination – accounting for 17pc of the goods and services we sell aboard. Consider, also, that America has no trade deal with China, China has no deal with the EU and the EU has no deal with America – the world’s three biggest economies, then, trade largely under WTO rules.
Trade deals matter but, even without them, trade goes on regardless. Politicians like to negotiate and sign agreements but international trade happens when commercially-minded people see mutual benefit and transact – usually despite, not because of, their political masters.
Keep that in mind as the Brexit rows continue to swirl.