Time to embrace the elephant

Tweet

 

There was a time in the 1960s, when Harold Wilson was PM, when the big monthly financial news regularly headlined by the BBC was all about this strange thing called the ‘balance of payments’. It was a crude and simplistic measure of the difference between imports and exports, and the news was invariably bad – the UK was importing more than it was exporting. These days, the numbers are worse – much, much worse – as this chart shows, but no-one is worried about it. The story about how a small imbalance was an existential problem but a huge imbalance is not an issue is a tale for another day. The point, here, is that government at the time, prompted as I remember by tabloids, launched the ‘I’m backing Britrain’ campaign, encouraging consumers to seek out and purchase UK-made goods rather than imports.

The campaign generated a lot of light, in terms of publicity and faux patriotism, but not a lot of heat, in terms of its effectiveness. It’s a precedent worth bearing in mind when considering the calls for a ‘Buy British’ campaign in response to the Trump tariffs. There are, of course, plenty of good reasons for buying goods as locally as possible, keeping the money in the local economy and reducing food miles amongst them. But for a variety of reasons, not all of which are immediately obvious, buying local can sometimes be an expensive option, not one open to everyone. Even assuming that everyone had the choice, and the financial ability to make that choice, of selecting British produce over all others, past history does not suggest that success is guaranteed. Worse still, if we did all choose to buy British, it doesn’t follow that the chief sufferers would be the desired target (i.e. the US); it’s just as likely that producers in other countries, including some of the poorest, would be the main losers.

The desire to strike back at Trump and by extension the US is entirely natural and understandable, but finding the best method of doing so is far from straightforward. If, as most of the experts say (and I believe them on this), the main immediate losers from tariffs are the consumers in the country imposing them, then retaliatory tariffs would do more harm to UK consumers than to anyone else. The second-line losers are the companies and their employees in the country targeted by tariffs, but the relative size of the UK and US economies means that the US economy can tolerate higher tariffs more easily than could the UK economy. Protection of those impacted looks to be a better mitigation than retaliatory tariffs, even if the UK government has been more than a little timid on that front to date.

Possibly the worst possible response is to plead with Trump for a deal which gives the UK some advantage over all the others seeking similar relief. Not only would it involve making unwanted concessions (and not just over things like food regulation – it’s clear that the US also wants to use its economic power to affect social and taxation policy in supplicant countries), the probability is that he’d just bank any concessions made and start again a short while later demanding more concessions. Giving in too easily to a bully merely convinces the bully that he didn’t demand enough in the first place.

That leaves us with the elephant. There is one, and only one, economic entity in the world which is big enough and has a diverse enough economy to be able to stand up to the US on the one hand, whilst developing its own economy internally to reduce or eliminate the need for the US on the other. It is, of course, the EU. Joining forces with the EU, and co-ordinating a joint response, doesn’t even require rejoining, or even the partial rejoining which the single market and the customs union represent. It merely requires a willingness to accept that joint action is better than allowing Trump to divide and rule (making that difficult is precisely why he hates the EU so much). It says a lot about what the Labour Party, founded on the idea of solidarity, has become that the idea of collective action has become such an anathema, and that competition and stealing a march on others is the only option of which they can conceive.