US, UK collaboration needed to take on China
by James Arnold
| October 03, 2018 12:00 AM
China has benefited most from global free trade, helped on by knowledge transfer and industrial espionage.
Yves Logghe
P resident Trump's recent United Nations speech focused on independence and national sovereignty over multilateralism. Among other things, you could say that Trump implicitly backed Brexit once again.
The recent transatlantic nuptials are a superb reminder of the inextricable ties that bind the United States and the United Kingdom. They remind us of the source and permanence of this relationship. There is a common origin, language, and legal system; shared security and defense: We are true collective cousins. And at this moment, between a frail Europe and a rising China, our mutual ties can become as meaningful today as they ever have been.
The World Wars made it evident what the Anglo mind believed in as the U.S. sacrificed for the freedom of all: The Atlantic Charter of 1941 and the U.K.-U.S.A. Agreement of 1946 and later amendments formed the backbone of military and intelligence cooperation — then further widened by mutual agreement. The Anglo Commonwealth remains in place three generations on.
Even as the EU struggles to hold itself together — Italy and Spain are swaying in the Euro winds — the Anglosphere may be reaching a moment in collective consciousness when we understand that free trade has not been quite the party we wanted. The West has suffered a relative decline as a result of the global nature of GATT and its successor, the WTO.
China has benefited most from global free trade, helped on by knowledge transfer and industrial espionage. The Middle Kingdom's development of competing military systems was born of their rising GDP and our complacency, in part due to our focus on the War on Terror. We are seeing the early consequences in the South China Sea, but China's end game remains probably best not imagined.
The U.S. has realized it is time to negotiate tariffs whilst being open to favor those closest or most reasonable. This may prove to be more successful than anticipated if executed appropriately: protecting key industry groups to allow them to flourish and outcompete. Implementation should be straightforward given our highly developed Information Technology infrastructure.
In a trade war, the country with the larger industrial base will be more prone to fracture. The U.S. economy of the Smoot-Hawley era is no more, but it is a closer representation of how China finds itself now.
Eighty percent of U.S. private sector incomes come from the service sector. This is why any trade war will have a far smaller impact on American jobs and incomes than a century ago in the West. The number of people engaged in agriculture and manufacturing, all other things being equal, has collapsed thanks to greater efficiency due to technological innovation. Any overall fall in U.S. consumption today would be much less dramatic than in any primarily industrial economy that tries to reject U.S. proposals for fair trade rules.
China's ability to enact industrial tariffs is also constrained by globally meandering modern supply chains. These present another reason the Middle Kingdom would only be shooting itself in the foot were it to respond inappropriately to US proposals.
The moment is here for the Anglo Interest to avoid being eclipsed by the rising Middle Kingdom — a rise that is primarily due to poor decisions of the former neoliberal order.
Meanwhile, the U.K. has reached a moment of need. Continental Europe is turning away, and a helping hand is most welcome from the United States. There is an irony in finding Western Europe unable to learn from the repeated lessons of history. It is time to define the future of the United Kingdom and the Anglo Interest in a positive tone.
The United States and United Kingdom have this opportunity to cement our historically strong relationship, unleash the power of free and fair trade, and eliminate burdensome red tape and regulation.
And such a collaboration, as successful as it promises to be, will almost certainly provide further impetus to the Anglosphere — Australia, Canada, and New Zealand are bound to follow.
James Arnold is a British financier.