Matthew Lynn It is close to losing its position as the world’s largest economy. It is facing challenges in key industries from aerospace to technology and pharmaceuticals. And its grip on the global trading system is weakening. The pressure is now on President Biden to strengthen America’s economic might in order to counter an assertive China before it is too late. But here is a question he needs to answer. Why is he scuppering a trade deal with Britain? The major economies of the Western alliance will surely need to work together if they are to have any chance of counteracting China. This won’t be possible without abandoning short-sighted protectionism and working together instead. Entering his fourth, and perhaps final, year as US President, no one was really expecting Joe Biden to make signing a free trade deal with the UK a top priority. The Democratic left, his key supporters, have developed a reflexive dislike of Britain, preferring to side with Ireland, or the EU, or anyone else who might be taking issue with us that week. The President would be more likely to go for a relaxed round of golf at one of Donald Trump’s courses than to invite Rishi Sunak to the White House for a grand ceremony celebrating free trade between the two old allies. It will be interesting to see whether Sir Keir Starmer, who is pitching for a summit with Biden ahead of the next general election, will have more luck. Regardless, the news that the US President has indefinitely shelved a trade deal between the two countries is a major blow. The chances of it happening this decade have narrowed significantly: it is far easier to pull something off the table than put it back on. We will hear plenty from ardent Remainers about how the UK is an irrelevance to the US, and it was fanciful to expect special treatment. We will be told that, now that we have left the EU bloc, we are a geopolitical irrelevance. But that ignores one fundamental issue. A strong US domestic economy is not enough, we need a strong Western one as well to counter the growing Chinese threat. It’s a threat Biden certainly seems to be taking seriously. Largely thanks to fracking, it has restored its energy independence, and reclaimed leadership of the oil industry. Sanctions have been imposed on technology transfers with China, while tariffs have been imposed to protect crucial industries. It will take many more years to assess the full impact of all those policies, and whether they have succeeded or failed. But it is notable that Mexico has now overtaken China as America’s main trading partner. And there are signs the Chinese industrial machine is slowing down, even if only modestly. The assumption that China would cruise effortlessly to global economic supremacy, that this would be the “Chinese century”, has started to falter. That the US is adopting a strategy of “de-risking” from China is welcome. The current regime may prove to be perfectly benign, as its leaders insist, though recent moves towards upending the current rules-based international order suggest otherwise. The chairman of the Foreign Affairs Select Committee, Alicia Kearns, earlier this year warned that its accelerating aggression poses an “alarming threat”, drawing some nations closer to a vision of “unruly autocracy”. But America is missing a crucial section of the strategic jigsaw. Its dominance will be weakened if Britain, Germany, Italy, France, Japan, South Korea, Australia and its other Western allies are economically stagnating. Clearly, it is not the job of Joe Biden to fix the domestic policy errors made by politicians in Westminster. But it can encourage them to nurture their own industries. It can make sure dollars flow through the global economy, and hold their value. It can encourage American companies to invest globally, building expertise in countries friendly towards its values and interests. And the quickest way to achieve that is through free and open trade, for the simple reason that it makes everyone richer. A US-UK trade deal would deliver enormous benefits to the UK of course. The US is our largest single market. Our exporters are rewarded by its expansion. But we are also the seventh largest partner for the US, measured by the volume of imports and exports. The UK is the second largest corporate investor in the US after Japan. Collaboration with us will improve the US position when combatting challenges including repression in Hong Kong, genocide in Xinjiang, coercian aimed at Taiwan, Chinese government subsidies, and the widespread theft of cutting-edge Western intellectual property. This same logic applies just as much to trade with Europe. Just as there is no trade deal between the US and the UK, there isn’t one between the US and European Union either (the Transatlantic Trade and Investment Partnership was scrapped in 2019 after years of negotiations). A trade deal with Japan was finally signed in 2020, which should have set a blueprint for a future agreement with Britain. A free trade agreement between the UK and the US, with similar legal and regulatory systems, should have been wrapped up in a year or two. The only obstacle was President Biden’s petty protectionism. He is ceding economic leadership to China – at precisely the moment when the Western economies should be working together and fighting back.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *