Monday, January 30, 2017

Matt Ridley: How Brexit is different from Trumpit

The big difference is that Britain seeks more, not less, free trade.

In the week that Theresa May reveals the trajectory of Brexit and Donald Trump enters the White House, these two “revolutions” are once again linked by coincidence of timing. For much of the rest of the world, and even in the minds of many people in Britain, the result of last June’s referendum and the outcome of last November’s presidential election are part of the same phenomenon: a revolt against globalisation by a forgotten, provincial, working class.

I think this is misleading. While it is true that both revolutions saw the intellectual and financial elites given a bloody nose by the forgotten provinces, nonetheless Brexit and Trumpit have crucial differences. For a start, one was an unprecedented constitutional earthquake that resulted in the installation of a thoroughly normal prime minister. The other was a constitutionally routine democratic transfer of power that installed a highly unconventional president.

And while many voters in both countries wanted to see immigration better controlled, racism was a fairly minor factor in Brexit. About a third of Asians voted Leave and, according to Tim Shipman’s book All Out War, Muslims for Britain played a big part in turning out “the ethnic minority vote in droves with calls for free trade with countries of origin and a fairer immigration policy”.

The biggest difference is with respect to trade. There is nothing protectionist about the case for Brexit. To the extent that there are differences between remainers and leavers about trade, they are about whether we can achieve tariff-free trade with Europe, not about whether we want it.

As far as trade with the rest of the world is concerned, all the rhetoric on the Leave side was in favour of more free trade with the world: escaping from under the EU external tariff to be free to import cheaper food from Africa, re-establishing free trade with New Zealand and Australia, doing free-trade deals with America and Canada, selling more whisky to India and more insurance to China.

There may be somebody out there who voted Leave because he wanted more tariffs and less trade, but he cannot have been paying much attention. This is in sharp contrast with Trump voters, many of whom are indeed exercised by the hope and promise of protectionism. They want tariffs on Chinese imports, punishments for firms that move jobs from Michigan to Mexico, the cancellation of transpacific and transatlantic free trade deals, and more.

In this, they are in a long American tradition, going right back to the Tariff of 1828 designed to protect the economy against cheap British imports, continuing through the time of Theodore Roosevelt, who spoke of the “pernicious indulgence in the doctrine of free trade”, and right up to the protectionist rhetoric of Robert Taft in 1952 and Dick Gephardt in 1988. The nadir came when Congress reacted to the Wall Street crash of 1929 by passing the catastrophic Smoot-Hawley tariff act, which set off a spiral of retaliatory tariffs around the world that deepened the depression and encouraged Germany and Japan to think in terms of conquest rather than trade.

Britain, by contrast, has nearly always been the world’s most fervent advocate of free trade, persuaded by Adam Smith and David Ricardo that tariffs hurt the poor, and convinced by Richard Cobden and Robert Peel to repeal the corn laws and then dare the world to dismantle tariffs for the sake of peace and prosperity. Brexit sits squarely in this tradition, being a revolt against remaining a member of a customs union protected by a high external tariff.

I was in Mexico just after Donald Trump was elected president. My Mexican friends were unhappy, understandably: the country stands to suffer most from Trumponomics. They asked me what I thought about Brexit and I started saying that it was a wonderful opportunity not just for Britain, but for its current and future trading partners, including Mexico. They assumed I was joking. I insisted I wasn’t. No, no, no, they said, slapping their thighs, this British humour is going too far. Brexit is like Trump, so how could I like Brexit? It took me some time to convince them I was serious, and I certainly did not persuade them I was right.

After foreign correspondents from around the world lazily portrayed the Leave campaign in the referendum almost entirely in terms of an argument for isolationism, we have a job to do persuading the world that we are in fact rejoining it. So for that reason as well as others the government would do well to emphasise the differences between Brexit and Trumpit.

There are signs that No 10 needs reminding of this point. In an article last weekend, the prime minister said that last June the British people “did not simply vote to withdraw from the European Union; they voted to change the way our country works — and the people for whom it works — for ever”. Hmm. One of the prime minister’s chief lieutenants is an admirer of Joe Chamberlain, the politician whose principled but misguided imperialism came closest to turning Britain into a protectionist country.

This is especially pertinent in the case of the industrial strategy now in preparation. To the extent that this identifies growth opportunities, recognises regional differences, clears obstacles from new technologies and stimulates new research, it could be good. To the extent that it props up old industries, protects inefficient businesses from competition, gives in to crony lobbying and tries to pick winners or subsidise losers, it will be a disaster.

Theresa May will be making a mistake if she thinks Sunderland and Detroit have the same priorities. One is an export-dependent city with one of the most efficient car plants in the world; the other is fixated on the threat to its home market from foreign competition. It is becoming clearer by the day that the biggest problem for the North of England has been an overvalued exchange rate, driven by our capital-attracting capital. Just by voting to leave, we have improved the terms of trade for the north.

When the history of this decade comes to be written, we may conclude that in voting to leave the European Union as it drifts towards the economic and political rocks, Britain has averted rather than experienced a populist revolution and the election of a demagogue. We have prevented the installation of a British Trump, or — for that matter — Farage.

Matt Ridley, a member of the British House of Lords, is an acclaimed author who blogs at www.rationaloptimist.com

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