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Thursday, 13 April 2017

Trump, Trade and Geopolitics

Less than six months from his election, Donald Trump is ascending the biggest learning curve that he has ever faced; and so far he is coping. His most recent utterances show that he has learned that the almost-euphoric reaction of protectionists in the USA to his election sent the dollar to a high against other currencies that is not reasonable or sustainable. After meeting President Xi and the debriefing that he has undergone with his senior aides he has reviewed his rhetoric about Chinese 'currency manipulation' and reconsidered the simple proposition that Chinese imports to the USA have replaced American jobs. The confrontation on all fronts against China that seemed destined to be a major facet of his presidency has evaporated and a step-by-step development of policy in regard to China [and, possibly, even North Korea] is now likely to be the preferred route.

On the other hand, the president's righteous and sentiment-driven revulsion at actions ascribed to the Syrian government has led to a direct confrontation with Russia that has become very serious. With total accuracy and complete cynicism Putin has said that there is no 'proof'' [that he would accept] of the guilt of the Syrian government. Even if it were to be proven that a Syrian air force 'plane dropped the toxic substance, then Assad could pretend to penalise the pilot as a 'rogue element' and continue on his cynical path. Meanwhile there is much talk of deeper trade sanctions on Russia among that NATO allies. The existing sanctions, imposed in the light of Russian adventurism in the east Ukraine and the Crimea, have hurt the Russian economy - especially poorer consumers - and have damaged west European exports. They have had no effect on the political situation; and it is unlikely whether tougher sanctions would do anything other than convince the Russian population that the west has a perverse hostility for their great nationalist leader. Meanwhile, the Ukraine remains a sink of corruption far worse than Russia itself.

For geographical and mineralogical reasons, China and Russia need each other. Their economies are intertwined at many points. They are necessarily allies, and the existence of that alliance means that China's relationship with the USA will always be characterised by caution: the Chinese will want the best terms of trade that can mutually be agreed with the USA but America will never replace Russia as the prime ally of China. So although the world can heave a sigh of relief at the relative defusing of the mood in Washington toward Beijing, the highest level of geopolitical relations has not yet shifted. It probably will not, for several years.

Western European politicians like to boast about the EU being the 'world's biggest economy', until it will inevitably be overtaken by China and India; but with or without the UK [with or without Scotland or Northern Ireland] in its common market, 'Europe' does not have the weight of the USA, or of Russia, or of China in world affairs. This is partly because of willful military weakness: the 'Axis powers' of World War II have not been allowed to develop nuclear armaments; and indeed have made a virtue of that enforced abstinence. France still has a significant nuclear arms capability; and unlike the UK the technology is entirely their own; this is not seen as a European resource: most EU countries would deny any proprietary or strategic interest in it. A 'High Representative' of the EU attends most major international conferences [she was at the G7 meeting last weekend] but that person is not seen as having any 'clout' in world affairs. Donald Trump is still banging on about getting his NATO allies to bear their part of the cost of the alliance; without success.

Outside the EU there is no doubt that the UK would struggle economically. Within a few weeks the false picture of a reasonably-strong economy would fracture. It is painfully clear that those ministers who talk confidently about coping with the consequences of a 'hard Brexit' do not know what they are talking about. Britain's one bargaining-chip is the skill of British cyberintelligence agencies - especially GCHQ - combined with the possession of bases and colonies around the globe and Commonwealth-based strategic alliance with Canada, Australia and New Zealand. Britain plays well above its weight in this field, and is indispensable to the USA because of it. Whatever terms of trade the May Team can agree with Brussels, that is not the great game for the United Kingdom. England-and-Wales, with whatever other components of the UK remain after the dust of Brexit has settled, has no destiny other than the Atlanticist option. Australia has accepted this for herself, as has Canada; New Zealand has no alternative option. Britain must ignore the Remoaners and go for the only viable option; whatever the restructuring costs might be.

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