Voices: Parallels seen between Brexit fallout, Trump on trade
AUSTIN – On a recent flight to Chicago, I sat next to a very nice woman with a British-sounding accent who was from Zimbabwe but had gone to school in London.
As tends to happen these days, our conversation veered into the U.S. presidential elections. “My friends in London mainly want to know if Americans have lost all their senses,” she told me.
She told me this as I thumbed through that week’s edition of The Economist, whose cover heralded: “The debasing of American politics.”
Hacked emails. Sexual assault claims. FBI investigations. Vows to jail political opponents. Corruption allegations.
This election season has certainly served up a smorgasbord of reality-TV-like fodder that has stunned and dismayed many of our allies abroad. But we can learn from other nations, too.
A good place to start is Britain, which is starting to feel hangover pangs from the Brexit referendum, in which 52% of voters chose for the U.K. to withdraw from the European Union. The pound is down 15% on a trade-weighted basis since the Brexit vote, according to the Economist, closing in on the depths it reached during the 2008-09 crisis and near the bottom of the 154 currencies tracked by Bloomberg.
A root cause of the sterling’s plunge, according to the British newspaper, is “fear that Britain is turning into a xenophobic, interventionist and unpredictable place, with calls to clamp down on foreign workers and foreign capital.”
Donald Trump’s policy agenda up until now has been tinged with similar xenophobic and unpredictable tones, from calling for a temporary ban on Muslims entering the U.S. to promises that he’ll renegotiate NAFTA, withdraw from the World Trade Organization and slap tariffs on Mexican and Chinese goods.
His vows to tinker with and, in some cases, tear up trade deals have some economists most worried. Trump has said he will renegotiate many of the deals for better terms. But a recent study by the pro-trade Peterson Institute for International Economics warned that Trump’s trade proposals, if enacted, could cost the U.S. more than 4 million jobs and spin the country into a recession.
As president, Trump would have wide leeway to alter trade deals. In a worst-case scenario, if China and Mexico retaliate by raising tariffs on American goods, America could be facing a “full trade war,” and unemployment could rocket to more than 8%, according to the Peterson study.
The study’s authors examined both candidates’ trade policies but concluded Trump’s would be far worse. “While Clinton’s stated trade policy would be harmful, Trump’s stated trade policy would be horribly destructive,” one of its authors wrote.
So can any parallels be drawn between Trump’s trade positions and the Brexit fallout?
Plenty, according to Jennifer Hillman, a Georgetown University law professor who focuses on trade and has studied the Brexit effect. The rhetoric from supporters of Brexit – fear of foreign workers taking local jobs – has been nearly identical to those found in Trump’s rally speeches, she told me.
In a speech in North Carolina last week, Trump reiterated his threat to slap tariffs on goods made overseas by companies that have shipped jobs overseas. “At the center of my jobs plan will be fixing our terrible trade deals,” he told the crowd.
But higher tariffs will not bring jobs back to the USA. More than 85% of them have been lost to automation and technology, not trade agreements, according to most studies, Hillman said.
“It doesn’t matter what you do with China,” she said. “Are you going to get rid of every robot at the end of every assembly line? Probably not. Stopping trade isn’t going to bring those jobs back.”
Britain, through its Brexit pains, and other European countries who embrace a nationalist, protectionist philosophy are fast discovering a pesky consequence of that thinking: It’s bad for business.
“It’s a huge loss for the U.K., and a huge loss for the world,” Hillman said of Brexit.
Of course, trade wars and Britain’s currency woes are far less sexy than sexual delinquency and hacked emails and will likely get scant air time between now and the Nov. 8 elections.
But if our economy is of any importance, it’ll benefit voters to take a hard look at what’s happening across the Atlantic before heading to the polls.