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Speaking at the recent GTR conference in London Jim said that the division in politics is no longer about Left versus Right but instead is about open versus closed. Are we open or closed to the interaction of ideas, people, goods, experiences, and services? And in this we are at an inflection point. He commented that the UK’s reputation as an enabler of free trade has been hard-won but only partly deserved. (Chile is the country with most free trade deals in the world). After all, it was only after Gladstone’s 1860 Budget that the UK removed most of its protectionist regulations. This openness wasn’t altruistic but borne of a belief that the UK economy alongside the reach of the Royal Navy was strong enough to withstand international competition. It was a view that lasted only seven decades until the fall-out from the Great Depression led to the Import Duties Act of 1932. Jim also cautioned not to conflate Russia and China as both countries want and expect significantly different things from the international community. He went on to tell the audience that he is increasingly active in connecting international investors and businesses with governments across Africa and Eastern Europe.
It wasn’t until democracy flourished in Europe after 1945 and 1989 that we again entered a twin period of openness accompanied by inquisitiveness. This liberalisation has led to global trade increasing forty-fold over the past four decades. This has contributed to more than 600 million people globally being lifted out of poverty. But despite what some free-trade champions assert a rising tide hasn’t lifted everyone. In the UK real wages are still below 2008 levels.
Brexit, no matter your view, has undoubtedly robbed the UK of any claim to be the most open economy on the continent. But nor should we conclude that current tumult unavoidably means that open trading relationships were only temporary interregnums that belong to our history. Right now, the CPTPP is attracting new aspirant members including the UK. The African Continental Free Trade Area (AfCFTA) represents an opportunity for countries to boost growth and may lift 30 million people out of extreme poverty. It is widely accepted that when countries open themselves up to trade, their economy grows at a faster pace and living standards improve across the board – although admittedly at a slower rate for those most in need of improvements.
But where are we heading? Free trade is being replaced by value-based trade – not value for money but the values of nation states and causes. Leaders believe that Covid has taught us the value of resilient domestic supply chains; geopolitics is forcing nations to choose between the open versus closed norms of the democracies versus Beijing; the climate transition is likely to lead to further tariffs ala the EU’s FitFor55 carbon border tax; social movements and investor appetite will lead to heightened action on supply chain behaviours; and the democratic consequence of stagnating personal income is having an impact on the tone of political discourse and elections. It is telling that very little was said by the WTO at its recent ministerial conference in Geneva about the emerging global food security crisis. Situations like the pandemic and rising populist politics has left countries looking inwards at a time when we are most in need of an outward thinking economic mindset.
Decision makers and institutions are beginning to construct a new set of relationships which navigate this set of challenges. It’s going to be tough and will require patience, strength, and dialogue. But it is essential if we are to avoid the slide into protectionism, mercantile foreign policy and a relapse behind closed minds and shuttered borders.
