Brexit leaves the UK grovelling to Trump as trade war worsens

The UK media has been amplifying the ridiculous claims that the UK’s 10% tariff on trade with the USA is somehow a Brexit bonus because it is lower than the EU’s 20% tariff. A moment’s thought undermines that - the UK is being hit with 10% tariffs not because we have a special relationship or because we are not in the EU its because the UK doesn't have a trade surplus with the USA - in other words the UK as a whole is not that good at exporting and so doesn't have as big a target on its back for Trump’s bullying.

If Scotland were an independent country and inside the EU it would have free trade with 27 allied countries. It would benefit greatly from being inside the world’s largest economy, part of one of the top three in terms of global trade. 

But thanks to Brexit and the resulting weak and isolated trade position of the UK, we are perilously exposed to Trump’s bullying and the increasing global uncertainty. The UK is now without a reliable prospect of free trade with either the USA or the EU, where non-tariff barriers to trade loom ever higher.

• If Scotland were still in the EU it would have the security of knowing it could rely on free trade with the 27 members who would all have Scotland's back in this worsening trade war
• After nine years, the UK doesn’t have a trade deal with the US and in its desperation it is considering some very risky concessions. The USA wants access to the NHS for its private health sector. They want to increase access for industrial-scale meat production, which doesn’t meet EU or UK welfare or health standards and would cause more problems with EU trade - which is nearly three times more important to the UK than trade with the USA.
• The UK is now very exposed to the unpredictable effects of a global trade war

1 - Being in the EU offers the protection of a strong trading block 

Members of the EU are safe in the knowledge they can trade with 26 other countries plus the four members of the European free trade area. 

The EU is the largest economy in the world, with a GDP per head of €25,000 for its 440 million consumers. Members of the EU and EFTA will continue to trade freely with each other whatever Donald Trump and the USA do. 

In contrast, Scottish businesses are finding it more and more difficult to trade freely with the EU. This is not because of tariffs but because of what is called non-tariff barriers. 

These mean that before a Scottish business can trade with the EU it has to prove that it meets EU standards. These are particularly hard when it comes to food and farming products. In one example, before Brexit Scotland exported a lot of seed potatoes to the EU. That trade remains blocked. 

The trade barriers also extend to services. That can be anything from touring musicians or a young person who wants to work a season in a holiday resort or high-end financial services. MP Pete Wishart, a former member of the band Runrig, told the House of Commons recently: “For the first time since 2003 no UK artist has made it into the global top 10 for singles or albums. Their chaotic Brexit closed a continent to so many UK artists, denying touring opportunities and product promotion.” 

Every time the UK diverges from the EU, those barriers get a wee bit higher. It makes it more difficult and expensive for UK businesses to comply with both UK and EU trade standards. They have to meet two different levels of trading standards.

In an effort to avoid these barriers, many Scottish businesses have deliberately tried to increase their trade with the USA, another of the world’s top markets. For example, Scottish salmon is the UK’s largest food export. Brexit cost it £100 million a year in lost exports. And it increased trade with the USA after Brexit. But that trade too is now under threat. 

2 - The UK is now dangerously desperate to do a trade deal with the USA

One of the main promises of Brexit was a free trade deal with the USA, but after nine years Britain has nothing to show for that. It doesn’t have any kind of free trade deal.

The pro-Brexit UK media has given a lot of airtime to right-wing commentators claiming that the UK is getting a “Brexit benefit” because the tariff that the USA has slapped onto British imports is 10%, though it is 25% for cars and steel.  

That is not because the USA singled Britain out for better treatment. It is because the USA’s trade tariff algorithm is based on whether or not each country is operating a trade surplus with the UK - i.e. they sell more goods to the USA than they buy. According to their figures, the UK doesn’t have a trade surplus. (The UK calculates the number differently and they think they do.)

The UK has been struggling to maintain trade with the EU because of the non-tariff barriers and is growing desperate to keep the doors open to the USA’s large markets.

But to secure a trade deal, they will have to give the USA concessions. The USA wants access for its private health sector. They would love to get further into the NHS. They want to increase access for industrial-scale meat production, which doesn’t meet EU or UK welfare or health standards.

If the UK does any kind of deal with the USA, it will probably make it even harder to trade with the EU because the standards will have diverged so much. It will also make the trade barrier that now exists down the Irish Sea between the UK and Northern Ireland even higher. 

3 - The UK is left exposed to the unpredictable headwinds of a global trade war

Donald Trump is effectively trying to bully the world into offering the US preferential treatment when it comes to trade, giving him concessions in order to keep selling their goods and services there.

If it chooses to, the EU may decide to combat Trump’s tariffs with a strong response. They are offering to negotiate at the moment, but everyone knows that if they want to they can make life very difficult for important US business sectors and for service providers. They are much stronger together than if they were just 27 individual countries. 

If the UK was part of the EU it could be in the room deciding and helping to lead a strong response. Everyone knows that lying down in front of a bully and inviting them to walk all over you is not a great strategy. It is not going to be a one-off. 

But what else can the UK do? It is far too small to threaten reciprocal tariffs. The UK Prime Minster Keir Starmer is talking about keeping a cool head and not retaliating - but any UK retaliation would be pointless. 

The UK is caught between the world’s three big blocks, the USA, the EU and China. It is very hard to predict the exact outcome of a trade war between these three. Goods that can no longer be sold in the US may be dumped at a low price in the UK markets.

That might sound good - for example, it could make goods cheaper in the short term. But that would just make it harder for Scottish businesses to stay afloat in what are already challenging times, where they face trade headwinds and other pressures like extortionate energy bills. 

Conclusion

If Scotland had voted Yes to independence, it would never have left the EU. One reason that many people voted No was because the Unionist media amplified claims that leaving the UK would put Scotland’s EU membership in jeopardy.

Just two years later, Scotland voted overwhelmingly to Remain in the EU - every single council area voted Remain. But the UK ignored that and dragged Scotland out against its will.

The promised benefits to Brexit never materialised. The Cambridge Econometrics report  found last year that the UK economy is £140bn smaller as a result of Brexit. Its economists concluded the average Briton was nearly £2,000 worse off per year. 

Scotland’s business people know all about the pain and cost of the non tariff trade barriers they face with the EU. They have worked hard to move to do more trade with the USA. Now they see that it is under threat.

Now thanks to Brexit, Britain is dangerously exposed to the fallout from the deepening global trade war crises. Instead of stepping up to be part of a strong response to Donald Trump as part of one of the top three trading blocks, it can do nothing but lie down in front of Trump and his regime and invite them to wipe their feet.

Following our first two hugely successful Creating Scotland events in Perth and Glasgow, we are thrilled to announce Creating Scotland is coming to Dundee.  

Join us for an afternoon of celebrating traditional and contemporary Scottish culture, featuring music, singing, poetry, readings, humour and creative thinking about independence. The event will take place at the Bonar Hall on Sunday, May 11th at 1pm.

The first two Creating Scotland events Sold-Out so don't miss your chance - click here to book your tickets now. Tickets are £10 each.