In the aftermath of the Second World War, Britain was victorious but broke. One of the genius inventions which was developed and helped Britain to win the war was the Nene jet engine created by Rolls Royce. Not only did the Nene engine give Britain an edge in defence, it was also thought at the time that this cutting edge technology could provide a solution to the country’s financial woes. As such, Prime Minister Clement Attlee agreed to sell the Nene engine to the Soviet Union on the condition that it could only be used in non-military aircraft. Unsurprisingly, once Stalin got his hands on them, he did not honour this commitment and eventually the Nene engine was being used in new MiG fighter jets being used against the UK and her allies in the Korean War.
Fast forward to 1953, and Rolls-Royce had developed the Avon engine, which was being used in the commercial Comet jets. It was hoped by British civil servants that sales of the Comet could help to stop the rot and reverse the country’s economic decline, so they urged Prime Minister Winston Churchill to approve the sale. The United States was understandably alarmed and opposed the move, with President Dwight D Eisenhower pointing back to how easy it would be for this technology to fall into the hands of the Soviet Union and be developed for military aircraft which could again be used against the West. Churchill decided to go against the wishes of the US and allowed the Comet to be sold to other nations, under the condition that there would be strict controls over their use in relation to the USSR. This did not assuage American fears and it could have destroyed the relationship between Great Britain and the US, but a series of Comet crashes meant that the aircraft was grounded and no sales ever went ahead.
What these cases illustrate is that since around the end of the Second World War, the UK has almost always faced a choice between the US and other nations and blocs when it comes to trade. As the world readies itself for the inauguration of Donald Trump, the UK will face such a choice once again.
However, despite the wishes of commentators who wish to make everything about Brexit, the choice for the UK will not be between drawing closer to the US or the EU, but rather it will be about whether or not it does more trade with the US or China.
Given that the US does not have a trade deficit with the UK in goods (unlike with the EU), the UK is unlikely to attract increased tariffs on what it exports to the US. Instead, Trump is probably going to be more interested in how the UK decides to act in relation to China. The Trump administration will likely make restarting negotiations for a free trade agreement between the UK and the US contingent upon the UK not strengthening its trading and investment relationship with China.
In an ideal world, the UK would trade freely with every other country in a world where there are no tariffs, quotas or subsidies. In a slightly less perfect world, the UK would adopt unilateral free trade where it would welcome imports of goods and services from every country, meaning greater choice and lower prices for UK consumers and more productive British firms. Unfortunately, we live in neither of these worlds and we have to acknowledge that there will be trade-offs.
So, how should the UK respond?
Donald Trump is capricious, mercurial and has shown himself to not be a fan of free trade. Moreover, recent interventions from Elon Musk attacking the our Labour Government have the potential to sour the ‘special relationship’. Despite all this, it should be remembered that the US has been a global force for good and has historically defended democracy and the liberal, rules-based system around the world. What’s more, whatever one’s thoughts on Trump, he will only be President for four more years.
Contrast this with China. It is a wonderful country with so much potential, but it is ruled by the truly evil Chinese Communist Party (CCP) which has not only crushed democracy within its borders and recently in Hong Kong, but also threatens the independence of Taiwan and seeks to silence dissidents around the world, including in the UK. In spite of this, it has been offered every accommodation over the past 25 years, such as being allowed to join the World Trade Organisation. This has been thrown back in the face of Western countries as the CCP has refused to play by the rules. It engages in unfair and unlawful trade practices, such as subsidies and dumping, while engaging in intellectual property theft and corporate espionage.
The current regime in China does not share the UK’s values and in many cases seeks to actively undermine them. While the CCP has mismanaged China’s economy, the nation is still a powerhouse and a global power which poses a risk to the UK and the rest of the West. Labour would be very foolish to embark on any course of action which strengthens the CCP’s hand.
As such, if the UK has to choose (which it probably will), then it should clearly side with the US over China. This does not mean that the Government should seek to undermine its current trade relationship with China, but it should be prepared to take a much stronger stance.
For example, Rachel Reeves should not cancel her upcoming trip to China (although the crisis in bond yields may mean she has to), but she should make it clear to China and the rest of the world that the UK will always choose liberal democracy and free trade over authoritarianism, and is prepared to help Taiwan in defending its sovereignty. It should make it clear that any prospect of agreeing to China joining CPTPP is contingent upon it respecting Taiwan’s sovereignty and ending its own human rights abuses and trade law violations.
In the meantime, the UK should push for stronger trade ties with the US. The goal should be for a comprehensive free trade agreement and strengthening the relationship wherever possible in the meantime.
Lord Palmerston once said that ‘We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow’. He was right. The UK’s interests are clear – we need to strengthen our relationship with the US, and speak truth to China’s Communist thugs.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.
