Does Britain have any friends?
Chennai City, India (Shutterstock)
Who are Britain’s friends in the world? Are they the states we’ve dealt with on such good terms since the end of the Second World War? And do we have the right friends? These questions are crucial for the future of the UK, especially as the country prepares to leave the EU.
Britain’s international, economic and geopolitical policies need to be set in the context of our domestic policies. Since the EU referendum, the UK’s overseas policies — especially in trade — have operated apart from domestic policy.
The debate over Brexit has highlighted this. On immigration, for example, the UK adopted what might be called a “laissez faire” policy towards EU and non-EU immigrants. More thought should have gone into how immigrants assimilate, as well as how they might boost our nation’s productivity.
On trade, the EU has not yet got close to delivering a single market in services, and in many cases member countries have actively discouraged it. Given that the UK has a large service sector, it might not be as surprising that most UK citizens haven’t felt much benefit from being in the EU.
Britain is geographically close to two of the current seven largest economies in the world, France and Germany, but neither has the demographics or productivity to grow very fast. Indeed, many EU member countries have rather poor demographics, especially Germany, Italy and the smaller east European countries, and without major improvements in productivity, they will not be major contributors to world growth in the next decade.
Unfortunately for Britain, the three most important nations in terms of world growth, and therefore, world trade, are not geographically so close. They are the US, China and India and in the decade to 2020, around 80 per cent of all the increase in global nominal GDP will have come from the US and China alone.
Countries tend to trade the most with countries that are closest to them. It might not necessarily have to be that way, but to overcome the geographic realities, we will have to become a lot better at trade. Until the Chinese economy slowed in the past year, Germany had spent the previous three years exporting more to China than it had to Italy — but that is also a reflection of Germany being so good at producing things.
Though we are close to countries that are not going to see substantial trade growth in future, we must not understate the problems that would arise from losing trade with them. And as these countries are so important geopolitically to us, I believe that a trade deal with the EU should take clear priority over trade deals with any other nation.
Turning to the US, geopolitically, we still seem to be almost obsessed with our special relationship. But perhaps we need to treat it as a more normal relationship and not deceive ourselves. As we are learning, in any trade deal, the US will want access to our food markets and health system. The US may not like what we want to do with our tax policy towards tech companies.
For these reasons, we shouldn’t spend so much time trying to strike agreements with Australia, Canada or New Zealand. Yes, they are more like us, speak our language and share our values, but economically they aren’t a source of major global growth, and they are distant.
This leaves China and India — these should be Britain’s priorities. Despite their distance, these nations will come to dominate world economic affairs. Even at its lowest real GDP growth rate for nearly 30 years, China is still creating the economic equivalent of another New Zealand every few months.
Britain should also increase its economic relations with the large African countries, Nigeria especially, given our past geopolitical relationship (it also happens to be in a similar time-zone).
Whatever might emerge as a global British strategy, it needs to be more closely knitted into how the British population sees itself. This way, voters will approve of what the government it trying to achieve. This, sadly, appears not to have been the case in the recent past.
