The election of Donald Trump—who lost the popular vote by 2.6 million—and the UK’s narrow decision to leave the EU (Brexit) have at least three things in common. Number one, they are portrayed in the mainstream media and by political commentators as the triumph of working people over the “elite” and the “establishment.” In reality, it was mainly older, retired people who voted Brexit and older, white, middle-class males who voted Trump.
Number two, and less well known; both Brexit and the Trump “victories” were financed and led by the elite: Brexit was bankrolled by hedge fund billionaires who wanted to free themselves from the regulatory shackles of Europe. Trump’s economic advisers include billionaires from Goldman Sachs and other financial institutions. As Trump writes in How To Get Rich (2004, BBC Books): “Invest with the help of a major firm like Goldman Sachs, Morgan Stanley, Bear Stearns, or Merrill Lynch. These are your hard-earned savings at stake. Don’t take unnecessary risks.” Trump didn’t need to add: because the taxpayer will bail them out when they tank.
Number three, while Trump’s victory and Brexit appear to herald a new age of domestic investment, protectionism, and nationalism, the truth is that the “free marketeers” who have sponsored both events want to dismantle political alliances and make Britain—and especially the U.S. —dominant partners in any given trade deal. At present, trade and investment deals are facilitated through the World Trade Organization. Since joining the WTO, the rising economies, particularly China and India, have challenged America on a number of issues.
Challenging U.S. Dominance
For instance, India challenged America’s imposition of countervailing duties on imports of certain hot rolled carbon steel flat products. India brought the challenge under GATT rules, claiming that America’s protectionist measures contravened the U.S. Tariff Act on customs duties. Also citing GATT, India complained that the U.S. was violating agreements on non-immigrant temporary working visas. China also challenged the U.S. at the WTO, citing the U.S. Department of Commerce’s claim that majority government ownership makes an given enterprise a public body. In other words, America was unfairly subsidizing its industries. In the same complaint, China alleged that the U.S. was levying heavy import duties on Chinese products including solar panels, steel sinks and drill pipes. Despite these protectionist measures erected by Bush and Obama, Trump screams that China has been “raping” America’s economy. In an effort to put China at a disadvantage, U.S. and mostly East Asian countries worked out a trade and investment deal—without the participation of the publics of either region—called the Trans-Pacific Partnership (TPP). Hidden within hundreds of pages of text are provisions to privatize public services, including transport, telecoms, and intellectual property.
But Trump has promised to either renegotiate TPP or rip it up entirely. Trump’s rhetoric suggests a retreat from globalization. But the truth is much darker and more complex. Trump and the Brexiteers like Nigel Farage, leader of the far-right UK Independence Party, want to further deregulate global capital by weakening regulatory institutions like the WTO and the European Union. As part of a kind of global devolution agenda, future trade and investment deals may end up increasingly dominated by the U.S. and its British ally working outside of the traditional mechanisms of global governance. Let’s look at some examples.
Trump & Free Trade
A TPP-esque free trade deal was signed in 1994 between the U.S., Mexico, and Canada. This was NAFTA, the North American Free Trade Agreement, from which Trump has promised to withdraw. NAFTA put hundreds of thousands of Americans out of work, destroyed Mexican peasant farming, led to Canada getting sued repeatedly for trying to protect its environment, and made a load of money for U.S. corporations.
If these deals are so good for big business, why would billionaire businessman Trump and his team want to dismantle them? It turns out that Trump is not actually opposed to free trade. In his book, Great Again (2015, Threshold Editions), Trump writes: “The free market works—it just needs leadership.” “Leadership” is code for absolute American dominance. In The America We Deserve (2000, Renaissance Books), Trump writes: “We need tougher negotiations, not protectionist walls around America.”
When Trump talks about his opposition to trade deals, he means his opposition to multilateral trade deals, i.e. agreements where other countries have some power through supranational institutions, norms and regulations; or where they can work as a bloc to restrain U.S. exploitation. Examples of politically powerful trading blocs where the U.S. feels hampered include the EU and Mercosur in South America.
“I am not an isolationist,” says Trump, “but neither am I one of those giddy globalists who thinks that we should leave everything to the IMF and the UN.” In other words, unless America’s business class has total control over every aspect of trade and investment, America is “getting screwed” by its trading partners, in Trump’s view.
For example: according to an academic study of NAFTA and the WTO, “Mexico won in several trade dispute cases with the United States.” The authors note that Mexico challenged America’s protectionist measures on tuna and bovine labelling. This led to WTO challenges by Mexico over tomatoes and shrimp, with Mexico emerging triumphant. Even tiny defeats over tuna are intolerable for a superpower committed to a doctrine of “Full Spectrum Dominance” designed to “protect U.S. interests and investment.”
In the Bush years, America fought a mini trade war with the EU because the EU blocked imports of American beef, GMOs, and toxic chemicals. The U.S. retaliated by slapping huge tariffs on EU products with geographical indicators, such as Roquefort cheese and Scotch whiskey. Corporate Europe Observatory discovered that TTIP—the secret, TPP- esque deal being negotiated between the EU and America—was heavily lobbied for by the U.S. agricultural sector which has been badly hurt by Brussels’ decision to ban several U.S. agricultural products and require labelling for others.
By disintegrating Brussels, American businesses think they have a better chance of ramming through their products, including private insurance and energy, through bilateral trade deals. To date the U.S. has free trade agreements with 20 countries, including Honduras, Israel, and Panama. Nations weaker than America, like South Korea, find safety in numbers. A scholarly study finds that “[a] region-wide FTA [free trade agreement] is more profitable than subregional or bilateral FTAs.” However, Chris Dent of the Evian Group points out that “[i]n bilateral FTAs, the stronger partner”—i.e., the U.S.— “can have the power to influence the terms of FTA more in its own favour.” Pascal Lamy, then-Director-general of the WTO, described bilateral deals as “an instrument to get ‘brownie points’ and gain an advantage over other WTO Members.” Trump has spoken publicly about his preference for bilateralism over multilateralism. In addition, a trade strategy memo obtained by CNN reveals the Trump team’s plan to “pursue bilateral trade agreements with Canada and Mexico,” as well as with China. The knee-jerk reaction to Trump’s rhetorical opposition to “free trade” is appealing to the working people who have suffered under NAFTA et al. But what is coming could be more of the same, if not much worse. Enter Britain and Brexit.
Britain & Brexit
Brexit serves America’s interest in weakening Europe, hence Trump’s new love affair (“Bromance”) with UKIP leader, Brexiteer and free market fanatic, Nigel Farage. It was revealed that a pro-Brexit member of Britain’s ruling Tory party, Liam Fox (now Trade Secretary), had quietly asked Farage to forge links with the U.S. Fox himself is an Atlanticist and a founding member of the pro-business Atlantic Bridge.
An article by the right-wing Heritage Foundation notes that the EU was created in part by the U.S. as a bulwark against alleged Soviet expansion in Europe. When the Soviet Union fell, the EU no longer had a purpose. In the 1990s, the authors claim, America tried to use its closest European ally, Britain, as what it calls a “Trojan Horse” to push through neoliberal economic reforms which the French and German governments had largely resisted. They succeeded to a degree with the Maastricht Treaty 1992, which required even left-wing governments to cut back on social spending, even during the recession in the early 1990s.
But after the Financial Crisis 2008, the EU adopted a number of directives designed to limit the power of financial institutions. European negotiators also demanded a financial chapter in the Transatlantic Trade and Investment Partnership deal with the U.S.—a move that angered Washington. TTIP was stalling and free market fanatics were getting impatient with Europe’s slow growth, as compared to the mega-GDP growth of non-EU states, especially Brazil, China, India, Mexico and South Korea.
Since 2012, the Tory government in the UK has been plotting to distance Britain from Brussels. According to them, British business has been hamstrung by EU regulation. Their 2015 manifesto advocates “turbo- charging free trade.” Some EU regulation has harmed domestic producers, especially farmers and the fishing industry. Famously, EU quotas have forced fishermen to throw their catches back into the sea. On the plus side, the EU has protected consumers from American GMOs, hormone- treated beef and toxic chemicals.
However, the EU has frustrated Britain’s efforts to enter into tariff-free customs unions and trade agreements with growing economies. If British workers finding it hard competing with French trawlers for fish, it will be worse for them to compete with slave labor in the Thai fishing industry, should a post-Brexit Britain sign a trade deal with Thailand, for instance. How will British carmakers compete with South Korean manufacturers. Or what’s left of British steel to compete with China? The pro-Brexit, pro-free market think-tank, Open Europe, talks about the “creative destruction” of the British farming industry in the wake of Brexit. Indicative of how a core within the Tory party wanted Brexit, as soon as Prime Minister Theresa May took office, her cabinet was stacked with free market internationalists, not isolationists. These include: Philip Hammond (who immediately started negotiating China deals), Liam Fox (as mentioned above) and Priti Patel (who co-authored a book in which British workers are called “among the worst idlers in the world”). And just in case there’s still any doubt about what Trump-Brexit “nationalism” really means: ex-chancellor Nigel Lawson authored an article for the Financial Times entitled, “Brexit gives us the chance to finish the Thatcher revolution.”
Trump’s cabinet is stacked with billionaires. When we look at the funding campaign for Brexit, we also find that the pro-Leave funding sources came overwhelmingly from male, multimillionaire and billionaire hedge fund and asset management CEOs: Peter Cruddas, Peter Hargreaves, Crispin Odey, Stuart Wheeler. They were furious at the EU for its post-Crisis regulations designed to constrain their financial activities.
Trump and Farage are not tools of the establishment: they are the establishment. Farage is an ex-banker, ex-Tory who has called for reducing social spending at home and promoting free trade abroad, but outside of the EU. His UKIP party has asked hedge funds for money. In The America We Deserve, Trump says “nonpoliticians represent the wave of the future.” Business now has a direct seat in the White House. The kind of economic globalization pursued by wealthy, politically-active businesspeople has enriched a tiny few. Despite what they say during campaign rallies, it is not in their interest to withdraw from the world and become isolationist. For that reason, it seems logical to reject the theory that Trump and Brexit are signposts on the road to a new anti-globalized future. Rather, the post-WWII political institutions crafted by Britain and the U.S. GATT— the EU, the WTO, and others—are no longer fit for purpose because smaller countries have grown.
The paradox of the neoliberalism which has so benefited Anglo-American elites is that it is has enlarged the economies of Brazil, China, and India (often at the expense of the working classes on all sides) and given them power at international institutions. That power is challenging the total dominance of the U.S. Where once they invested in and traded with entire blocs, Britain and America will now attempt to smash this world order and negotiate with the fragmented pieces.
T.J. Coles is the author of The Great Brexit Swindle (2016, Clairview Books).