If the sad truth is that Cameron simply doesn't care about Britain taking a lead in developing a more multilateral economic approach then so be it. But by doing so he's shutting the UK out of the game - with the US, the G20 and the EU.
David Cameron is busy gallivanting round the world to strengthen bi-lateral trade agreements. This week he’s in China, following recent talks with India and the defence agreement with the French government. But while it’s laudable to attempt to increase exports to the likes of China and India and improve relations with France, the reality is that Cameron is giving little attention to the forums where British leadership could have a much bigger impact in shaping policy – the G7 and G20.
The truth is that Britain needs to be able to export its way out of recession. But despite the fact that exports to China have increased from £3.8 billion to £5.3bn in the last two years, we still import around twice as much from China. So yes, we do need to increase our exports to China but that will not be enough.
People should also remember that we export more to Sweden than to China or India. Our main export market is the European Union, which accounts for over 50 per cent of our exports, and for many years we have been running a large export deficit with European countries. Reversing this situation is the priority. Next to our EU trade deficit, exports to China and India are tiny.
Another point is that these are still desperately uncertain economic times. In 2008 and, particularly, at the 2009 London G20 summit, Gordon Brown earned the respect and appreciation (although he didn’t get many plaudits at home) of the US, the G7 and G20 for his leadership in responding to the financial crisis. We forget that the recession could have been a whole lot worse.
But now, while the threat of financial meltdown seems to have been avoided – although a double dip recession may still hit the UK and other countries – many G20 countries have reverted to a dangerous economic nationalism. The US policy of further quantitative easing, which is partly a response to China’s refusal to devalue its currency, threatens to cause a currency war.
Meanwhile, the trade imbalances both at a global and EU level between countries with healthy export surpluses but low import levels and vice versa, are growing. We need to learn our history – and fast.
Following the Wall Street Crash a US tariff law intended to protect US farmers and industries led to duties of more than 60 per cent being slapped on 3,200 imported products. The consequence was that by 1933 imports into the US fell from $4.4bn to $1.3bn, while exports decreased 69 per cent over the same period.
The US tariff law ignited a domino effect of retaliation and counter-retaliation from other countries. It led to a collapse of international trade, decimated growth and drove up unemployment around the industrial world. It turned the Great Crash into the Great Depression. We are in danger of repeating such ‘beggar thy neighbour’ policies.
But Mr Cameron has weak relations with the EU, largely of his own making by withdrawing from the centre right European People’s Party grouping in Brussels, while foreign secretary William Hague and defence secretary Liam Fox make speeches about working with individual countries but not the EU as a whole. His economic stance of huge public spending cuts is also at odds with President Obama’s strategy for the US to grow its way out of recession.
A Government official pointedly told the press that the prime minister was less bothered about the G20 than Brown, because:
“… he’s had rather more important domestic issues on his mind.”
If the sad truth is that Cameron simply doesn’t care about Britain taking a lead in developing a more multilateral economic approach then so be it. But by doing so he’s shutting the UK out of the game – with the US, the G20 and the EU.
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