Donald Trumps team during April began announcing practical programmes for dealing with the trade issues theyd previously been merely vocal about

Donald Trump's team during April began announcing practical programmes for dealing with the trade issues they'd previously been merely vocal about

After months of loud – and often unrealistic – sloganeering, both the Trump Revolution and Britain's Brexit plans got a transforming injection of hard-nosed practicality in the first few weeks of April.

Just in time to deal with whatever new shocks French voters may have in store for the world's trading arrangements over the following few weeks.

Trump: Common sense beats pre-election posturing…

Donald Trump's team during April began announcing practical programmes for dealing with the trade issues they'd previously been merely vocal about:

  • China On April 12, Trump publicly abandoned his campaign pledge of telling the US Treasury to label China a currency manipulator. A few days earlier, he'd agreed with the Chinese President that their two teams would develop a plan to address trade imbalances between the US and China "within 100 days".
     
  • NAFTA A campaign pledge to announce on his first day in office the renegotiation of America's NAFTA trade deal with Canada and Mexico hasn't turned into anything concrete. Congress has to approve the team's objectives 90 days before talks start, the team hasn't produced them yet, and Congress can't consider them now till well into May.

    Early drafts of the objectives, though, suggest a lengthy agenda of technical issues, likely to take at least a year to get through negotiations – plus     time for legislatures to endorse them. No immediate import surcharges – and no change likely for a year or so in America's trading rules with either     country.
     
  • "Unfair" trade deals The campaign promised to "to identify all foreign trading abuses that unfairly impact American workers". On 31 March, Trump signed an Executive Order directing the Commerce Department to examine the causes of US trade deficits, country-by-country.

    Commerce Secretary Wilbur Ross said his department would complete a comprehensive analysis within 90 days of why the US is trading at a deficit with China, Japan, Germany, Mexico, Ireland, Vietnam, Italy, South Korea, Malaysia, India, Thailand, France, Switzerland, Taiwan, Indonesia and Canada.

    He said the analysis will assess whether a trade deficit is caused by one of seven factors:
     
  • Cheating
  • Ineffective free trade agreements
  • Poor US enforcement
  • Bad policy decisions by previous US administrations
  • Cheap currencies
  • WTO constraints on US behaviour
  • Deliberate overcapacity in some industries
  • Unfair foreign barriers

    Cynics may note the absence of other possible factors – like poor-quality US products. But realism was never part of Trump's campaign.

    Whatever Ross's team concentrate on, he's not even going to have a list of changes he wants to make before the end of June.
     
  • Border taxes Trump's campaign promised lower taxes: he said he'd have a plan offering ordinary people a 35% tax cut with Congress by now. An important part of the case was going to be some mechanism for higher import taxes to fund the cuts.

    After Trump abandoned attempts cut the cost of America's health system to the US government, cash for tax cuts is scarcer and his team doubt they'll get Congressional approval for a new tax system quickly. As for what form, if any, higher import taxes might take: no-one on the team is prepared to comment.

    The Treasury Secretary, Steven Mnuchin, conceded on April 17 that "it's unlikely that we're going to have a plan passed before August". Most Congresspeople think agreement on tax reform is unlikely before the end of this year.

So on four key planks of Trump's promised trade revolution – NAFTA, China, border taxes overall and "unfair" trade deals - it looks very unlikely we'll see any changes approved by Congress and turned into law this year.

Trump's team can act faster. It's recently:

  • Made life tougher for foreigners to sell in the US. In mid-April, for example, it changed the rules on how to determine Korean manufacturers were dumping oil piping below cost in the US
  • Helped the US government to extract more cash from importers. On 31 March another Trump Executive Order gave border officials wider powers to collect antidumping fines because in the 15 years to September 2016 they had failed to collect US$2.8bn of antidumping duties. Sounds a lot – but most of that $187m a year was for honey, crawfish and wild garlic.

On marginal issue like these, some decisions are now getting decided and implemented quickly. On the big trade issues, though, the team is beginning to realise that conforming to legal requirements and avoiding retaliation from trading partners just takes a lot of time.

…but leopards rarely change their spots

That, of course, isn't an attitude that comes easily to Donald Trump. So no sooner did his press secretary admit how long it would take to get NAFTA talks started than the President started attacking the laws on managing trade negotiations as "rules and regulations that are horrendous".

Clearly few pragmatic decisions don't mark an outbreak of grown-up governance.

Meanwhile, in Britain:

Over the past month, the British government began grasping the sheer scale of the problems it has to solve to leave if it wants an EU exit at the end of March 2019.

  • First the divorce settlement. Its EU partners made it clear that full negotiations on future relations would not start until there was agreement on a divorce payout. The EU's pushing for EUR60bn (US$64bn).
  • Border friction. Prime Minister Theresa May had earlier announced she wanted the UK to leave the EU's Customs Union and the Single Market at the same time as it left the EU. During March and April, it became increasingly clear the UK was in real danger of not having adequate border facilities, trained staff, Customs processing capacity, or capability for regulatory conformance checking to operate the borders with the EU that would have to be established by 1 April 2019.
  • Migrants. Britain hosts – and employs – about 3m migrants from other EU countries, while about a million (mostly retired) Britons live elsewhere in the EU. It seems impossible to keep the UK economy going without continuing to employ most of these 3m.
  • Other arrangements. Britain cannot begin negotiating new trade deals until it has left the EU. It is unlikely to be able to move the tens of thousands of regulations and judicial processes established while in the EU into UK law in just two years.

The UK government's preferred solution, parts of which leaked throughout most of March and April, appears to be to leave the EU almost only in name on 31 March 2019, and to retain some kind of transitional relationship for some time thereafter.

Dream or nightmare?

Properly handled, such a process would ease many of the fears expressed about Brexit within our industry. It would enable borders to remain open until adequate software had been fully tested, UK apparel factories to retain their EU workers – and possibly, UK importers to retain duty-free access to fast-fashion manufactures in Eastern Europe and Turkey.

Unless such an arrangement is adopted, the nightmare for the UK government was to hit all the real problems of leaving the EU in 2019 (including a formidable departure tax), have none of the benefits of access to other markets for some years – and then find itself electorally destroyed during the planned 2020 election by anger at the botched Brexit management.

A surprising outburst of multipartisanship

So Mrs May's proposed solution produced the single most surprising event in the English-speaking world for the past two years. She decided to call an election three years before the next one was due: for which, under UK law, she needed a two-thirds majority of what is probably the most bitterly divided Parliament I can remember in my lifetime.

The proposal was passed 522-13. The election is on 8 June.

Her party wants to go through the negotiations and transitional period without an immediate election: her opponents want to give her a hard time in the campaign.

Next up: elections

A set of UK local elections were already planned for 4 May, and they're going to offer an unusual rehearsal of public opinion for the June national election.

By then, we'll have the results of the 23 April first round of French Presidential elections after a late March surge in polls for the anti-EU Jean-Luc Melenchon. His policies include 100% tax on incomes over EUR360,000 (US$390,000), easier immigration, legalised marijuana and more barriers against imports – whether made in the EU or outside.

The allegedly populist governments of the US and UK seem to have gone more mainstream lately: but France now faces the possibility of a fight in the 7 May second round between Melenchon and the equally un-mainstream, but right-leaning, Marine Le Pen.

If either won, they'd hurt the EU far more seriously than Brexit. If neither win, the widespread belief in the UK and US of imminent EU breakup will be clearly just deluded make-believe.

The next month looks fascinating. And that's just the known events.