December 18, 2016    3 minute read

Planet Of The Apes: Primitive Protectionism Will Hinder Global Prosperity

Inspiration From A Distant Past?    December 18, 2016    3 minute read

Planet Of The Apes: Primitive Protectionism Will Hinder Global Prosperity

 

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Pre-modern ages fortified themselves behind the sovereign state, behind protectionism and behind militarism. In a time where global unity is more important than ever to combat the threats posed by terrorism and cyber warfare, people increasingly find themselves backtracking the path of progression.

What The Future Holds

Pessimistic speculation suggests that next year could witness executive orders from the current president-elect to reverse Obama’s legacy. A pressured Merkel could be forced by Trump’s isolationism and Putin’s hostility to lead a military buildup in Europe against Russia, or deal with the devil and agree to Russian spheres of influence in Eastern Europe. Trump would have restored his friend Putin’s prestige, with the west recognising Russian dominance over Ukraine, Belarus and Syria.

The New Year could also see an economic war between the US and China. Such a trade war could pack as much detriment as the 1930’s Smoot-Hawley Act, when GDP, trade and the stock market fell by at least 50%. Islamic State could expand its drug operations out of Afghanistan, taking advantage of US detachment from the rest of the world. Marine Le Pen could win the French presidency and call a referendum on EU membership. And Italy’s Five Star Movement could come to power and reinstate the lira, breaking from the Eurozone.

The Domino Effect

True to Edward Norton Lorenz’s butterfly effect, the ripples of protectionism could well send economic shockwaves across the globe. The Organization for Economic Co-operation and Development (OECD) recently stated that global trade growth was “exceptionally weak” and employment would suffer if myopic politicians tied the noose around trade liberalisation. With a prediction for the weakest performance in UK growth since the recession, the OECD warns of tentative prospects for the UK, and its trading partners, as Brexit negotiations begin.

Bespoke Brexit may well be the best way forward for May’s government. A “Norwegian model”, where Britain joins the European Economic Area, would mean a multi-billion pound check to Brussels every year at the expense of the taxpayer. Not only this, but Britain would have to abide by many EU regulations – notably “freedom of movement”. This model simply will not satisfy the British voters, where many voted for border control or parliamentary sovereignty. A ‘Bespoke Brexit’ would allow the government to negotiate terms better suited to the UK, which considering our £60bn trade deficit with the EU would certainly beat the terms of the EEA route. In any case, the last thing one should do is become economically insular.

The UK-EU Divorce

Despite the government’s commitment to publish a Brexit plan before invoking Article 50, the complex process is surely an iterative one. Any plan will be obsolete the second it goes to print. Further, it could be a strategic mistake in a crucial time. Given the protectionist mood across Europe, fueled by high unemployment due to euro membership, a lengthy and laborious UK-EU negotiation could result in gridlock. This would only catalyse the annoyance of Europeans with incompetent politicians. The resulting divorce between the UK and the EU would be far from amicable and accelerate rising anti-establishment and anti-globalization sentiment across Europe.

It appears that a swift and painless Brexit is needed. Couple this with a decrease in myopic political leaders looking for quick-fix solutions and you have the vital antidote to curb counterproductive protectionism.

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