Emily Thornberry MP is an admirable and impressive person. Scandalously overlooked for high office, she has the consolation of knowing that she would have been (and may yet be) a far more effective minister than most if not all of the current clueless Cabinet. She is chair of the Foreign Affairs Committee, well informed and widely respected.
So she deserved our attention when she said – on the Today programme at the start of the week – “let’s sit tight for a moment” on the Greenland crisis. It was sage advice. In 72 hours in Davos, we went from the collapse of civilisation as we know it to ‘Donald Trump’s art of the deal – Greenland edition’.
It makes for astonishing political drama, but the events of the past few days will have left businesses seeking to trade with the US – many of them in food and farming – wondering if the risks involved are worth the potential prize. Those companies, many of them exhorted to trade by a government rightly desperate for growth, faced real financial peril with the suggestion of a 10% additional tariff within 10 days, and possible ruin within a couple of months if President Trump had gone ahead with a subsequent 25% bump.
In fact Thornberry was channeling her inner Corporal Jones. “Don’t panic Mr Mainwaring” is usually right – except when you are trying to sell products in a country hundreds of miles away. Then abrupt action may well be the order of the day. For most food businesses which trade with the US, a 10% increase on top of existing tariffs would have been at the very edge of profitability. A 25% increase would, almost certainly, have rendered trade unviable.
It would also mean those goods already on the high seas would be lost: their value vaporised by a business-savvy American leader who knows exactly what he’s doing by undermining those importing into the US to the benefit of domestic business. With Trump it’s America First every day.
For the moment the danger has passed. But with Trump, you can never know: anything can happen in the next half hour. We should assume that as long as he is in the White House, Europe has a target on its back, and European companies trying to do business with the US are acceptable collateral damage.
How can UK business protect itself?
So, what can UK food and drink businesses do to insulate themselves against such random, but existential, threats? If I was still leading the Food & Drink Export Council, this is what I would do.
First, I would want to ensure industry organisations are telling ministers, their opposition shadows and every other elected representative exactly how the new tariff changes hit and why ‘sitting tight’ is not an option. Those organisations need to be brutally clear about the damage to jobs, prosperity and our communities that will accrue from President Trump’s quite calculated actions.
Secondly, all businesses, but particularly those in food and drink, must be clear-eyed about the risks of doing business with the US, China and even with many other foreign nations. In our current volatile times a useful rule of thumb might be “can I afford to lose every product I have shipped to country X which is in transit or hasn’t yet gone on sale?”
That might be the scale of the financial risk – if you can’t afford to lose it, stop trading.
To improve those judgements managers must make themselves experts on the drivers of potential volatility in overseas markets. The past is now absolutely no guide to the present and certainly not to the future – leaders like Mr Trump and President Putin have trashed the established rules-based order. It will not return.
Thirdly, business leaders – and their representative organisations – must engage our political class on the details of trade policy. They should ensure that everyone from Emma Reynolds and Peter Kyle through to Thornberry and even Nigel Farage are crystal clear on the consequences, risks and costs to their constituents of support for Trump, for membership of the EU customs union, or even for Mark Carney’s wise suggestion of an alliance of those relatively few remaining liberal democracies. Every one of those possible courses of action come replete with more risks than opportunities.
This is a vital but huge task. It reminds me of the monumental effort undertaken by the NFU under Tom Bradshaw and Terry Jones. They went door to door across Whitehall and Westminster to deliver a reversal of the government’s small business Inheritance Tax proposal. It took them over a year, involved their whole organisation and exhausted it. That is what it will take to recalibrate our trade policy to minimise risk and give prosperity a chance.
Ian Wright is a partner at Acuti Associates
No comments yet