UK should ignore Donald Trump’s Brexit threat – free trade deals can fall apart, as history shows

Don of a new era. EPA

Donald Trump’s visit to the UK will have concentrated the minds of MPs still coming to terms with Theresa May’s Chequers “agreement” and the cabinet walk-outs that followed. The American president made clear that the government’s Brexit plan would remove any chance of a free trade deal with his country, albeit later toning this down. For MPs facing the thankless task later this year of choosing between staying closely tied to Brussels or doing no deal at all, this raises the stakes still further.

Notwithstanding, those who prefer the idea of the UK riding to prosperity on a wave of free trade agreements after Brexit should pause for thought. The tensions around global trade are hardly a good omen. Trump is centre stage here, too, having provoked protectionist tit for tats with the EU, Russia, Mexico and the Chinese.

Foreign Secretary Francis Osborne in the 18th century. Wikimedia

Those who still believe the good will out should read up on another occasion when Britain was deep in international trade negotiations – the late 18th century. In November 1786, when the then foreign secretary, Francis Osborne, referred to “the present rage for commercial treaties”, he knew what he was talking about.

Between the end of the American War of Independence in 1783 and the outbreak of war between Britain and revolutionary France in 1793, the UK was involved in trade negotiations with eight of its European neighbours – France, Portugal, Spain, Russia, Poland, Prussia, Sicily and the Dutch Republic. It was also considering similar negotiations with several others.

Many states were caught up in this mania for trade agreements. Such deals were not unusual, but the large number between 1783 and 1793 was exceptional. In part, this was symptomatic of a growing revulsion against a system of protection broadly known as mercantilism. Many politicians and economists were convinced that the best recipe for economic development and growth was to remove restraints on trade. From Britain’s perspective, meanwhile, the loss of the newly independent United States also meant it had to reevaluate much of its foreign and colonial trade.

All talk

Brexiteers might consider what happened next. Despite the “rage” for trade treaties, only one British negotiation bore fruit. The Anglo-French agreement was concluded in September 1786, after just six months of close negotiations. It removed or substantially reduced all duties and tariffs between the two countries.

The reason it succeeded was the clear commitment on both sides. The English representative, William Eden, was both on top of his brief and a very able and determined negotiator. Ministers refused to allow individual sectors to imperil the larger objective of safeguarding British commercial interests. The treaty also promised a major improvement in political relations between Britain and France, who had been frequently at war, inside and outside Europe, in the recent past.

The failure of the other trade negotiations can in part be attributed to the absence of that determination to succeed, Britain’s desire not to abandon its traditional commercial advantages, and a fear in those other states of the consequences of opening up their domestic economies – less robust than that of France – to British competition. This was particularly an issue with Portugal, Prussia and Spain, where manufacturing had hardly developed up to that point.

There were also instances where a deal was undermined by a change in Britain’s political relationship with the state in question. A case in point was the confrontation with Spain at Nootka Sound, off Vancouver, after the Spanish seized British fur-trading ships with no justification. This nearly led to war in 1790. Another common problem was the rise or fall of politicians more or less committed to doing the deal.

Nootka Sound crisis of 1790. Wikimedia

The cause of trade treaties was undeniably also damaged when a major downturn in the French economy post-1786 helped lead to revolution. This confirmed many rival leaders’ existing fears about the economic effects of such deals. Changes to the economic or political weather seem every bit as likely to derail trade negotiations today.

While more gung-ho Brexiteers should bear this in mind, history does also offer a case study that might point to a useful alternative strategy after Brexit. Around the same time as Britain’s 18th-century hopes of multiple trade deals were floundering, another state was mastering the art of commercial diplomacy.

The other Amadeus – Victor of Savoy. Wikimedia

The kingdom of Sardinia, which would go on to unite Italy in the 19th century, was wooed by various other states in the decades leading up to the French revolution. The king of Sardinia, Victor Amadeus III of Savoy, was reluctant along with his ministers to commit to full free trade deals, but they did reduce lesser restraints on trade instead.

They reached agreements with a number of states which effectively exempted ships from incurring duty when entering the port of Nice, which the king owned at the time. Similarly, deals were done with various states making it easier for the relations of foreign merchants who died in his states to recover their property. While more ambitious trade deals like those attempted by Britain and the major European powers had failed, policymakers could not ignore the value of secondary-level commercial agreements like these.

Those framing policy today and tomorrow might well ponder the experience of a past generation that did not achieve all of its more ambitious goals and had to settle for less exalted successes. The modern equivalent for Britain might be to accept deals with other countries that only cover certain sectors, for instance.

At the very least, Britain needs to proceed cautiously. Trump’s “America First” rhetoric and protectionist measures suggest a zero-sum game for any country that engages in trade negotiations. And as Francis Osborne would doubtless remind us if he could, other potential partners in free trade are unlikely to behave very differently.

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