Why UK avoids picking a side in multipolar world

Good morning. The British government is not joining in the global trade war or in attempts to regulate artificial intelligence. Some thoughts on why that is below.

Staying on the sidelines

The UK will not join the EU in threatening sanctions against the US in response to Donald Trump’s global tariff on steel and aluminium imports nor will it sign an international communique on AI safety.

From a policy perspective, this is a no-brainer. In his Sunday Free Lunch newsletter, Tej Parikh went over the ways that Britain could surprise on the upside over the next few years, and one way was for the country to be “geopolitically promiscuous”, as Marko Papic, macro and geopolitical expert at BCA Research, put it:

The UK should be pursuing an independent trade policy. The advantage of being outside the EU is going to diminish if the UK simply adopts an American attitude towards China. A multipolar world is one where geopolitically promiscuous countries outperform.”

The UK is not inside the customs union of the EU. Indeed, it is outside all the economically significant trading blocs. As regular readers will know, I think this a bad thing and I wish it were otherwise. However, given that we have a Labour government that does not want to reopen the question of our institutional relationship with Brussels, and a Conservative opposition that will scream the house down at anything that even looks like getting closer to the EU, what we ought to be doing is finding routes to making the best of that situation.

And the Trump era provides one way of doing that. Whereas the EU is significantly more exposed to the president’s tariff measures, the UK — which exports just 5 per cent of its steel to the US — has more room to manoeuvre. It can have it both ways, sidestepping a tit-for-tat on trade with Trump and avoiding having to put its own, low-tariff approach to China on the table.

The UK, as it stands, has lower tariffs on China than the US or the EU. Our interests are well-served by finding ways to avoid having to pick a side between the world’s trading powers. And when it comes to AI, too, the UK does not really stand to benefit by being a small, “safe” market outside of those powers. If you’re thinking about doing research in the UK, you already have to accept a fairly limited market, and a series of regulatory and human barriers between you, the EU, US and China. What frankly is the value add to the UK if it regulates as tightly and as cautiously as the EU, but is smaller and weaker?

But while the policy calculation is a no-brainer, the politics are not. Plenty of Labour voters want the UK to use the Trump era as an opportunity to undo its divorce with the EU, rather than to seize the opportunities of being “globally promiscuous”. Seeing the government sit back and roll over for Trump is not going to make liberal voters warm to Labour. And should some event or moment make China as unpopular among British liberals as Trump is, the pressure on the UK’s ultra-pragmatic approach to global trade may prove insurmountable.

On top of all that, what works best for the UK as a small, open economy outside the EU may make it harder for the UK to plot a course back to being a small open economy inside of it: the thing that most in the government still secretly hope will happen one day.

Get the FT’s weekly briefing on trade for premium subscribers straight to your inbox (sign up here). Expect rigorous analysis by senior trade writer Alan Beattie, who was previously the FT’s international economy editor and world trade editor and has reported from Washington and Brussels.

Now try this

I was at the launch of my old political correspondent Patrick Maguire’s new book Get In (co-written with Gabriel Pogrund) last night. I am very much looking forward to reading it. Robert Shrimsley’s review is here.

Top stories today