Apparel Sourcing Intelligence - Worldwide

Why voters don’t want any more global supply chains

I spent the first six months of 2016 campaigning in Britain against Brexit. Not once did I hear a Brexit supporter attack global integration.

Scarcely anyone in Britain opposes global integration. What 52% of those voting (actually a 38% minority of the British electorate, since 28% couldn’t be bothered to vote) were against was:

  • The right that EU membership gave more than 450m other Europeans to move into Britain and almost immediately have access to British jobs and welfare benefits;
  • Subordinating almost all British law to European regulations, presided over by courts based outside the UK;
  • The barriers imposed by EU membership against trade with the world outside the EU;
  • A net annual bill of around GBP9bn to fund an organisation many believed was holding Britain’s economy back.

Most British Brexit supporters wanted a simple free trade agreement with the rest of Western Europe – and similar deals with the rest of the world. They wanted real globalisation: not the extravagantly over-engineered, spendthrift and inward-looking protectionism they believe EU imposes on its members.

I opposed Brexit – like most of the British business community – because I believe its advocates’ ambitions are unrealistic and potentially damaging.

But we had to recognise our opponents’ dislike of growing external interference in Britain’s management – and of the costs it imposed on British taxpayers. It’s impossible to imagine anyone in Obama’s America or Trudeau’s Canada accepting these aspects of the EU – or regarding their country’s insistence on self-government as “repudiating globalisation.”

Who’s rejecting globalisation in America?

In the US, the truth is a lot more complicated than: “Should Trump become president, then we will see a rejection of globalisation.”

As far as foreign trade is concerned, both Trump and Clinton oppose the Trans-Pacific Partnership (TPP), which is now in real danger of disappearing altogether, writing off seven years’ hard work by negotiators from 12 countries.

With Britain – until now the EU’s most trade-friendly member – no longer involved, the Transatlantic Trade and Investment Partnership (TTIP) looks threatened too – and opposition to it is hardening throughout Continental Europe.

To simplify: Trump wants the US to do far less international trade than at present; Clinton wants restrictions on much more international trade.

So what are Britain and the US rejecting?

With or without Trump, Americans look likely to want slower expansion in foreign trade.

British voters didn’t reject “global integration” of supply chains: they rejected a particular version of international cooperation many thought wasn’t right for Britain, and some thought wasn’t global enough. That version included policies on migration, foreign governments’ jurisdiction, compulsory subsidies to other countries and restrictions on trade deals that nowhere outside Europe has ever even considered adopting.

With or without Trump, voters in Britain and America are getting increasingly uncomfortable with deals they think are integrating economies too far.

Why the rejection?

Four reasons:

  • Most of the West bought into freer world trade in the 1990s and the beginning of this century. But since the 2008 recession, unemployment, corporate profits and senior management pay have rocketed, while average earnings have at best stayed flat. Growing numbers of Western voters believe they’ve paid for a theory of free trade that hasn’t delivered for them.
  • Too much government-to-government debate on new free trade agreements has been conducted in secrecy. This has encouraged all kinds of conspiracy theories – and some of those theories really do seem founded in fact.
  • Since 2008, far too many companies’ senior managers have avoided sharing the pain imposed on their current and former employees. Detroit’s carmakers used fleets of private jets to plead with Congress for taxpayer bailouts in 2008, while Philip Green took hundreds of millions in dividends from his BHS stores while failing to contribute to his employees’ pension funds. Austerity programmes seemed to be aimed only at ordinary people.
  • Since 2000, no business pushing for even more free trade has offered a credible, simple summary of how that will benefit Western voters

Is the problem just in Britain and the US?

Opinion polls show other European voters are even more unhappy with the EU than in Britain – mostly because they too think the EU’s intruding more than it should into things national governments should deal with. Meanwhile, opposition to further trade liberalisation in most developing countries is probably even more powerful than in the West. For example:

  • In India, progress towards real free trade agreements has been agonisingly slow. Indian businesses oppose Western competition in Indian markets like retail and insurance in return for improving other Indian companies’ access to Western markets.
  • In the proposed Vietnamese trade deals with the EU and US, Western governments believe Vietnam will keep subsidising domestic companies. So they’ve agreed a seven-year delay on full duty-free access for Vietnamese apparel exporters till there are convincing signs of Vietnamese reforms.
  • In their three-way trade discussions with China, both Korea and Japan have similar suspicions about China. So they’re moving very cautiously indeed.

Practically every developing Asian country wants better access to Western markets. Few are prepared to offer better access to theirs in return.

Whose job is it to deal with it?

Does the problem lie with politicians who have poorly described the benefits of free trade, as so many pro-liberalisation lobbyists argue? No. The problem is that deals are going further than voters’ comfort zones. And businesses expecting more free trade are unprepared to make a credible case for how that liberalisation will benefit the voters they want to approve their case.

Trump, politicians or Brexit campaigners haven’t created the current hostility to mismanaged globalisation. Businesses wanting more international integration have to make a better job of arguing for it than they’ve managed so far. If they doubt they can, they have to assume that integration has – for now – pretty much reached its peak.