Britain must get closer to Donald Trump, says HAMISH MCRAE

Europe has to embrace Trump. That was the big message from Christine Lagarde, president of the European Central Bank, last week. He said in an interview with the Financial Times that European politicians should cooperate with his tariff plans, buying more from the United States, rather than trying to retaliate. It was, he said, “a checkbook strategy.”

Follow the money. The brutal truth is that the European economy is in no position to wage a trade war with the United States, so its best option is to appease the new administration.

The European Commission is developing plans to buy more American agricultural products, cooperate on defense procurement, etc. This is in stark contrast to his attitude towards trade with the UK in the Brexit negotiations.

The task of our new Business Secretary, Jonathan Reynolds, is to use the fact that we are not part of the EU to our advantage. How can you do it? Five points: First, you must be aware that the United States will not receive special favors. It’s a lesson we’ve learned over and over again. Even during the warmest period of our relations, during and just after World War II, that was true.

It was a great shock to the new Labor government of 1945 that Lend-Lease, which kept us ahead in the war, ended abruptly after Japan’s surrender. We only managed to pay off the loan that replaced it in 2006. It’s a transactional relationship, as always.

Then it’s okay. We can be useful to the United States and we must identify what we want in return. One obvious area is trade in services. The United States and the United Kingdom are the largest and second largest exporters of services, but we are excluded from Europe. After Brexit, American financial institutions were forced to relocate staff to Paris and Milan, although in much smaller numbers than planned. That’s ridiculous. We both need open access to Europe for financial and other services.

Third, we can cooperate even more closely on defense. BAE is the world’s sixth largest defense contractor: the top five are American and the next five are Chinese or Russian.

Rolls-Royce and Babcock are smaller but important. This uncertain world will have to spend more on security, and we are reliable supporters of the United States in ways that continental contractors have not always been.

Fourth, there have been a number of detailed trade agreements signed by the previous Administration with US states, including Washington (Boeing’s main base), Indiana, Florida and Texas. This approach began when it became clear that a comprehensive trade deal between the United States and the United Kingdom was going to be too difficult. They are not substitutes for a broader agreement, which may open now that Joe Biden will no longer be there as a bloc, but in the meantime they are a useful middle ground. Reynolds needs to move on from them.

Finally, we must differentiate ourselves from the continent. We are not France, which is having difficulties carrying out its austerity budget. We are not Germany, which went ahead with construction of the second Baltic Sea gas pipeline from Russia despite the previous Trump administration’s efforts to stop it. We are not Italy, the only G7 country that joins the Chinese “Belt and Road” initiative. Although he retired a year ago, when the new government of Giorgia Meloni realized that Beijing was not the welcoming friend it pretended to be.

None of this suggests that the UK should abandon its efforts to improve trade relations with Europe. I just want to say that we too should adopt a checkbook strategy. If they want to sell us more things, what do they offer us in exchange?

One last point. The new United States Secretary of Commerce will be Howard Lutnick, head of Cantor Fitzgerald, whose offices were destroyed in the attack on the Twin Towers in 2001.

She only escaped when she arrived late that morning and dropped her son off for his first day at kindergarten. He rebuilt the company thanks largely to the London office, which continued to operate. There are no special favors, but he knows how important the United Kingdom can be as an ally.