Trump vs Clinton: Does it Matter to Britain’s Special Relationship?
With the US election imminent, many of us are asking what the result might mean for us folks over the pond. What sort of effect will it have on the ‘special relationship’? And what role will the economy play in the outcome?
The enduring special relationship
It was Winston Churchill who first coined the term ‘special relationship’ to capture the bond between the UK and the US in 1946. As the son of an American mother and a British father, it’s unsurprising that he should have been such a cheerleader of the rapport between the two countries. He called for “a special relationship between the British Commonwealth and Empire and the United States”, who could “work together at the common task as friends and partners”.
Since Churchill’s day, the presumption that Britain’s place is by America’s side has been more or less accepted by all US presidents and British prime ministers. Yet it has also ebbed and flowed according to the policies, priorities and personalities of the leaders. Like any long-term relationship, it’s had its ups and downs.
The downs have included the Suez Crisis and the Vietnam War, both of which put it under considerable strain. On the up-side, the chemistry between Harold MacMillan and JFK and that between Margaret Thatcher and Ronald Reagan both demonstrated how strong it could be. Tony Blair’s time was more contentious. His links to Bill Clinton probably benefitted him, but his closeness to George W Bush and the accompanying decisions the two took together continue to cast a shadow over his legacy to this day. This year, President Obama repeatedly stepped up to add his weight to the Brexit debate, standing shoulder-to-shoulder with David Cameron on the remain ticket.
When the UK woke up to the reality of Brexit on 24th June this year, the White House was quick to reassure us that voting leave wouldn’t affect the UK’s relationship with the US for the worse. The true longer-term implications of Brexit on the special relationship remain to be seen in the fullness of time and could depend to some degree on the outcome of the US election. Stateside reaction to the Brexit result was very much split along party lines. Democrats, while stressing their respect for the decision of the British public, hinted at challenges ahead. Republicans greeted the news of the UK’s desire for greater independence more positively: “we value the principle of sovereignty, self-determination, government by consent and limited government,” said House speaker Paul Ryan summing up GOP feeling.
In day-to-day economic relations, our two countries remain closely allied. During the recession, decisions over the introduction of quantitative easing to both economies and over the raising of interest rates in the US and the UK were the product of a close ongoing relationship and a constant dialogue. The pressure to raise interest rates is now increasing in the US, but both countries have been keeping a close eye on the activity of their Transatlantic partners for any sign of movement.
Still the economy, stupid?
Not so long ago, elections were dominated by the economic cycle. If the economy was in good health, with low unemployment and strong growth, the ruling party could reasonably expect to stay in office. Conversely, a recession would likely lead to a strong protest vote against the incumbent and they could expect to be turfed out of 1600 Pennsylvania Avenue in short order. Famously, Bill Clinton’s campaigns were dominated by the phrase “It’s the economy, stupid”, a distilled four-word mantra of what motivated the voters.
In a mere 20 years, the cycle has reversed so that the economy is now dominated by elections and other geopolitical events (everything from national elections to international wars). Some might say that the prospect of a Donald Trump win is a one-man geopolitical event in itself, while Clinton is more of a known quantity. The direction of influence between election and economy might have flipped, but the economic policies of the candidates will still play a key part in informing voters’ decisions at the ballot box.
Key economic battlegrounds
Tax – Hillary Clinton’s stated aim is to tackle income inequality by raising taxes for high-earners. She’s proposing a 4% surtax on incomes over $5m, a boost in capital gains tax, the closing of tax loopholes for the wealthy, and an increase in the estate tax (the US’ inheritance tax). She has also called for higher tax breaks for healthcare and on education spending for middle-class families.
Last year Donald Trump set out a plan outlining the possibility of more than $10 trillion in tax cuts. According to more recent analysis by the non-partisan research group the Tax Foundation, his plans would cost the US government about $5.9 trillion in revenue over 10 years. His current proposals include reducing the number of tax brackets from seven to three, cutting corporate taxes, eliminating the estate tax, and increasing the standard deduction for individuals. According to the Tax Foundation, the top 1% of earners would see their income increase by double-digits, while the bottom quarter gets a boost of up to 1.9%.
Jobs – Trump has pledged to create 25 million jobs over 10 years, saying too many jobs, especially in manufacturing, are being lost to other countries. He will reduce the US corporate tax rate to 15% from 35%, and suggests that investing in infrastructure, cutting the trade deficit, lowering taxes and removing regulations will boost job creation. Clinton wants to boost the job market through investment in technology, renewable energy, advanced manufacturing and small businesses. She also plans to increase employment training. Independent experts have estimated that her plans will create 10 million new jobs.
Trade – Donald Trump’s approach to trade is driven by a desire to protect US industrial interests at all costs. This is at odds with the traditional free-market approach of the Republicans and is one of the most controversial and contrary of his policy areas. The Washington Post remarked recently that “for a businessman [he] displays a rare hostility toward economic freedom.”
He strongly opposes the Trans-Pacific Partnership and has said that he will re-open negotiations on already signed pacts, such as the North America Free Trade Agreement (NAFTA), threatening to withdraw if US demands are not met. Trump has also threatened to impose tariffs on China for ‘manipulating’ its currency against the US and accused Mexico and other trading partners of unfair practices and intellectual property theft, again promising punitive measures if reforms are not put in place.
This protectionism and hostility to international trade has left many commentators astonished and worried, particularly as exports have been a major driver of the American economy in recent years. Many suggest that not only would this economic nationalism damage the US economy but dent growth in the rest of the world also. Former US Treasury secretary Lawrence Summers went so far as to say that “if Mr Trump did even half of what he has promised, he would surely set off the worst trade war since the Great Depression.”
Hillary Clinton once called the Trans-Pacific Partnership the “gold standard” for international trade agreements. Her husband, Bill Clinton, oversaw the passage of NAFTA during his first term in the White House. With public sentiment turning against free trade deals, however, Clinton has toned down her line, stating earlier this year that “we have to trade with the rest of the world, but we have failed to provide the basic safety net support that American workers need in order to be able to compete and win in the global economy.”
Happily ever after?
It’s widely believed that this election has been the nastiest, dirtiest fight in the history of US politics. The open vitriol and personal attacks have made other political set-tos seem quaint in comparison. It’s been emotional and highly-charged, brutally unrelenting in smear and counter-smear. But when the dust settles, and the emotion and rhetoric have died down, will the special relationship remain intact?
It remains to be seen how a Trump or Clinton administration would take the relationship forward. Could we imagine the blossoming of a beautiful friendship between Theresa May and Donald Trump, a la Maggie and Ronald? How would the first all-female special relationship work if Clinton took the seat in the Oval Office? At this point, we can only speculate. It’s at times like this that we closely scrutinise the day-to-day detail of how this decades-old partnership works but perhaps now, more than ever, it’s time to take the long view for some guidance and perspective.
In 1956, ten years after Churchill’s speech, America, under Dwight D. Eisenhower, staged a run on the British pound in retaliation for being kept in the dark by Prime Minister Anthony Eden over Suez. Shortly afterwards, Eden, disgraced and dying, resigned. In 1961, a mere five years later, the special relationship had bounced back, even stronger than before, with Harold Macmillan and John F Kennedy. The ‘Mac and Jack’ show – the most improbable buddy movie ever.
Anyone worried about the future can surely take heart from this. Even when the special relationship has come under extreme pressure it has survived, often in ruder health than before, due to the will and belief of both parties. House speaker, Republican Paul Ryan’s response to the Brexit result summed up what it means to the US: “Our friends in the United Kingdom are our indispensable ally, and this is a very special relationship, and that relationship is going to continue no matter what. Period, end of story.”