Dr Tim Kane. A New Global Alliance: A Proposition for a 21st Century Political Order

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EVENT TRANSCRIPT: Dr Tim Kane. A New Global Alliance: A Proposition for a 21st Century Political Order

DATE: 1-2 pm, 17th of October 2019

VENUE: Committee Room 10, House of Commons

SPEAKER: Dr Tim Kane, JP Conte Fellow in Immigration Studies at the Hoover Institution at Stanford University

EVENT CHAIR: The Rt Hon Sir Michael Fallon MP

 

 

Michael Fallon (introduction):

Okay, welcome to everybody, to the Houses of Parliament. My name is Michael Fallon, and I’ve been invited to chair this particular meeting of the Henry Jackson Society. On a housekeeping note we are about to vote in the Commons so if I disappear for five minutes I hope you will excuse me. You might have thought that Brexit, the Brexit agreement today was a big deal but today’s topic is actually even bigger than Brexit. It is how we repair and refresh our international order, our liberal democracies can cope with potentially enormous flows of migration from troubled countries and how they can do so given the seeming withdrawal of the United States from its previous leadership role. The man who can explain all that is Dr Tim Kaine whom Id like to welcome to Parliament. I understand this is your very first visit to our Parliament. He has the background, the political, the military and the economic expertise to help us tackle these issues. So, Dr Kaine, over to you.

Dr Tim Kane:

Thank you so much. So, I did something –I hope you can hear me if I hold this up- I did something I normally never do which is I wrote my remarks. I may break from them to interact with you more. But I wanna make sure that I understand the format so I don’t go too long. What’s the time frame?

Michael Fallon:

We have an hour. We have to start exactly at one o’clock as we did and we have to finish exactly at two o’clock. But it is a great feature of Henry Jackson meetings that we do encourage as much interaction as possible so our speakers tend not to speak for a majority of that time. Twenty minutes would be ideal, if you have to take, if you need to take twenty-five, you know, that reduces the amount of time for questions.

Dr Tim Kane:

I will simply stuff if we go long, so we will have at least half an hour for conversation because I’d like to hear your thoughts as well. Now in the States at least I have habit of telling a bad joke before telling my remarks. So with that indulge me. I wanna thank first of all the Henry Jackson Society for hosting this and for hosting me. I came to Britain for the first time to the World Debate Championships at the University of Glasgow in the year 1990 and it was a real treat because I was studying economics and Glasgow was the home of Adam Smith for many years. Now, you may now he was appointed a professor of logic in 1751 and a year later became a professor of moral philosophy. This is before the discipline of economics was defined which he went on and did. Legend has it that he was walking home one afternoon with a flack of sheep, you know he wasn’t married but he stayed with his mother his whole life, and nonetheless he forgot the groceries and he realised he needed to figure something out so he asked the shepherd for a way he could count up all the sheep in the flock and if he can get the number right he’d get one and if he can’t then he gives him a coin, and the shepherd took him on so he surveyed and he said 472. And the shepherd was surprised but honoured it and told him to have his pick, Adam Smith proceeded to lift up the juiciest and was proceeding on his way and the shepherd said “double or nothing I can guess your profession”. And Adam Smith said “alright, go ahead” and he said “you’re an economist”. And Smith was amazed. The word hasn’t been invented yet but [laughter]. He said “how did you know”. Ah he said “put me sheep down”, or sorry “put me dog down and I tell yam”. So listen, I come from the States, I’m an economist and I’m famous for knowing how to count things but not necessarily knowing what they are and I come at this momentous time when there is a very weighty issue before us and I think you know what I’m talking about. As I discovered London traffic, the roads here are really astounding I’ve been here for a few days, leading up to this event and imagine they were built to be used by about two horses and now they accommodate about three cars so it’s a metaphor for the institutions that we have, and their legacies. Some of these instructions are tremendous. And when I was a young economist, as I mentioned, I was absolutely [inaudible] about the brilliance of Adam Smith. And the insights and the example, the empirical example of the United Kingdom growing to great power, 99 years of Pax Britannica, based on the principle of free trade. And yet I feel that institution has been neglected So let me return to the [inaudible]. I have to admit I was gonna include another comment, I was trying to get on the underground the other day, I was jumping on the Northern Line, and I couldn’t figure out, I knew I wanted to go south but apparently the Northern line splits into two, and so I asked one of the other people which one should I get on, he said you have to get on the train first, before you can figure out where you’re going. What a funny way to organise society! If we had our airplanes at Heathrow that way, ‘you have to get on the plane first, and we’ll tell you where we’re going. No, we wanna know where we’re going. We wanna control our destiny. I think that’s behind this urge with Brexit and I didn’t come here with advice. Or any deeper interpretations of the forces that led to Brexit. But I picked up a lot, I learned a lot from talking to everyone from taxi drivers to you know esteemed colleagues and other economists and scholars. So, there is a serious issue and I wanna thank Henry Jackson for letting us focus on it. I’m gonna propose today a rebirth of the UK-US alliance and I’m actually making the proposal formal for the first time. I come from the Hoover Institution at Stanford University, it’s an honour to be there with Condoleezza Rice and George Shultz who’s gonna turn 99 in a few weeks. [Inaudible comment from a member if the audience.] Yeah, I don’t doubt it, he had not slowed down at all. Jim Mattis recently re-joined Hoover, HR McMaster so to be in that atmosphere and to talk about these world events… I proposed a deeper alliance with the UK for a long time. My feelings though are [inaudible] by military service and how many times we shed our blood together. Even when I was at the Academy, we had exchange students from the UK. I was at the Air Force Academy as an undergrad. I graduated in 1990 when saw Soviet communism fall. And that was more than just a collection of allies on one side, and a collection of Warsaw Pact countries on the other. It was an ideological battle. And I think today we are engaged in an ideological battle. It is between the ideal of liberal democracy and free market capitalism and a pretty clear model which the Chinese are trying out which is an authoritarian capitalism, they call it communism but let’s call it neo-Communism. It’s pretty clearly hyper organised free market. just one example of what they’re planning to do is get rid of cash and institute a digital currency so they can monitor every transaction and tax every transaction. But the complete monitoring state is a challenge to the values which I think were largely birthed in this nation and then adopted by the United States. So, unfortunately I think America’s energy in engaging with the world and championing these values is weakening. The latest pull-back in Syria is embarrassing and shameful and really hard for veterans to witness it. I served myself in Korea and then in Japan. One country was an enemy that became a great friend and ally in these principles, and the other was; South Korea was far poorer than North Korea when the North invaded and has grown into another champion of the values that we hold dear and yet our energies are flagging, in fact one of my lines of research shows the percentage of US troops stationed abroad, for those who challenge that we are a new empire, relative to the world’s population is lower today than it’s been in 70 years. And it’s been on a downward trajectory. If you forecast out that goes to zero by about 2035. So the energy’s flagging and the challenge is real. And maybe this is a building block between our two countries to re-establish what those principles are and remember what they are.

So I look across the ocean to Europe and see something worse than weakening. I worry about the Byzantine supra-national regulations originating in Brussels that choke the spirit of economic dynamism. The very spirit of capitalism that was born here in the industrial revolution. Here. So if we turn to the metaphor of the traffic roads as a symbol of old institutions that were once marvel but desperately need to be replaced. So let me turn to one of the institutions that has been really waxed by modern times and that’s free trade. So from the Sino-American trade war of 2019, which we were warned just gonna be a squabble and it turns out they’re doing real damage now to hard-Brexit, confusion [inaudible] about the merits of free trade. Just one example, ideological principles of America’s two major parties, the Democrats and the Republicans are really unclear about where they stand on free trade. NAFTA was a bipartisan achievement, the North American Free Trade Agreement, championed by Clinton after it was initiated by George Bush. But now with Trump turning against free trade aren’t really sure what to believe, they’re secretly cheering him on and yet at the same time they wanna see him personally and politically fail. But on principle there isn’t a free trade party right now in America. And from where I stand, the unsteady principles concerning the great discoveries of Adam Smith in 1776 represent a level of ideological confusion that’s much wider than trade alone. And whatever reason human beings respect laws of the universe that are established in physics, law of gravity by Isaac Newton, and chemistry laws but not economic laws. I don’t know why. They are questioning now more than they did I the 1800’s what free trade is. I’m sort of flabbergasted to see Britain’s worried about access to European markets or worried about access to American markets because not how free trade works. Adam Smith explained, you should only care about having as cheap import as possible, it’s your tariffs that matter. That’s free trade, allowing others to sell goods to you, and the empirics back it up. Regardless of Europe wants to erect a trade wall or China does, I would explain to President Trump it wouldn’t matter if they dump cheap goods on us, that just lets our industries get stronger and we will upscale to more advanced industries. That’s the way it works historically but somehow we lost track of it and fallen back to this mercantilism that we need to worry about our exports primarily and that’s got it exactly wrong. So faith in free trade is about on pair with faith in Wales or England winning the world cup and I say don’t doubt Gareth Bale. My son and I are big soccer fans, I know you call it football here, we are really Chelsea fans now because you got Christian Pulisic now so anyone out there who’s paying attention to the Premier League, just want you to know we are watching closely.

Now I’d like to put forward two theories in the talk. The first is that the English speaking people of the world are forgetting who they are, and as I say that as an homage to Winston Churchill, a Prime Minister who is half American as you know and I can’t imagine the sadness he would feel witnessing what’s become of the self-confident ally across the Atlantic who once cherished their constitutional freedoms and institutions, and nowadays doesn’t pass [inaudible] a famous American scholar or a television show host doesn’t question the Bill of Rights whether it’s free-speech, whether the right to bear arms, birthright citizenship, the idea of federalism or the Electoral College. If we’re forgetting who we are that’s a problem.

My second theory is that the post-war institutions that’s defined the world order since 1955 are fading, Bretton Woods, the IMF, the World Bank even NATO. [Inaudible] question whether NATO should carry on, that question we answered once in 1990, I think to great benefit but I wonder about the presidents’ not just Trump but Obama’s as well who’ve constantly been pulling us back. And I think it is really appropriate, to say this with Scoop Jackson’s ghost watching over us; he would agree on this point. So let me just ask a question and maybe dull your senses a little bit. What’s progressive? Because I think they are on the other side of the position that I’m taking and it’s a question that Henry Jackson asked. In America modern progressives were, I should say, it traditionally meant to designate, left-liberals who favour income redistribution, wealth taxes, material remedies for social injustice, and let’s be frank Bernie Sanders isn’t a progressive he is a socialist, he is a leading candidate to win not the socialist nomination for the presidency, but the Democratic nomination for the presidency, and I’m not criticising him, this is what he himself describes himself as. He honeymooned in Moscow during the Cold War, so there is no hiding what he believes in. But it begs the question: does he believe in progress? I think of myself as a progressive and yet politically I am not, and the progressives on the other side have said we’ve got such a terrible society we live in, and we’re getting poorer and people are getting left behind. It’s interesting to look back then at Henry Jackson’s life. In a May speech in 1970 in California he distinguished the views in drift of many in his Democratic party, he called them radicals and he said they have a “doom and gloom view” of America that denies the existence of progress. I didn’t know this until I researched this speech because it’s a line I’ve been using to mock liberals for a long time. As it was recounted by Richard [inaudible] at the time, Jackson sounded the theme that reoccurred in his speeches many times the absolutists have lost faith in American universities, lost faith in the American system of justice, lost faith in America’s foreign policy, they have in fact lost faith in America. This loss of faith continues I think in both of our countries, coming back to this point about free-trade. I know you all feel it as well, loss of faith in British exceptionalism. Something I wrote about in my 2013 book called Balance, the Economics of Great Powers. Now we looked at the collapse of ancient Rome and the collapse of ancient China and imperial Spain and we knew our critics would say ‘what about Britain, Pax Britannica has faded’. So we included a chapter on Britain, but we do it tongue and cheek because we don’t believe that Britain has really collapsed. Made a mistake. It didn’t give representation their own representation right here in Parliament but barring that one mistake the alliance that has been forged afterwards is really a union of values, Enlightenment values that we’re continuing to fight for together.

But returning to free trade, the tide toward freer trade, it really began in 1945. But what was shocking was how it was abandoned by Britain in the wake of World War One. The return to free trade was initially with the General Agreement on Tariffs and Trade 1947, carefully negotiated established a principle of non-discrimination and it allowed though for separate FTA. This is a technical point, but because of this one regulation in 1947, or that one grand treaty, it said that you could have an FTA between countries, and it set up the rules for that. And I think it’s an important quote: ‘As long as participants apply substantially the same duties and other regulations of commerce to non-participants.’ So it basically opened the door to super-national regulation, that just to use an example, Britain could be part of the European Union if it followed the same harmonized labour policies and environmental policies. And we find ourselves promoting these FTAs now, with NAFTA, or with CAFTA, or with the Pacific Trade Area, as a country, our first was in 1985 with Israel under Ronald Reagan, that have these super-national binding and then arbitration agreements.

So here’s my central critique, our world’s been gripped by a cult of trade negotiations on the false moniker of free trade agreements, or FTAs, that are Orwellian. And FTA is an antithesis of free trade, and it must be understood not as an FTA but an MTA, or maybe a CTA. Managed trade agreement or conditional trade agreement; I’ll trade with you on this condition. It’s not free trade. Free trade doesn’t even require two parties. It’s one country saying we hold to the principle; we won’t have tariffs because it makes us stronger. Once we agree to free trade agreements, so called, they become concrete handcuffs. So my view is that FTAs are a synthesis of free market principles and a dangerous ideal of one world government. And I’ve talked to too many friends on the left, that’s exactly right, they think you can make war illegal, but as Jim Mattis likes to say, ‘the enemy gets a vote.’ You can’t just outlaw things and expect everyone to agree. And the handcuffs that we put ourselves in can make us weaker. So as an unapologetic libertarian I’ve been challenged with this rhetorical trick when I say I really support free trade: My friends will say, well, so do we, but we want it to be free and fair trade. And I’ve searched Adam Smith’s writings and he didn’t call for free and fair trade as the key to prosperity, it was free trade. And so they’ll challenge me, so you don’t believe in free trade, and usually so rhetorically you want to waffle from that one, and I’ve just started to just not waffle and say, no I don’t believe in fair trade at all, I believe in free trade. Let’s have our principles, let’s stick to our principles.

The context of fairness means what? That exports are more important than imports. That it’s got to be fair to the workers not the consumers. I think free trade puts the consumers first and that’s what Smith wrote about. It’s just a new mercantilism. So according to the US trade representative in fact, US goods and services with the UK are an estimated 262 billion dollars in 2018. And I was a little surprised to learn this, there is actually a trade surplus with the UK. So you’re on good terms with President Trump. I think that means you’re actually winning. But the founding principle of free, not fair, trade should be updated with a unilateral policy of zero tariffs. Now that doesn’t leave us a lot of room for an agreement, but I think it would be really great for our two countries to establish an agreement based on zero tariffs, maybe agree to zero tarries without conditions. But then do something more. Something might even be easier as a step to that. When I hear the leaders saying, you know, with Brexit now’s the time to establish a new FTA, I’d just like to maybe push back a little bit and challenge it. And say, could we have more? Could we have more than an agreement that is a CTA really and make people think about it a little bit? I think we should aspire to an alliance agreement. An alliance agreement, not just a free trade agreement. And maybe that’s just my own rhetorical trickery, but I mean it. I think we should be thinking more about trade and goods, and services, and investments, and ideas. We should think about movement of people and wonder why there are any restrictions on the movement of people between the United Kingdom and the United States.

So our nations enjoy a highly open environment already. You may wonder why do we need this. It’s relatively easy, right, to travel to the United States. Britain is one of 38 countries that falls under what we call a Visa Waiver Program. And the technical details are that you can apply online electronically, it’s very easy, you get an ESTA, and then over a two-year period you can come anytime during that, with just your passport, and stay for up to three months. That’s pretty free movement. Same in the reverse direction; the UK welcomes Americans to come visit for up to six months. So what’s Tim Kaine calling for? You can’t work when you visit. You can go to Disney Land, you can conduct business deals, you can’t really be a student either, that’s a separate visa category. And you can’t work. So it’s really challenging and it can be very slow and weighted by uncertainty to want to form business partnerships, where you establish a company seamlessly in one another’s country. Now, if I were to get too wonky I would talk about how nations grow. Like the descendants of Adam Smith who look at economic growth, tend to use a formula which is GDP equals a function of consumption, government spending, plus investment, plus next exports. And that’s led to the whole misunderstanding that you want to be a mercantilist and have your exports be greater than your imports. But that’s just an income identity, it’s not how nations grow. The supply side looks at an equation that’s more like GDP equals a function of capital and labour and particularly now human capital, so we modify that, and technology. And if we look honestly at the international data, the UK, Germany, and France, on a GDP per capita basis, using purchasing power parity, has been hovering at about 80% of the world frontier, if you decide to find US GDP.

Likewise, I’m supposed to carry one here, Ohio is lower than the frontier. Where I’m from. California really defines the GDP per capita frontier. But the UK’s hovered there for far too long to think its just a matter of you know a new trade agreement or more open commerce. The real key is having an entrepreneurial society, that word I used earlier, a dynamic society that welcomes change. That doesn’t try to protect jobs. In America today and I think this might be universal, isn’t the concern of politicians, were worried about immigrants who are going to steal our jobs, or we’re worried about trade that is going to steal our jobs, or now its AI, robotic technology that is going to steal our jobs, and I actually can’t keep up with the data. But I think the unemployment rate in the United States is the lowest it’s been in 50 years, it’s about 3.5%. When I was a student that was considered impossible, you couldn’t go much lower than 5%. So if all these factors are stealing our jobs they are doing a terrible job at it. Because we live in a dynamic society where we can create new industries and new companies faster than ever. The thing we should all be looking at is not whether can access Europe’s markets, or even if we can access America’s markets, its look at the doing business index. It’s an index put out by international authorities that assess how long does it take to start a company in different companies, how many forms do you have to fill out, those countries that are more dynamic allow you to start companies more seamlessly. And what I’d like to see is more UK-US start-ups and that shared culture, that inventiveness. Because we like to say we have the best universities, but I’m more giddy to visit Oxford later this week than I am to visit Harvard. So we have these shared cultures yet we’ve put a wall between our peoples working together.

So I don’t think the burdens on me to call for an alliance agreement and have to justify and explain it. I really think the burden is on the other side. Why are there any limits on free movement between the people of Britain and the people of the United States? I can’t justify it. I think it’s just baggage from a long time ago. And people might ask, is this a practical idea, right? Would President Trump ever support something like this? I think absolutely. President Trump loves big ideas, he loves to be contrarian, and frankly, the president has tremendous authority over the movement of people. Unlike trade which involves treaty, and horrible complications now with existing agreements, that would have to be run through the Congress. But at least we could have a conversation and get it started, and have it be suggested. So when someone here in Britain, tomorrow, talks to you about let’s do the US-UK trade agreement, I really hope this idea of an alliance agreement is one that you’ll push back with and think about going further. Because, you know, adjusting those numbers on the trade balances won’t really create or even lose many jobs, but whether you are a dynamic economy, when change comes, and change will come, through technology if nothing else, do you have the dynamism to keep growing, keep inventing new companies? You need brain power working together to do that. We already have a shared language. You know it’s hard to create companies with the French, but it’s not hard. It should be seamless and easy between our two countries.

So, I think James I’m done on time. But I’m really excited to get your feedback and engage in an extended conversation. Thank you.

James:

Well, thank you very much for that. So whilst Mike is not here, I will take over for a while as chair. I guess that leaves us with a 35 minutes or so of discussion. A deeper UK-US alliance, which includes not just an economic, but I suppose a strategic component, but things live freedom of movement of people. Quite a big thing for something to grasp. So I wonder if anyone has any questions or any responses. We can begin to ask those. Maybe if I take two questions at a time. The gentleman over there. Would you mind, also, just announcing who you are.

Questioner: [Inaudible]

I think it’s an interesting idea that so much of trade is about regulation and law. If so if you were to have a workable, tariff free zone between the UK and US, then the UK would have to open up to, would have to deregulate along American lines, which would preclude a lot of trade with Europe. And I think the danger in that, what would potentially happen is that Britain would become another state of the United States, being such a small partner relative to the United States. And our ultimate political autonomy would be threatened. In a way I don’t think it is in the European Union.

Dr Tim Kane:

I’d like to hear you extend that more, but let me share a couple thoughts. So my perception of free trade agreements soured. I advocated on behalf of NAFTA. I’m a big believer in partnering with Mexico as well. They’ve boomed under NAFTA. My eyes were opened talking to some of my friends in Mexico, who say they need the FTA to stop the worst impulses of some members of the Mexican government who want to regulate heavily. And that stops them. But I see the attitudes in America where they call for greater environmental – let’s pick Indonesia, right, or Jordan, and they’ll say, we’ll do an FTA with Jordan but they have to follow our labour regulations and have a limited workweek or whatever else they want to load into an environmental regulation. That inhibits the growth of that country, which is precisely what the people who want to pack the regulations in. Because they fear the competition with countries that maybe have the cheaper labour. And yet that’s really the advantage of a developing country. It has cheaper labour but it doesn’t have as much human capital. So in fact you’ll see sometimes there is trade, study trade economics, the empirics of it, and when trade booms regardless of agreements it will often be the country with the lowest cost capital. Even if it’s one-tenth the other, doesn’t incur a big advantage, because they don’t have a human capital advantage. It takes time to develop. But you’re undercutting them when you impose labour regulations. So the notion of the walled garden holds both sides back and so I lost favour with it.

I would say to the notion of being small, Britain being small relative to the US, a great comparison, analogy, was made by a friend of mine, a colleague, that the UK should think of itself modelling after Singapore which modelled itself after the UK, which became a very free trade regime. And Singapore became incredibly wealthy be being very open to trade. And I don’t know if that’s an insult to Singapore or an insult to the United Kingdom. I don’t mean it to be one way or the other. It only strengthened itself and it didn’t make itself a more junior partner to the world. It made it have a larger economy relative to the world when it reduced its barriers. Does that help?

Questioner: [Inaudible]

I very much agree with the thrust of what you are saying and I share the general argument, but on one issue I am uncertain, and that is on the environment: I mean, I think it’s recognized that we are really at a delicate stage as far as the environment is concerned. There are some initiatives now to link trade to compliance with certain minimum environmental standards. And I have a lot of sympathy for this. How would you deal with this?

Michael Fallon:

If I could be permitted a thought from the chair. As I understood it, you didn’t like free trade agreements that were more than free trade agreements. They were comprehensive, I think you used the word conditional. But they increasingly, or potentially include, environmental considerations and you yourself want to include migration considerations if you’d like. Isn’t that right? So they’re not as pure as you’d actually like them to be.

Dr Tim Kane:

No, I think my vision is to have free traded, openness to a market, as a bribe to then have access to labour. I would have them be not conditional on one another. I think both would be good. If one side violated the principle, I think it only hurts that side. But the question is, do I care or do I worry, I guess, that this might hurt the environment. And I don’t. Environmental concerns predate free trade agreements by centuries. The creation of the national parks in the US, the imposition of health standards, labour standards, and environmental conditions were decades and decades before GAAT. So I don’t think that concern goes away. In fact, it might free it up for some countries to go further. And there’s economic benefit for the countries, or the industries, or the individuals, that invent the technologies that address environmental concerns. And I think it’s too easy to, when you build a walled garden, if the EU, if you think of the EU as a walled garden, or the West, NATO countries as a walled garden, if China doesn’t participate we realize now we’re in the tragedy of the commons that’s global, when you deal with climate issues. So we can’t impose them through our trade deals to obey. And I’m not even sure the arbitration issues through the WTO would be effective.

Questioner: [Inaudible]

I’m a former law enforcement, intelligent worker … I am largely, very much an admirer, although with some criticisms. The point about the dangers of the UK becoming a junior partner … what would you say is vital in terms of services, skills, technology start-ups. Is your bureaucracy up to enabling that?

Dr Tim Kane:

The amazing thing about having spent time working in the Congress as a staffer is that I witnessed a parade of tax experts, who were working on tax policy, and who would quickly then after a few years become consultants and advisors to tax lobbying firms and big corporations. They wrote the law, they know the law, they knew how to exploit the law. So I think there is a similar expertise that becomes its own special interest around trade negotiations. And these, the USTR is filled with staffers that think that this is the way it’s done. Even if they have pro-trade instincts, it’s just become their worldview that it has to be negotiated. If I were president, I would slash the bureaucracy and explain unequivocally that we were going to go to zero tariffs and I didn’t really give a hoot what the EU did or what China did. I don’t worry about dumping at all. And I think the facts are on our side. But it’s tough because you find people that get that worldview. And it would be a slog. There would be plenty of experts quoted in the papers you know raising doubts. I just look back at the 99 years of Pax Britannica where it was a truly free trade country, and the repeal of the Corn Laws is just one of the great achievements in human history. It worked and we’re losing our faith in it.

Questioner: [Inaudible]

Objectively those countries that have applied free trade, which was the original British model, have done pretty well … Question at the moment is that the threats to free trade come both from the left-wing populist progressives, as you referred to, but also from right-wing populists. And so my question is how do you intend to try and meet that. What is the counter for this?

Dr Tim Kane:

That is a great question. There are populist movements that are worldwide, which I think some of it comes back to that lack of appreciation of what made greatness in the first place. People are always imagining they have new crises and problems, and certainly the art of politics is to tell people what to be afraid of. I don’t think though, I’ve done a lot of polling more on immigration than on trade issues, and I was really shocked at my polls of the American people which are not nearly as polarized as the politics and the politicians have become. They are much more welcoming to immigration, in general, this is true of republicans and democrats, they would welcome more refugees not fewer. But the fears are real of terrorism. So I don’t think it’s that hard to push back through democracy, but it’s the political bureaucracy that’s grown up around things that gets difficult. And I think frankly what’s driving populism everywhere is the new media environment were in, where the ability to have responsible, frankly it’s not profitable to be a responsible journalist. It’s much more profitable sot sound the alarm bells. We all thought naively that the internet would liberate us, and that we would be able to share so much information and find the truth. Yet it’s become a pile of untruths that gets very difficult. And filter bubbles, where it gets difficult to get to people. I don’t know the answer to that but I think that’s really the part of the threat that’s facing democracy. And I think that the Chinese and the Russians understand this very clearly, that it’s a threat to our democracy, and will exploit it.

Questioner: [Inaudible]

Dr Tim Kane:

I think Brexit gives us the opportunity to think fresh thoughts and to make bold proposals. So that’s really why I wanted to come here and talk about this. Its funny because America is such a big country. I think if I were to explain to my mom and dad that we didn’t have free movement, they’d be really surprised and say, why not? Right, so maybe it’s time to ask the question, why not. And there is not a really articulate answer on the other side. Although we have some thoughts and worries here, I actually wanted to come back to this issue of getting smaller and lack of conditions. The idea of free movement isn’t open borders. That’s code-word in the States that anyone can come to the US and instantly become a citizen. I think a free movement means that when an American comes to London, they stay American, even if they’re paying local taxes, and if a Brit comes to the States. So the voting rights and sovereignty don’t change at all. They can do business. And that’s the beauty of it. And it restores a core principle that I’m afraid we’ve lost sight of, which is you’re not really responsible for everyone. We have 181 million visitors come to the US every year, many tourists, many business travellers. And we don’t have to give them all free healthcare, and a pension when they retire. And we understand it when it applies to that and it’s not that difficult to just push the line just a little bit and yet preserve the citizenship lines.

Questioner: John Dobson (India Sunday Guardian)

I quite like thinking about conspiracy theories from time to time. One that you’ll be aware of is the conspiracy theory about the existence of big organizations like the EU and NATO. And it’s said that Putin and his very good friend Donal Trump both dislike organizations because if they’re broken up you can pick off the individual countries much more easily. Now if you look at the current situation, the conspiracy theory is that Putin is winning in that President Erdogan is coming to the S400 … in other words, Turkey is Putin’s puppet to break up NATO. And the other bit is that Brexiteers are Putin’s puppet to break up the EU. Now, whether you agree with that I don’t know but looking into your crystal ball, if in 20 years’ time, would you say that both of those organizations will exist or will Putin have achieved his objectives?

Dr Tim Kane:

Vladimir Putin likes to create turmoil and he doesn’t really care what it is. So I could imagine that if you followed the money trial, he would be funding both sides of Brexit and the hostility. We have certainly seen evidence of that in the US, in the Twitter ads that are being run. There is a lot of racial tension in the US, and we’ve found that Twitter ads were paid for by Russian trolls to exploit black fears but also to exploit white fears. So I don’t worry about that. Margaret Thatcher became very sceptical of the EU and the super-national soaking up of sovereignty from Britain and I know she was a patriot. So I think, my perspective is that Britain is going to be fabulous no matter what happens with Brexit, honestly. And the human capital doesn’t melt away, maybe they’ll be a restructuring of trade agreements, but I think you know standing up, and there’s at least a warning shot, that there is only so much regulatory sovereignty that Britain is willing to surrender is a moment to be cherished, regardless of what the new agreement looks like.

Michael Fallon:

So there’s a lot of thought in that. Who’s next?

Questioner: [Inaudible]

… How careful can you be to actually protect each nation? The ones that have an attraction that others don’t have, because there is an imbalance of services?

Dr Tim Kane:

I have mixed feelings on this and I don’t know if I can say it articulately enough. Economically it’s not sustainable to have open borders and I have very dear libertarian friends. And I say I am libertarian and libertarians are funny because there are no two that agree on everything so it’s like a good church debate. But it’s not sustainable and it will tax the system and there is a larger context in the time we live in, which are massive budget deficits in almost every country. We really haven’t seen the reckoning yet. I’m an optimist in general about the future except for our budget deficits, and I think the recession when the world starts to lose faith in the dollar, will be a very ugly recession. And I think that will come in my lifetime, in the near future actually. Social spending programs in America explain all of the budget deficit. Our GDP, per capita spending on national security, has been cut by two-thirds in the last half-century. And we’re seeing some of the chaos. NATO countries aren’t enforcing a more stable world order. If we pull out of Asia completely, leave Japan, leave Korea, the animosity among those countries is horrifying. So, we need to learn the lesson that these massive expenditure programs really aren’t sustainable. I think you’re right on that point, absolutely.

On the other hand, I emphasize often in the US that refugees turn out to be, often, our most patriotic citizens. One of my friends is a Vietnamese boat person, came to the US, went to West Point, after serving as White House legal office, he still felt that he had more to give back. So I think it’s a level of pacing and it’s also a level of emphasizing assimilation. I think it’s not a bad word that you should assimilate into English culture and you should assimilate into learning the English language. We had a bad experience where for a good decade people thought that was racist. And it turns out that it was the immigrant communities that said we don’t want our kids stuck in separate classrooms, they’re being disadvantaged. So I’m much more of an advocate now that cultural assimilation is a good thing.

Michael Fallon:

But it is the speed and scale of migration that presumably the Pax Britannica didn’t have to cope with. Didn’t have millions quickly uprooting themselves and moving to Britain.

Dr Tim Kane:

It’s been interesting. It occurred to me recently that the States now has two political parties. One is more internationalist and globalist and one is nationalist. But we don’t have a party any longer that is a localist party, that emphasizes federalism. But people still believe in it, they instinctively understand it. And schoolchildren are taught we had two Foundings: we had the Revolutionary War and the Articles of Confederation, where each state could have their own money, each state could have their own tariffs, and it wasn’t working. SO we now have this vast free trade area, which was an inspiration for many of the EU founders, and yet Michigan and Ohio can’t tariff one another and they also can’t regulate one another. So the EU only got it half right I think. I do think well come back to some centrist leadership. It’s a question of leadership. I’ve done too much opinion polling, and been involved in politics too much. Attitudes for free trade are terrible and yet politicians that embrace free trade, as Bill Clinton did, contrary to his party, as long as the GDP is growing and jobs are growing, the people tend not to be ideological, but we rely on our leaders to, you know, chart the path forward. So this is really an issue of explaining what’s right, what’s in our value system, what’s in our heritage and having leaders that embrace those. And I think they’ll be successful.

Questioner: [Inaudible]

I just wanted to pick up on the free movement people piece and the impact on the UK. As an immigrant in the US, you quickly find out something that isn’t the case here. Which is that almost all of the entitlement programs are insurance-based or you have to own your way into them. Which is not the case here … and that’s where I think we’ve gotten it very wrong here … the entitlements were immediately given upon entry.

Dr Tim Kane:

I think it’s very insightful and I’m afraid that we are still too generous and it leads to the wrong incentives. So, yeah, well done.

Questioner: [Inaudible]

Is there no area of commerce that you would you know exclude from … for example, Huawei is an example. Which would allow China a military advantage for example. Would you not exclude that sort of thing?

Dr Tim Kane:

I would ban products that are spying on people and that’s got nothing to do with how cheap they are. It’s a very interesting point. I remember when I was based in Japan and would talk to our friends and allies and they would justify various tariffs they had on rice. But like what if we ever got in a war and someone wouldn’t sell us rice. You could always play what-if-ism. Like what if this happened and we didn’t have steal or what if we imported all these cheap Toyotas and we didn’t have a car industry. And they went with war against us and Americans couldn’t drive around anymore. I think it’s so easy to restart and industry now. That’s a dynamic culture. But when you get to these modern technologies where you can spy on people and get leverage over their private lives, it’s a really different, it’s not a commodity at that point. So it requires careful consideration.

Michael Fallon:

I think there are examples of industries where we’ve had to confront this. We’re losing our steal terms for example. But the particular example I always give is warship building. You might think we’re completely out of warship building. It’s not something we do in a competitive way, compared to heavily subsidized yards in France and Italy, or the much cheaper working practices in Korea or whatever. But we are now since 1976 selling a new British warship to Australia and Canada. So the wheel has turned right around. It’s the high end systems. But these things can come back and we’ve had the space to develop them.

We’ve got four more minutes, sir …

Questioner: Inaudible]

Dr Tim Kane:[

I think it’s a really good point. And I have friends in the White House and I like a lot of what the president does and I want him to be successful. On trade I’ve been vocal on where he’s made mistakes. He’s not distinguished carefully enough between friends and rivals. Because Peter Navarro who is his main trade advisor is a mercantilist and President Trump has those instincts unfortunately. He doesn’t have the right view of how growth happens. The correct, supply-side growth view. So this is something that we nationally have to manage. And I think he’s got also some very good advisors-Kevin Hassett’s been a good friend, who’s recently left the White House-who are advocates of the point of view you have. But the reality is, yeah, that America has a new president or a new administration every four years. And we do it like clockwork. There’s a sort of instability in our stability. There is a tradition that presidents tend to come back to, wanting to favour American leadership in the world and believe the mythology that they’re promoting free trade. Even though now I’m trying to show a mirror to that this is not as free as you think it is. So, no, I think there is also a direction to history. And that direction is leading to stronger countries being the ones that are going to embrace liberal democracy and true free markets, and this is where Britain went a little astray when it lost its leadership on that principle.

Michael Fallon:

Well, Dr Kane, thank you. Maybe today marks the start of us regaining that advantage. But thank you in particular for how you’ve stimulated this discussion today. I know it’s your first time in Parliament but you’ll be able to go back and say that you’ve not only visited Parliament but you made a speech in the House of Commons, which is great. You began on a slightly pessimistic note, because quite rightly you asked us to examine our loss of faith in free trade and our loss in faith in some of the institutions that were originally designed to protect it. But in that examination of course, we’ve been led by you to confront the challenges of mercantilism again. And I’ve been much encouraged in the end by your overall sense of confidence that these countries, our two countries in particular, can rediscover some of the magic and the intellectual honesty of the original free trade. On behalf of all of us here, can I think you very much indeed.

HJS



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