EconoMatters, Future of Globalization, Global Pairings

How the United States and UK Risk Their Global Goodwill

Britain is not alone in paying a price for its strategic isolationism. International disillusionment with the US has also begun.

Credit: GrAl Shutterstock.com

Takeaways


  • Britain and the US are at the forefront of seeing withdrawal as an answer to problems facing an evolving world.
  • The Brexit referendum that was to make Britain stronger has in fact weakened its position on the global stage.
  • Britain is not alone in paying a price for its strategic isolationism. International disillusionment with the US has also begun.
  • Blaming foreign competition for an income divide in the US isn’t encouraging for overseas investors.

Isolationists are gaining ground worldwide. From worries about losing jobs to concerns about the erosion of social values and cultural norms, disengagement and retreat from the international stage is seen as a viable solution to the looming challenges ahead.

United States and UK at the forefront

The most glaring fact is that Britain and the United States are at the forefront of seeing withdrawal as an answer to problems facing a rapidly evolving world.

But far from offering any longer-term solutions to the real worries of losing out to international competition, the isolationists are at a real risk of losing their political, military and social and economic power.

With even the staunchest of U.S. and British allies frustrated by their retreat, those supporters are already beginning to take matters into their own hands.

Asia’s concerns

With Brexit, non-EU countries are reassessing how they continue to do business in Europe, as Britain can no longer remain their gateway to Europe.

Never mind that for countries like Japan, Britain had been their base in Europe. Corporations including Toyota and Hitachi created over 140,000 jobs across UK as a result.

But while Brexit supporters have touted that leaving the European Union will enhance British economic competitiveness, such signs have yet to emerge.

In fact, the IMF predicted in October that Britain’s GDP growth will fall to 1.1% in 2017, compared to 2.2% growth in 2015. This is a direct result of Brexit and inspire of the British pound’s depreciation.

Japan speaks out

In a 15-page letter entitled “Japan’s message to the United Kingdom and the European Union” at last month’s G20 summit meeting, Japan outlined its frustration with the uncertainties created by the British referendum.

The letter was the result of a working group led by deputy chief cabinet secretary Koichi Hagiuda. It clearly stated that British-based Japanese companies will transfer their European headquarters to the continent (if EU laws are no longer applicable in Britain, after Brexit is completed.)

What’s more, Japanese worries about the future status of Britain in Europe is being shared by other non-EU countries, especially in Asia.

There is growing concern in London that Tokyo’s assertions and its hardball stance will be followed by others, including China.

Britain losing reliability?

But the real cost of London’s isolationist policy may well be that it has shaken the foundations of relations over the decades that spills out well beyond the economic realm.

The intense national debates within Britain ahead of the referendum underscored the unexpected strength of the anti-trade, anti-globalization and ultimately, anti-foreigner stance of many voters.

With popular sentiment becoming more insular, Britain’s reliability as an ally in diplomacy and in security issues has come into question. the concerns are thus not just limited to trade relations with Europe and beyond.

Moreover, confidence in a Britain that has the will and the wherewithal to be a leader in addressing transnational issues, not least to ensure global economic stability, has faltered as well.

In short, the Brexit referendum that supposedly was to make Britain stronger has actually weakened its position on the global stage, at least in the near term.

U.S. not far behind

Still, Britain is not alone in paying a price for its strategic isolationism. International disillusionment with the United States has also begun, especially as Washington continues to shy away from a global trade deal that it has been instrumental in crafting.

The economic merits of signing on to the Trans-Pacific Partnership aside, the fact that the United States could walk out of a negotiation at the eleventh hour, that it had been an integral part of puts U.S. credibility on the line.

As governments of the 11 other TPP member countries are pushing hard to have the deal ratified by their legislators, the fact that both U.S. presidential candidates are united in rejecting the TPP – at least as it currently stands – has been alarming.

In particular, blaming foreign competition for a growing income divide in the United States can hardly be seen as encouraging for overseas investors. At best, such “reasoning” is a wild stretch of the truth.

Declining goodwill

The trend to blame outsiders for many U.S. economic woes, when domestic reforms and reinvestment into projects, especially infrastructure, could do much to spur growth, has been alarming.

Like Britain, the United States continues to enjoy much international goodwill as a global leader in promoting democracy and free markets that it can continue to draw upon.

Yet, as public opinion in both countries continue to support greater protectionist measures and scaling back on global commitments, that goodwill may whittle down far more rapidly than expected.

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About Shihoko Goto

Shihoko Goto is the senior associate for Northeast Asia at the Woodrow Wilson International Center for Scholars. [Washington, D.C, United States]

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