Should we trade with the enemy?

Lord Adonis, John Kay and Janne Teller debate

Trading with the enemy

 

Russia, China, Saudi Arabia, these are all countries that the West has moral qualms over.  And yet, despite some selective economic sanctions, Europe and the US continue to heavily trade with them. Is this a sign of hypocrisy and weakness on the part of Western leaders? Or is morality simply not a good guide to foreign policy? Politician, journalist and academic Lord Andrew Adonis, one of the U.K.’s leading economists John Kay, and macroeconomist, novelist and former UN humanitarian Janne Teller, recently debated the moral perils of international trade at the HowTheLightGetsIn festival in London.

 

Several years ago, when it was clear that Saudi Arabia had been systematically brutalizing its female and homosexual population, the BBC’s weekly current affairs show, ‘The Big Question’, ran a debate with the question ‘Should the UK cut ties with Saudi Arabia?’

 

One of the panelists was the now famous right-wing author and journalist Douglas Murray. When Murray was posed this question directly by the host Nicky Campbell he answered, ‘It’s not that simple…we can’t just cut ties with Saudi Arabia…if we do other countries…far worse countries, will simply take our place’. His response was met by a sea of collective groans, but also a mild smattering of applause. Murray had touched on a very pertinent problem at the heart of Western economics. Prosperity often comes at the cost of trading with everyone, even those who commit atrocities.

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Fast forward 7 years, this issue has resurfaced in a profound way. At the time of writing, Russia is 9 months into its savage and illegal invasion of Ukraine. Whether one places culpability for this conflict on Putin, erstwhile Western policy, or a mixture of both, most in the West believe it to be an unconscionable act. Despite this, and all the economic sanctions imposed on Russia, the EU is still importing 260 million euros worth of Russian fossil fuels every day.

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Should we cut ties with nations that commit atrocities? Do we need to keep our enemies close to smooth over global conflict?

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Similarly, in the past decade, China has not only succeeded in democratically gutting Hong Kong, but has also carried out one of the most well-documented violations of human rights, that some go as far as calling a genocide, of the Uyghur Muslim population in Xinjiang. Despite this, China remains by far the West’s largest goods trade partner.

 

Such examples pose a myriad of questions: Should we cut ties with nations that commit atrocities? Do we need to keep our enemies close to smooth over global conflict? Do we need to rewrite our core economic beliefs or can free trade be rescued?

 

This was the topic of just one of the wide range of debates at the most recent HowTheLightGetsIn Festival in London. The line-up was stellar, including former Labour politician, journalist and academic Lord Andrew Adonis; one of the U.K.’s leading economists John Kay, and macroeconomist, novelist and former humanitarian Janne Teller.

 

John Kay was first to take the floor. On the question of whether we should only trade with countries that share our values, the answer from Kay was a quick and definitive ‘No’. If many can’t even agree on values they share with Donald Trump or Liz Truss, how on earth could we have a unified set of values against which we compare other countries? The question of ‘values’, according to Kay, can only be applied to individuals. We should rightly restrict trade with people or businesses who are dishonest, immoral or inappropriate, and in fact sometimes we have a moral imperative to do so. But doing so at a country-level is a different story.

 

Janne Teller, from her experiences as a conflict advisor for the European Union and the United Nations, added some essential context to this point. When the International community sanctioned apartheid South African businesses for their hideous oppression of the black population, we can quite justifiably call this a moral act. The alienation of Russia however from the international community, and the ensuing decimation of living standards for average Russians will only serve to harm our quest for peace.

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A country that has not only blown up the North Sea pipeline but ‘annexed and literally raped’ another European democracy is not one with which we can do business.

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Lord Adonis, with the eloquence of a seasoned debater, and the expertise of an accomplished academic, strongly disagreed. We can establish clear conditions under which we trade with countries and importantly whether those countries are moving towards, or away from us. Are they a) democratic do they b) have a strong basis for human rights and do they c) have respect for the rule of law? The gulf, when it comes to Russia, is simply too great. A country that has not only blown up the North Sea pipeline but ‘annexed and literally raped’ another European democracy is not one with which we can do business.

 

Adonis wasn’t finished there. ‘It’s stark staring obvious’ what we should be doing. If we want to ‘strengthen our democracy, strengthen the rule of law, and make ourselves more prosperous’ we could re-join the EU as soon as possible which would also reorder many of the international relationships we have for the better too. His comments were met by a thunderous round of applause.

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The host Finn McRedmond, with the ease of an experienced chair, pressed Lord Adonis a little more on the underlying philosophical question of the discussion. Is trade primarily an economic or a moral issue, to which Adonis responded, ‘I don’t think that you can divorce them’. He reminded us to consider that the same Adam Smith who wrote the ‘Wealth of Nations’ was the one who wrote the ‘Theory of Moral Sentiments’. Crucially, there is no objective ethical standard we can apply to trading partners. Moral judgement has to be applied on a case-by-case basis:

 

The China that was opening up to the West seriously 20 years ago, was a very different place from the one that is now engaging in a genocide against the Uyghurs’ and ‘The Russia of Gorbacev…that we thought might become a democracy, is fundamentally a different place from the one that is ripping up all rules of international law, invading its neighbours, annexing their territory, holding fake referendums and engaging in something akin to genocide!…’

 

Perhaps the most surprising part of the debate however was what John Kay said next: Sanctions are essentially a paper tiger. The evidence that they worked in Apartheid South Africa, according to Kay, is minimal. They certainly haven’t worked in Saudi Arabia, and they have had precisely the opposite effect in Russia. In an almost catastrophic act of self-harm, we have inflated the price of energy, whilst Russia’s economy is in no way ‘strangled’ by the measures as some claim and we are no closer to peace.

This was unexpected. The majority of mainstream media has concluded that Russia has lost at least 10 years of growth and one of the most comprehensive studies of the post-sanctions Russian economy came to precisely the opposite conclusion.

 

Adonis took great exception to what Kay said. Look at the sanctions against individuals. The fact that Russian oligarchs are trying to evade sanctions so they can enjoy their penthouses in New York and London would seem to suggest their efficacy. But of course, like anything else, their imposition requires judgement.

 

Kay introduced another thought-provoking point into the discussion. On the question of who we should or shouldn’t trade with, Saudi Arabia is often presented as the West’s greatest problem. But look at it this way: Saudi Arabia needs us to buy their oil. Whilst it’s true that their regime is particularly repugnant, their reciprocal need to export their oil to the West means that they have had to liberalize in dramatic ways. If this is true, then the question of Western involvement in Saudi Arabia is far more complicated.

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Sanctions are essentially a paper tiger. The evidence that they worked in Apartheid South Africa, according to Kay, is minimal.

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Teller was not convinced. Nowhere near enough interaction and influence flows into the broader society; it’s mainly the regime that takes advantage of any relations with the West. But it was Teller’s second observation that became the bone of contention. The reason why we are in the mess that we are in with Saudi Arabia is that we chose not to diversify early enough and change our energy consumption habits. Adonis responded rather interestingly: Saudi Arabia is a different kettle of fish from Russia -  it’s not creating international instability in the way that Russia is.

 

Teller looked bemused and interjected. ‘They fund all the terrorism, they fund the Wahabists!?’, to which Adonis coarsely replied, ‘if I can complete the sentence, not to the degree of Russia who are actively breaching international borders and invading neighbouring states’. At this point, Adonis seemed to get more agitated. When Kay argued again that sanctions on Russian oligarchs may or may not work, and thus the safe thing to do was to refrain, Adonis was not impressed. ‘Our response has to be pragmatic and ruthless’ he proclaimed. If we wake up and there’s been a coup in Moscow, which is distinctly possible, it may be because the price that the oligarchs felt that they were paying for their oil was too high. It would be extremely unwise to rip up any strategy that would lead to Putin being overthrown. The precautionary principle is an extremely academic one.

 

McRedmond came to Kay’s defense and pointed out that the trade-off was more complex: sanctions may or may not work, but we know that they invariably harm your own citizens. How is that an ‘academic’ argument?

 

Adonis responded concisely and firmly. ‘What will harm us most is if Putin successfully subordinates Ukraine’. ‘He’ll play cat and mouse with us on energy’. Adonis also took on Teller about Saudi Arabia and the hindsight that we would have been better off not being dependent on Saudi Arabia for oil. Hindsight is great, but arguing over it is pointless as it’s never something we have at the time of making decision.

 

Kay looked poised to jump in and came to Teller’s defense. ‘Diversification is not a matter of hindsight, it’s a matter of general truth!’. It’s precisely because we never know what will happen that we need to diversify our trade. Angela Merkel’s decision to become dependent on Russian oil was a clear folly and it’s time that we all accept this.

 

This was not taken well by Adonis, and sparked a spirited defense of Mrs. Merkel. The reason why Germany became so dependent on Russian oil and gas was because it turned off its nuclear power. Why? Because it was terrified of experiencing a nuclear catastrophe in the way that Japan did. ‘I’ve rarely seen anybody who makes a greater effort to apply facts and good judgement to data than Chancellor Merkel!’. It was reasonable to conclude that the lesser evil was dependance on Russia rather than the possibility of complete nuclear meltdown, he continued.

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The debate ended on somewhat of a cliff hanger. How would Teller and Kay have responded to Adonis's impassioned defense of the German chancellor? Is hindsight really a pointless thing to debate? But one lesson was clear: Trade is a strategic enterprise and morality often has to play a secondary role. From Russia and China to South Africa and Saudi Arabia, we can't take ethical stances in a geopolitical vacuum. Policy is about trade-offs, and while our moral principles can guide us in charting the least harmful path forward in an ever more complex, dangerous and evolving world, they can’t, alone, tell us how we should act.

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