Since I have been able to talk and read I have always had opinions, but I have always been inspired by listening to others and learning anything and everything I can get my hands on. I don’t know why I felt that writings these opinions, often tempered with good arguments and advice from friends, was something I should do, but we all have our thoughts and ideas so here are a few of mine.
I hope you enjoy……….
Given the timing of Prime Minister May’s speech on BREXIT and general anxiousness about what may happen next, I have attempted to summarise and analyse the insights I have gleamed on the process over the last year below.
This has been the biggest area of focus for many weeks, but finally we have some clear outlines. First and foremost, the UK will not be accepting the EU’s freedom of movement, as it applies currently. Instead it appears that the UK will offer its own equivalent of the American ESTA scheme, an online visa form which is approved quickly and lasts up to two years, for all EU nationals. This would mean, absent a 5 minute application online, that all European tourists, academics, artists and business people in would be able to visit the UK as easily as they can today. The second piece that we can say with a very high degree of certainty is that all EU nationals currently residing in the UK will be offered citizenship. Not only has Theresa May already offered this to the EU commission, in exchange for guaranteeing the rights of Britons living in the EU. We also know that the Home Office is pushing this approach as well. The costs and resources needed are extensive and frankly Theresa May’s government views this as an easy compromise, that will encounter limited real resistance from within the UK or her party.
On work rights the picture now is also clearer. One school of thought is to create a skills based quota for each year and make it applicable for all global nationals, including the EU, which is in line with the US, Canada, Australia and other developed economies. The aim would be to allow a quota of non-UK nationals to enter each year, provided they were sponsored by an employer. This is the approach currently championed by the Home Office under Amber Rudd (who previously supported Remain). The other option being proposed is to grant an automatic visa to any EU national who has a full-time job offer to work in the UK. This idea has been proposed by former foreign secretary William Hague. The ultimate choice is likely to be determined by the EU’s negotiating position. The automatic right to work, if an employer has made a full-time offer, allows the government to demonstrate that only “working migrants” are entering the UK, thus dispelling the pernicious lie that EU immigration is welfare driven. It also allows UK industry to recruit top talent across Europe, thus helping to address business fears about labour shortages in certain sectors (including the NHS). If implemented properly, this could even be a blueprint for the EU’s relationship with other future members, such as Turkey and Ukraine. However, if the EU appears to push for punishing exit terms and UKIP maintain the pressure on key Conservative seats, then the first option is more likely.
Foreign Policy and Security:
As of to date, there has been no suggestion from any government official or any source, that the UK wishes to change its cooperation with the EU at an international level. The UK has continued its planned increase in troop and materiel deployments to the Baltic states, and there are no signs of a thawing between the UK and Russia (unlike the USA). Moreover, at the international level the EU grouping often includes Canada, Australia and Norway at institutions such as the UN, World Bank and other multi-lateral agencies. It thus appears clear that the UK will simply remain within this broader grouping, albeit with less influence on the EU’s ultimate position on issues than it previously held.
Amazingly, the UK has not made any attempt to link security and NATO related issues to the terms of exit, despite a range of arguments that suggest this could be a strong angle, especially in light of the changing US position on NATO. There have however been early signs that the UK intends to expand its presence once again “East of Suez” and there have been discussions to re-open UK naval bases outside of Europe. However, given the UK’s limited manpower currently across the armed forces and its shrinking maritime presence, these recent moves appear to be more symbolic of a UK “open to the world” than a sign of significant redeployments to come.
Given that the UK seems certain to leave the EU single market and customs union, the game is now about Tariffs, Equivalence and Regulation.
Let’s start with Tariffs. While there remains a number of technical issues to finalise, it appears certain that the UK will become an automatic WTO member after its exit from the EU is completed. This membership ensures that both the UK and EU have strict limits imposed on the level of tariffs they can set on each other and what they can set them for. To put into perspective, the level of tariffs on cars between the USA and Europe is around 3%. For some areas, the tariffs are higher, for example food, but as the UK is largely an importer of goods from the EU, it’s unlikely that the EU would want to impose large tariffs.
However, where the EU is likely to seek a clearer split with the UK will be around regulation and Equivalence. With an exit from the single market, the UK Financial services sector are likely to lose what are called “Passporting rights”, whereby UK firms can sell financial products directly to EU consumers and businesses without needing to have a local presence. What the net effect of this will be is unclear. The immediate answer will be that costs for all financial services companies in Europe will rise and the UK will lose some staff in areas like FX trading and clearing of some Euro denominated debt. Beyond that the picture is less clear. As the cost of regulation has increased since 1997, the Financial service sector has seen considerable consolidation, leaving Europe with a smaller group of larger companies than existed before the single market. As these players have operations all over the EU, it’s unclear whether firms couldn’t simply hire a staff member and a postal address in the EU to circumvent many concerns. This approach already exists to an extent within the EU today, as it allows companies like Facebook and Google to take advantage of different tax laws, see Luxembourg and Holland.
Again, the more positive outcome for both sides would be an agreement to keep all tariffs on goods at zero and to introduce “Equivalency”. This concept means that the UK financial services sector could sell goods into Europe, like a firm based in Europe, but they would be subject to EU regulation and EU courts. Moreover, the UK would have no influence on EU regulations and firms in the UK could be prevented from doing business in Europe if they did not match EU standards.
On the broader international trade piece, it looks as though the UK priority list will be the USA, followed by Canada, Australia and New Zealand. I would also add, though it hasn’t been mentioned, that Japan would likely be high on that list too. Japan is a large investor in the UK and moreover, the UK and Japan have few sectors of extreme competition, with the UK unlikely to threaten Japan’s agriculture or electronics manufacturing, while Japan poses few threats to the UK services sector. The UK would likely use templates from the failed US-EU trade talks as the basis of terms with the US (50% of all US gains from TTIP were due to come from greater access to the UK anyway) and the UK is likely to use the current EU-Canada trade deal as its template as well.
The BREXIT process is subject to a huge amount of political brinkmanship. Should moderate EU parties do well in elections, the global economy accelerates, Theresa May remains popular in the country and Trump remains largely focused outside of Europe, then political leaders should have the breathing space to craft a reasonable and fair deal. If, however, Russia and the US increase pressure on Europe, the migrant deal with Turkey collapses and populists are successful in EU elections, a fortress mentality may set in. The EU, despite its challenges, remains extremely popular in Europe. For this reason I continue to believe that if the survival of the EU becomes more threatened, we are likely to see a youth led backlash in favour of greater EU integration.
The EU is, in the words of Romano Prodi “an unfinished project” and Europeans know this. Thus, how BREXIT plays out is not simply a story that can be told in isolation, rather, BREXIT is also the story of the European Union. Will it become what its fathers dreamed of, a full political union of nations, or will it unwind to an early form. Time will tell.
Christopher Jackson graduated from York University with a 1st Class Honours Degree in Politics with International Relations, BA and is currently a Research Assistant at Bologna Institute for Policy Research (BIPR) at Johns Hopkins University SAIS in Europe.
Click HERE to read Christopher’s impressive curriculum vitae on Linkedin.com
Please note that the views expressed in this Blog are those of the author and do not necessarily reflect the views of The Vintage Magazine.