[ad_1]
After four and a half painful years, we have reached the end of the beginning of Brexit. We have a deal. It is inevitably a detrimental deal for the British economy compared to staying within the EU. But it is much better than the stupidity of not negotiating. Above all, it maintains a working relationship with close neighbors and the UK’s main economic partners.
No responsible government would leave just a few days for companies to adjust to the complexities of this new situation. Even less would it do so in the midst of a pandemic. This will remain a foolish and unnecessary divorce. But the reality of Brexit may even bring some benefits.
The EU should have seen some by now. It almost certainly would not have been able to agree to its € 750 billion pandemic recovery fund had the UK remained at the table. From now on, the EU will be able to move more quickly towards its shared goals.
For the UK too, Brexit will bring the great benefit of separating reality from deception.
Some delusions have already disappeared. Brexit supporters told the country that it would be easy to secure an excellent free trade agreement with the EU, because it had “all the cards.” In fact, it has been quite difficult to do so and the UK has had to make tough concessions since 2016, in particular on the money it owes the EU, the border in Ireland and the EU’s demands for a “level playing field”.
These delusions were endorsed by others. Among them was the idea that the UK and the EU would negotiate as “equal sovereigns”. Yes, the EU and the UK are equally sovereign. But they are not equally powerful. The UK economy is less than 20 percent that of the EU. 46% of the UK’s merchandise exports went to the EU in 2019, while only 15% of the EU’s merchandise exports (excluding its domestic trade) went to the UK.
The economic relationship between the EU and the UK is similar to Canada’s with the US As Jonathan Portes of King’s College London points out, the trade agreement imposed on Canada and Mexico by the United States is quite intrusive.
Sovereignty fetish
Given this imbalance and the UK’s sovereignty fetish, the UK has won a good deal. The 1,246-page text of the agreement contains scant and insignificant mention of the Court of Justice of the European Communities. The detailed agreement on the controversial issue of “level playing field” is symmetrical. But any action by the EU to ‘rebalance’ its policies, in response to action by the UK that it has successfully opposed, will have a much greater impact on the UK than vice versa.
The reality is asymmetrical. That will continue to be the case in the many negotiations with the EU that are yet to come. When dealing with foreign powers, and especially the more powerful ones, “regaining control” is a theoretical thing.
However, that motto is a hoax in some other respects as well. In defense, education, housing, health, regional development, public investment and welfare, the UK already had much of control. But the British are about to lose valuable opportunities to do business or live, study and work in the EU. They will not “regain control” of their lives, they will lose it.
Even where control will be regained, in theory, reality may surprise those who drop out. Consider immigration. In the 12 months ending June 2016 (the month of the referendum), net immigration from EU and non-EU sources was 355,000 (ignoring net British emigration). In the 12 months ending March 2020, net immigration was 374,000. Net immigration from the EU collapsed from 189,000 to 58,000. But that of the rest of the world, always theoretically under the control of the United Kingdom, soared, from 166,000 to 316,000.
In fact, the UK has retained relatively favorable (albeit notably worse) access for manufacturing, where it has a comparative disadvantage, while accepting substantially worse treatment for services, where it has a comparative advantage. In fact, it fought more for control of fisheries, which generates 0.04% of the UK’s gross domestic product, than for services, which generates most of it.
Johnson promised that the UK will “prosper tremendously” even without a deal. But virtually all economists agree that the UK will be significantly poorer in the long run, even under this type of arrangement, than if it had remained a member.
Survival of the UK
Even the survival of the UK is in doubt. Scotland and Northern Ireland can leave the Union, the former to join the EU, arguing that they also want to “regain control”, and the latter to join the Republic and thus the EU as well. England can then have a border with the EU in the Irish Sea and the Tweed.
Brexit is, in many ways, the English equivalent of Donald Trump’s promise to “make America great again.” One big difference is that, unlike Trump’s time as president of the United States, Brexit is forever. It seems almost certain that it will permanently damage the prosperity and influence of the country. But only now can we find out. Let’s watch and learn. – Copyright The Financial Times Limited 2020
[ad_2]