The Financial Express

From European Britain to global Britain

| Updated: October 21, 2017 22:03:18

Evaly and Fianancial Express Evaly and Fianancial Express
From European Britain to global Britain

The United Kingdom (UK) triggered Article 50 of the Lisbon Agreement on March 29, 2017 signalling its decision to leave the  European Union (EU). Article 50 stipulates a two-year deadline to unwind the membership of the club. The separation from the EU will definitely redefine Britain's relationship with its largest trading partner and bring to an end four and a half decades of deepening economic and political integration with the continent.  Prime Minister Theresa May's six-page letter stated that the government believed that it was "necessary to agree the terms our future partnership alongside those of our withdrawal from the European Union'. The letter apparently gives  an impression that the UK wants to have the cake and eat it too. However, German Chancellor Angela Merkel warned "the negotiations (on the UK's exit from the EU) must first clarify how we will disentangle our interlinked relationship. We must deal with many rights and obligations that have been linked to membership. Only then, later, can we talk about our future relationship''.  This very divergent views of the terms of separation have created uncertainty on what the future relationship will entail. Britain's negotiation strategy and methods will be very closely watched by rising nationalist and far-right populist leaders in the continent. As if to discourage other EU members who might contemplate  to look at the exit door, EU officials warned that Britain would not be allowed to have better terms outside the bloc than inside it.
 All this now creates profound uncertainty about the future British-EU relationships. Both sides are getting prepared for rather a very difficult, arduous, even painful process  of negotiation while each party is trying to strengthen respective  negotiating  position. British Chancellor Philip Hammond said the letter set the "right tone'' and sent the "right signals'' to European leaders how Britain wanted to conduct the negotiation.  Leading EU leaders agreed to enter the negotiation in a "positive sprit''. The European Commission (EC) has already issued the draft negotiation guidelines to its 27 member-countries for consultation and EU leaders will meet on  April  27 to agree on a mandate for Chief negotiator Michael Barnier to pave the way for negotiation to begin in May.
While Prime Minister May has threatened  that a no deal is better than a bad deal, the other side is also upping the ante and responded in kind talking up an enormous exit bill  estimated at £60 billion (as  the UK's share of EU liabilities) as well as no special favour other than what  is accorded to non-member countries.The  EU appears   to be taking the hardest possible line on its negotiation stand.
To consolidate Britain's negotiating position, Prime Minister May  in her  letter  warned that Europe's security would be jeopardised if a favourable trade deal to the UK was not agreed. Indeed she mentioned the  word "security''  no less than 12 time in her six-page letter. There is an implied threat in it alluding to withdrawing  its substantial  security and intelligence assets and further hinting that the EU needs Britain more than the other way round. To make the matter worse, President Donald Trump  has already threatened to withdraw US support for NATO if EU  countries in the organisation did not increase their military spending.
The decision to leave the EU has divided Britain and left three million EU citizens in European countries worried about their future. Brexiters  campaigned on the promise  to "take back control''  which would reverse immigration, save taxpayers millions and free Britain from the economic burden. Europhiles contest that and say that it would lead to deep economic uncertainty and cost thousands of jobs. Some even have gone as far as to say that the future of Britain would be a greater Norway, abiding by EU rules without having  any political influence to shape them.  But Brexiters are not buying any of those arguments, instead  they view Britain's exit from the EU as a springboard to launch the UK into the world from the confines of Europe - a truly "global Britain'' which is now out of shackles of EU rules, regulations and laws encompassing almost every facet of life. Britain would be free to enter into agreements and trade deals on its own accord. There is great sense of liberation. Even Prime Minister Theresa May used the expression "global Britain'' no fewer than 10 times in her Lancaster House  speech ( January 17, 2017). She further pointed out  that Britain "has always looked beyond Europe to the wider world'' and the referendum was a vote to "get out into the world''. The Economist has summed up the euphoria by stating "where Brexit increasingly resembles a faith-based initiative, voters have been given wildly unrealistic expectations of the Utopia ahead''.
How will this global Britain shape up, mere rhetoric aside, to build a Britain that is outward-looking and embraces the world? It is true Britain has historically been a trading nation; so are many other European countries also. Britain was a late comer to the EU, joining the club in 1973. There were many reasons that prompted the UK to join, but most importantly, to halt its relative economic decline as reflected in the ratio of UK's per capita income to EU6 declined steadily between 1950 and 1972. It has been comparatively stable since then. But since the Global Financial Crisis (GFC) of 2007-08, economic climate, both within the EU and other developed countries, has radically changed.The southern flank of EU is in deep economic crisis.The enlarged EU is poorer and less united. Now The EU is spending most of its energy trying to hold together the euro.  There has always been a part of the British establishment and society against any economic or political integration with Europe, but over the last decade or so that base has expanded to such an extent  where Brexiters (also known as  Eurosceptic) were successful in their bid in the last June referendum.
Britain has embarked on a new course under the  banner "Global Britain''. The EU has become less important market for Britain now than before and that may continue to be so unless the EU re-bounces. Yet the EU remains the largest trading partner of the UK. But that would have been the case even if it were not a member of the EU.  Much of the UK's trade is conducted with rich and nearby member-states of the EU; the three largest  trading partners of the UK in Europe are Germany, France and  the Netherlands.  But the USA remains the single largest market for the UK as a single country.
Even in the absence any trade deal, the UK will still continue to trade with the EU but under  World Trade Organisation rules which include tariffs and other barriers to trade. That will put the UK in the same position as the USA, China and Japan  and these countries are exporting relatively easily to the EU.  At the same time the UK will have the opportunity to deal with independent and faster growing markets unencumbered by EU rules and regulations.  London still remains significant on its own as a global financial centre, so there is a strong national interest in getting the deal with the EU right. The Economists also warned that attempts to undercut it European partners by building an unregulated Singapore-on-Thames,  would even horrify most Brexit voters.  Any such attempt is also economically not feasible given the country's political and social structure.
Brexit will likely to diminish UK's standing and influence on the global stage but that will also be equally true for the EU.  Exiting such agreements or covenants only happens in times of crisis. Behind the façade of peace and stability, the EU is indeed in dep crisis and Brexit is just a sideshow. Europe in general and the EU in particular look increasingly losing global standing, both economically and politically.  In Britain, real income per household  has been declining over the last one decade, it is no higher than 10 years ago. There is a great foreboding that the next generation will be the first in Britain's history to be less well-off than their  parents.  Dealing with economic and political decline is a very challenging task - but that is  not a purely  British phenomenon.
The writer is an independent economic and political analyst.
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