How to make the best of the mess – Brexit III

 

So, three weeks in, we will have a new Tory PM as of tomorrow, the Labour Party is still running around like a chicken with its head cut off (oddly enough the SNP now commands the loyalty of more MPs than the Westminster Labour Party and could reasonably ask to be made the official opposition party) and the £ has crept up a little against both the $ and the €, presumably because the prospect of Teresa May as PM is significantly less terrifying than Boris Johnson or Michael Gove. Ulster is applying en masse for Irish passports and Nicola is talking to EU leaders, making it clear to them that Scotland doesn’t want to leave the EU.

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Meanwhile the markets have stabilized and while there are companies, banks in particular, that are threatening to leave the UK in the wake of the Brexit vote, economically at least, everything seems to be in limbo at the moment.

Because, frankly, no one knows what the fuck is going to happen next. In fact, the only people who seem to be confident of the future are the ones who know the least about what Brexit is actually going to mean politically, financially, economically and socially.

What we do know is that there has been a certain amount of buyer’s remorse, with a couple of petitions currently doing the rounds. One, with four million signatures, to redo the referendum and a second with over a million votes, to allow British citizens who haven’t been resident for over fifteen years to vote. There’s also a call to let EU citizens resident in the UK vote (as they were allowed to do in the Scottish independence referendum) . But it’s highly unlikely that there will actually be a rerun of the vote any time soon. The most likely scenario for a second vote will come after the Brexit negotiations have been completed and the UK voters are asked to decide whether they really want to leave based on the results of the negotiations. Of course, that assumes that the EU is going to care whether the UK still wants to leave at that point. Once Article 50 has been invoked there isn’t a “lets negotiate and then decide” section in the clause. Article 50 is an unequivocal exit clause.

So just when is Article 50 going to be invoked? On the morning after the vote David Cameron said that it wasn’t his place to start the procedure, it would be up to the new PM; July 13th there will be a new PM, but she still can’t do much without parliamentary approval and parliament doesn’t take up again until early September. Realistically, you would think that Brexit should be the first thing on everybody’s mind when they reconvene, so we probably have about seven weeks until the Tories really have to face whether they’re going to pull the trigger on the exit clause and begin the process. Any reluctance on their part would be entirely understandable, once Article 50 has been invoked there is a very tight two-year timeline for exit negotiations to be completed. But without another vote they really don’t have any choice but to go forward. The political consequences of not following through would be very difficult to justify.

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One possible escape clause that has been discussed is the possibility of calling a snap General Election with MPs standing on the basis of Leave or Remain, thus providing a fresh look at what people actually want now that they realize there are consequences to voting. Given the disarray in the Labour Party and the large numbers of traditional Labour voters who seem to have voted to Leave (especially in the North of England) this actually might not be a bad idea for the Tories. Despite Jeremy Corbyn’s lukewarm support of Remain, the Labour Party is ideologically committed to the European project, as are most of their parliamentary MPs. Even if the parties allowed MPs to stand on their conscience rather than follow a party line, many more Labour MPs would hold to the Remain position than Tories. Which could result in the bizarre sight of Labour winning in suburban London and the Tories in Sunderland and Darlington. Realistically, however, that’s unlikely to happen and we’re about to see Teresa May and her new cabinet of lukewarm Remains and nervous Leaves try to come up with an exit strategy for the EU while keeping the more disaffected parts of the UK in line (not that I think they’ll be focusing too much on internal constitutional questions, which could leave some serious wiggle-room for the SNP and Sinn Fein to stir up trouble).

The way forward itself is unclear right now. The Leave campaign lied through its teeth when it claimed (among other things) that the UK would be able to retain all its existing trade relationship advantages with the EU while limiting immigration. The “we can be like Norway” argument. Yes, we can be like Norway…full trade access (which means no tariffs but abiding by every single one of those hated regulations), unrestricted movement of people, small budget contribution and no voting on the rules…the UK will become a rule-taker not a rule-maker. Norway, of course can afford this because it is a small country with a massive trade surplus because of oil, and a huge sovereign wealth fund; I saw several people also trying to compare the UK to Switzerland…sorry, that doesn’t work either, Switzerland is also small, incredibly homogeneous, relies on small niche-trade markets and is hellaciously rich from decades of living off the proceeds of the world’s most ethically questionable banking industries.

The actual outcome is going to depend on how the negotiations go, how pissed off the EU actually is about this mendacious piece of wrecking and how competent the British negotiating team turns out to be (not holding my breath if they go to the Leave campaign to make up the team).

Assuming that there are no constitutional upheavals within the UK then the best possible option two to three years down the line is probably the Norway option. That would allow financial services to remain in London, provide as little disruption as possible to the manufacturing and agricultural markets and still allow all of those expats (Europeans in the UK and Britons in Europe) to stay where they are. The UK would no longer provide their £198 million a week to the EU (a much more accurate figure than Boris and Nigel’s £350 million) but in return, there would be no subsidies from the EU, no agricultural subsidies, rural redevelopment grants, industrial regeneration grants, scientific funds, environmental clean up funds etc. It seemed to come as a surprise to the 65% of the Cornish voters who wanted to Leave, that they won’t see the remainder of the £2.5 billion of EU funds that has been slated for Cornish economic development by 2020. In theory that money would be made up by the savings being reallocated from Westminster. In practice, of course, the history of Conservative governments supporting peripheral parts of Britain is pretty dismal. Agriculture is sufficiently “patriotic” to appeal to Westminster, those subsidies will probably remain, but urban and industrial regeneration, rural and small town job creation and small business subsidies and education and training are all likely to see substantial cuts. In short, the people who were most likely to vote to Leave will be the ones who are most likely to suffer under Brexit.

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However, the political fall out of this kind of Norway deal will be considerable, most pertinently there will continue to be free movement of people. That will have the construction and hospitality industries breathing a sigh of relief, but what about all those Leave voters who want to “get control back”; all those people who saw Farage’s vile campaign poster and voted accordingly. What will they do when there isn’t any change in the number of Polish kids in the local primary school and there are still muhajibat walking around the streets (notwithstanding that most Muslim immigration to the UK has been from former colonies and has nothing to do with the EU).

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To actually effect change in immigration laws the UK is going to have to negotiate a much more distant relationship with the EU, one that potentially displaces huge numbers of non-citizens who have been comfortably settled in the UK for decades, and that puts the futures of hundreds of thousands of British retirees living on the continent in jeopardy, leaving them without access to reciprocal health care, social services and benefits. One that shuts the borders to the thousands of low-wage workers who keep the British economy running. The impact on young Britons, those who want to pursue their educations in Europe, working through the Erasmus program, who want to be able to continue to travel, live and work freely in the worlds largest free-movemetn zone is going to be incalculable.

At the same time, trade walls will reappear, food prices will rise and industries, particularly manufacturing and finance, will look seriously at relocating to stay within the EU tariff-wall. The British industry that remains will now be subject not only to real tariffs but, if the UK begins to deregulate industry to get rid of the onerous burden of EU membership, any exports to Europe will now face an array of non-tariff barriers. The EU is very clear on many things, and obeying their health, safety, anti-trust, environmental and consumer protection regulations is high on their list of requirements for external trade.

External trade relations will also become more complicated, in a world of trade blocs only the very largest states — the US and China — can negotiate alone and from a position of strength (and even the US doesn’t do that, using NAFTA as a cover for WTO negotiations). Within the EU the UK is one of a bloc of 28 countries (with 29 votes thanks to the recognition of the EU as a sovereign entity in itself) that represents the richest market in the world. With a coherent, previously agreed trade policy, the EU has huge power within the WTO. Power that is no longer going to be available to Britain, with its one vote. On the furthest lunatic fringe of the far right there has been a suggestion that Britain cement the special relationship by applying to join NAFTA; given the UK’s relative competitive disadvantage in all major production areas relative to Canada (timber, minerals, oil and gas and services). Mexico (agricultural goods and assembly line products) and the US (everything else) that would seem like a losing proposition. Neither is there any prospect of putting the Commonwealth back together as a trading group. Former colonies long ago integrated themselves into their own regional trade networks. Outside the EU, there is no place for the UK in any other trade bloc; a lonely place to be in a globalized world where real sovereignty rests not in the UN’s acknowledgment that your state exists, but in the power to act and achieve your goals relative to the world’s other power-players.

But all of this is speculation, all we can do now is wait and see how the aftermath plays out…

 

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