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ON THE OUTSIDE LOOKING IN: BREXIT (Part 2)

By Tim McNamara, Chief Political Correspondent

Would British industry be staring into the abyss if Brexit comes about, or would the UK economy benefit from ‘unfettered’ global trade?

It is certainly true that international trade with the remaining EU and with the rest of the world would change substantially. Decisions on Foreign Direct Investment (FDI) into the UK would be significantly effected. Access to global markets would change dramatically and a multitude of free trade agreements would have to be renegotiated.

Whether all of this variation of economic relationships with other states would be to the benefit of the UK is open to question. It would certainly lead to turbulent economic times. The one thing business hates is uncertainty, the higher the level of investment, the greater the distaste for unpredictability (as demonstrated in recent Scottish Referendum which shook the markets, not just in Scotland, but also in the UK and beyond).

The key to the UK’s economic future would almost certainly be dependent on access to the EU’s single market. If the UK had full access (being part of the European Economic Area), then the costs are quite high ( as Iceland, Lichtenstein and Norway know).

Free movement would remain and control over EU migration would be illusory, even Switzerland with its semi-detached relationship with the EU (members of the Schengen area = no border controls with EU countries) allows for free movement of people from the EU because of treaty obligations with the EU.

EU Budget contributions would have to continue and the rules and regulations of the single market would have to be adhered to. Not being part of the single market is not even favoured by many eurosceptic business people. Even Margaret Thatcher when ‘swirling her handbag’ remained a staunch supporter of the single market. The Tory eurosceptic Ian Duncan Smith has advocated the UK having a similar relationship with the EU as Norway has, i.e full integration with the single market.

The eurosceptic group Business for Britain assert that the UK does not need to be part of the single market, but part of a customs union instead. As the Daily Mail reported last year “One source close to the project said: ‘The manifesto will conclude that we should be in a customs union, not the single market. ‘What’s important for Britain is to make sure there are no trade barriers with our European partners. The support from Tory MPs is considerable.’“ Of course, this takes no account of what the other 27 EU member states would agree to. A customs union would simply not be acceptable without huge disadvantages to the UK.

The self-perception of Britain’s role in the world would be altered, albeit slowly. The British media have a penchant for overblowing the influence the UK has globally, it is likely that there would be a “rally round the flag” momentum after a Brexit. It would take several years for many opinion-formers in the UK to realise that in many global fora the British representatives could be reduced to being bit part players, fighting for scraps from the big table.

Whilst the external view of how the UK would be seen would be transformed overnight. The UK would be seen as acting counter-intuitively at a time when countries were forming regional alliances. Whether that be regional trade agreements like Mercosur, ASEAN or NAFTA or more more political one such as the Arab League or the African Union. Others such as Vladimir Putin are also trying to create a strong political and economic counterweight to the EU.

The UK’s global reach is undoubtedly strengthened by EU membership. It is an open secret inside the European Commission that as far as foreign policy is concerned, the UK and France are the most influential, followed by Germany, Italy, Spain and Poland. The other 23 member states are happy to follow as long as their direct interests are not concerned.

The UK would be able to hang on to its seat on the Security Council of the United Nations but influence would be heavily diminished.

Membership of International organisations such as the International Maritime Organisation (a UN body) and the World Trade Organisation to name but a few would be transformed – instead of being in a bloc of 28, the UK would be one of many countries with little or no influence compared to the US, China and the EU (who nearly always coordinate their policies into a single position in international bodies). E.g. caucus meetings occur between EU member states before all international organisation general meetings.

Unlike much smaller countries like Switzerland or Norway with no imperial heritage – the UK would not be trusted as an honest broker by many others. Furthermore, as a medium size state, with a close relationship to the USA, it would not be seen as being able to play a neutral role in many circumstances.

The UK’s ‘special relationship’ with the USA would also be drastically altered. No longer an influential partner for the US in Europe, diplomatic relations with Washington would continue to be warm but unimportant from the State Department’s view. The UK’s influence on American foreign policy would be limited to mainly military matters were the need for interventionist coalitions suited American foreign policy. In all other fields, the UK’s profile would be dramatically diminished if it was outside of the EU.

Some would argue that the UK could fall back on its relationship with Commonwealth countries. Yet the most populous/richest Commonwealth countries have moved on from their previous imperial status. Canada, Australia, India, Nigeria etc have developed close ties with a multitude of countries (including free trade agreements) e.g. China, Japan, USA etc etc. A return to the idea of a quasi-Imperial preference zone is a eurosceptic/Empire Loyalist pipe dream and utter nonsense.

Other issues such as the free movement of people is a double-edged sword. Many people’s dream of owning ‘a place in the sun’ would be shattered unless they meant Bournemouth or Torquay maybe. If Britain was outside of the EU, then there would be no rights to own property or even reside anywhere in the UK. The hundreds of thousands of Brits residing on the Costa del Sol would lose all their free access to Spanish-provided health care.

There would certainly be a property market collapse on the Spanish Costas caused by a drying up of new British buyers allied to the need by current residents to pay for expensive health care. The property market would then implode as more Brits raced to cash-in on their main financial asset as a vicious circle ensued.

This article is intended to be the second in a number of features related to the concept of Brexit. It is intended to focus on individual sectors such as international trade, automotive, transport, chemicals, agriculture, fisheries etc etc in the new year.

Articles, from all sides, mapping possible impacts of Brexit are welcome, this is a debate that needs to take place before anybody can have an informed decision if a referendum on EU membership is called.

Comments
  1. Talk about setting up a load of straw men, only to knock them down!

    Do I care about ‘Britain’s influence in the world’? No – to the extent we do have any (I actually think it’s pretty limited, and within the EU, we only get our way where it doesn’t contravene France and Germany’s interests), it tends to be mostly an excuse for our overblown politicians to pump up their own self-importance and waste loads of our money. No thanks.

    Nor do I want some kind of ‘imperial preference’ or return to Empire – I’m under no illusions that this would return. But as the world’s 6th largest economy, I’m sure other countries will wish to continue to trade with us. And given the Australia – a much smaller economy – plays a key role in the WTO, I’m sure an independent UK could too.

    I’m sure that Brits could retire in the sun too – and probably get free healthcare. This could be done through reciprocal arrangements – I’m pretty sure that, given the mess that lots of EU economies are in, their populations would be none too happy about being denied access to UK employment and property rights by some blown-up politicians annoyed at the UK leaving the EU.

    On trade, you don’t mention the trade deficit we run with the EU. Why not?! Do you think German car manufacturers would be happy to see no free trade arrangements between the UK and the EU? Really?

    Even paying for access to the Single Market a la Switzerland / Norway, we still wouldn’t have to pay the monstrous costs of the CAP – so a quick win there too.

    In the end, you are a fanatic – so profoundly fanatical about the EU that you simply cannot look at the facts fairly. The reality is that the EU is constantly trying to drag us into a US of Europe that very few in the UK want; it is constantly making decisions through the Commission, the Courts and QMV that run counter to our interests (just see the 2 court decisions today…). It’s time to leave and set our own course in the world.

    Comment by bishop brennan on December 18, 2014 at 4:24 pm
  2. More attempts at costing Brexit along the lines of Ian Mansfield’s pamphlet “Openness not Isolation” would be helpful. His most likely case scenario is an increase in GDP of 0.1% and a worst case scenario of -2.6%.

    Vague articles which hint at “the abyss” are not very helpful.I am particularly sceptical of articles which talk constantly about securing “influence” but without explaining how influence translates to greater prosperity or greater security for the British people.

    Comment by Richard on December 18, 2014 at 7:47 pm
  3. It would appear that the respondent in comment 1 hasn’t really read the article, or taken on the profound and most important points, or at least has chosen not to address them. This is true of Brexiters before the vote and indeed now. “people have had enough of experts…” etc etc. For example its no good talking about a German trade deal because and sighting the deficit between UK and Germany because they are constrained by their obligation to the EU. The trade deal will be with the EU not Germany or Italy or wherever, and they prize free movement and the principles of the Single Market over any individual country. Partly because doing “a deal” would require all countries to get the same “deal”. Please think it through.

    Comment by Chris on August 30, 2016 at 12:01 pm
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