Wednesday, December 28, 2016

On EU Trade, Brexiteers To The Rescue!

By Kavitha Surana
Foreign Policy
December 29, 2016

Let us imagine a world where “leave means leave,” and “Brexit means Brexit.” The United Kingdom would promptly trigger Article 50, close its borders, and say cheerio to its special single-market EU privileges. In doing so, Britain might slowly fade into irrelevance as banks, business opportunities, and immigrants flee to the continent.

Yet, like a picky child, lead Brexiteers appear to still hope they can finagle leaving the nastier, more difficult bits of the single market European Union sandwich (the crust, if you will) by the wayside while simply enjoying the tasty benefits – like free trade.

In a recent letter to business groups in the 27 other countries muddling along in the EU, Leave Means Leave pressure group co-chairmen Richard Tice and John Longworth called for continuing an uninterrupted flow of goods between the U.K. and EU. They also sought a wide-ranging trade deal “that has close to zero tariffs as is possible.”

Longworth headed the British Chamber of Commerce until he was forced to resign for openly supporting Brexit. He and Tice seem to hope stirring up economic concerns might lead European business leaders to pressure their home governments to give Britain extra market access. In turn, that could pave the way for the U.K. to eventually have its cake in Brexit negotiations and eat it too.

“Many EU member states export significant amounts of goods to the U.K. and the erection of barriers to this trade by the European Commission will have a detrimental effect on jobs and prosperity in a number of EU states, some where unemployment is already unacceptably high,” the letter said.

In other words, “leave means leave in all the trade benefits of being in the EU, ta.”

British Prime Minister Theresa May has said she plans to formally begin negotiations to leave the EU in March. But she hasn’t yet outlined whether Brexit will mean leaving the single market — and what other trade arrangement would replace it. German Chancellor Angela Merkel, meanwhile, has suggested that access to the single European market is not open to those countries that do not accept European values — like free movement.

Mark Leonard, director of the European Council on Foreign Relations, told Foreign Policy that Brexiteers “live with a fear that the negotiations are going to get very, very difficult,” perhaps forcing compromises on immigration and EU regulations, the key tenants of the Brexit campaign.

Leonard said the letter might be a bid to smooth the waters by framing an ongoing trade relationship as a win-win for EU member states with struggling economies. But it’s unlikely spurned EU countries will feel the need for leniency, despite economic concerns.

“EU member states feel that [Brexit] is an existential political threat to the European project, and they will want to make an example of Britain,” Leonard said. And the U.K., which has a large trade deficit with the EU, will pay a higher economic price for losing out on trade than the rest of the bloc.

And for those who doubt the EU will follow through, Leonard pointed to austerity negotiations with Greece in 2015. While Greeks overwhelmingly voted in a referendum against a rescue package tied to more cutbacks, the EU didn’t back down on its demands. Ultimately, Athens had to bend to the harsh terms.

Whatever the hopes of business leaders to influence the Brexit process, it’s politics — not economics — that will drive the next stage of Brexit negotiations, said Mujtaba Rahaman, head of European analysis at Eurasia Group.

“The corporate sector is going to have a very limited influence on government policy,” he predicted.

And businesses seem to be falling in line with their governments. Back in September, Markus Kerber, head of Germany’s business association, signaled business leaders would put political considerations above short-term economic benefits.

Though acknowledging 7.5 percent of German exports go to the U.K., Kerber noted “the vast majority goes to other European countries. So, as much as we would like to uphold our very good relations with British customers, it is extremely important for us not to alienate other European markets.”

Meanwhile, Italians had a field day jeering British Foreign Minister Boris Johnson when he told Italy it would have to come around to tariff-free trade in order to protect its prosecco industry.

Clearing up where the U.K. stands on trade would probably be welcome at home. Mired in uncertainty for the future, Britons are now hoarding cash, according to the British Bankers Association. Home loans in the U.K. also fell nine percent in November from a year earlier.

If the thought of a long, drawn-out Brexit negotiation fills you with dread, perhaps try something light-hearted. The comedy duo Cassette Boys just released a hilarious 2016 Brexit mashup video, in which speeches from the key cast and characters of Brexit — Johnson, former Prime Minister David Cameron, and former U.K. Independence Party leader Nigel Farage — are cut and pasted to rap out a different, perhaps more candid, version of the year.

Their edited rendition of Theresa May? “Brexit means Brexit. And we’re making a mess of it.”

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