May 17, 2016
Guest blog post by Sanford Henry, Partner of Global Resources Partnership. His book “Only Trade Works: A History of Transatlantic Trade’ will be out later this year.
“It ain’t what you don’t know that gets you in trouble. It what you know for sure that just ain’t so.”
Of the many Mark Twain aphorisms in the public consciousness, this one especially springs to mind in the context of the current debate on ‘Brexit’ – the nirvana that hardline eurosceptics have spent their lives waiting for, and which is now a realistic prospect after a 23 June referendum in the UK on EU membership.
Champions of Brexit speak with the conviction of a lifetime’s obsession about the certainty of what they can guarantee to both the British people and the country’s trading partners. They laud the prospect of an avalanche of free trade deals with partners worldwide as reason enough to unshackle Britain from Brussels. With these fast-growing economies, so the argument goes, the UK will be free to forge its own commercial accords and loosen its dependence on dreary, sclerotic Europe – even a Europe that absorbs close to half of all British exports.
Peddlers of this utopian dream need to be brought back to the real world. Where is the queue of countries lining to ink deals with London by the summer holidays? There is no such queue. Brexiteers talk of China, and India – yet China’s president pointedly expressed his wish for the UK to remain in the EU during a visit to Britain last year, and big business in India is also dead against withdrawal.
What of Canada, Australia and New Zealand, outposts of Britain’s imperial past? Many eurosceptics see these countries as a betrayal of kith and kin when the UK finally joined what was then the Common Market in 1973. Surely they are clamouring for Brexit?
Surely not. Australia and New Zealand are now hardwired into the Asian economy, which – despite China’s slowdown – remains a ready taker for their agricultural wares, mining ores and hydrocarbons.
Canada’s economy is entwined with that of America through NAFTA and now the Trans-Pacific Trade Partnership, in its final stages of approval. Furthermore, Canada, after years of fine-tuning, has crafted the CETA (Comprehensive Economic and Trade Agreement) with the EU. None of these countries see a return to the 1970s as a viable option for them. They’ve moved on – something many proponents of a British withdrawal from the EU are loath to do.
Will the United States ride to the rescue of Britain’s soloist movement? Unlikely, for several reasons. First, the next president of the United States – Republican or Democrat – is going to struggle against a tide of anti-free-trade sentiment stirred up in the campaign. But supporters of a British departure have failed to answer the wider question of why America would want to strike a bilateral trade deal with the UK in the first place.
The clue to answering that question lies in the mid-1990s, when Conservative eurosceptics pressured prime minister John Major to seek British membership of the NAFTA accord. He was told plainly that this would be possible only in the context of an EU-NAFTA deal. Britain alone was not sufficient inducement for the Clinton White House – and there’s no reason to think the situation would be any different today, or under the next president.
Why, also, would the US want the hassle of negotiating a separate agreement with a post-Brexit UK if it manages to settle the putative Transatlantic Trade and Investment Partnership (TTIP)? At most, America is likely to offer Britain a take-it-or-leave-it deal on roughly the same terms. Certainly, London would not be in a position to shape such a deal according to its preferences.
The conundrum here for eurosceptics touches on a truism about global trade: it is increasingly negotiated and conducted by blocs, not by individual states. These layers of trade integration provide for more opportunities, more stability and more legal certainty: in fact, exactly what Britain takes from the single market today. It is this ‘minilateralism’ – a phrase coined by leading law professor Chris Brummer – that represents the future of the international trade landscape.
Those who argue for Britain to remain in the EU are too frequently dismissed as fear-mongerers. It would be more correct to argue that they are victims of the fear that infects people in difficult economic times, and in an age of jihadi terrorism. There is indeed much to fear from a leap into the unknown, and much to regret about the way Brexit has become a plaything of political elites gambling with Britain’s future.
This is especially true for the businesses that generate Britain’s prosperity, not least the financial services sector. Many Londonders will feel rightly betrayed by Boris Johnson backing Brexit just as his mediocre mayoralty comes to an end. His naked careerism at the expense of London’s continued success may yet come back to haunt him. London’s universities, the City and the many global corporations that have massaged Boris’s monstrous ego over the past eight years have particular reason to feel aggrieved.
The EU is not a popular organisation. It should do much less, and do what it does do much better. But at its core is a single market that represents a triumph of economic integration, based on the rule of law and supporting hundreds of thousands – perhaps millions – of livelihoods in the UK. If the Brexit faction could come up with solid, irrefutable evidence that this trading hub will be replaced by a brave new world with economies elsewhere, we should listen.
But until then, they are playing Russian roulette with their country’s future, and perhaps the EU’s too. The fact that all of these potential partners want Britain to remain in – and continue to reform – the EU suggests that the key motivation for Brexiteers on trade is an old ideology, not the new prosperity and security our citizens expect and demand.Blogactiv Team