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Link: https://nationalinterest.org/feature/brexit-deal-will-it-make-uk-stronger-175308
or https://nationalinterest.org/ and google
*Brexit Deal: Will It Make the UK Stronger? *
Brexit
is a done deal. Here are six points that must be noted.
1. The Agreement
Britain’s future relations with the EU are defined by
the free trade agreement (FTA) concluded on Christmas Eve.
It covers trade in goods, but not services. This asymmetry benefits the EU. It
gets tariff-free access to the British market for manufactured goods, where it
has a trade surplus of £97 billion. The service sector, contributing 80 percent
of Britain’s GDP with a share of total exports to the EU at 42 percent and
generating a British surplus of £18 billion, is left in the doldrums.
The City of London will no longer be able to
offer its services to EU member states. The move of staff to European cities
will continue and probably accelerate, albeit the exact size is difficult to
gauge. The challenge to the City of London from cities like New York and
Singapore may be more threatening. Why keep big offices in London with no
access to the EU?
The British
claim of getting free access for goods to the EU market is not exactly right.
Yes, tariffs and quantitative restrictions are out, but a free trade agreement
does not do away with a whole string of checks when goods cross the border.
British exporters still face administrative barriers such as customs clearance,
product standards, and red tape, which taken together could amount to 4–8
percent of the value of the goods traded. It may be higher for selected goods
in particular from agriculture and similar sectors with a focus on health and
safety.
2. Impact on international trade agreements.
One major argument for Brexit was the freedom to enter into FTAs with
non-EU countries around the world without constraints and limitations. That is
true—up to a point.
Tariff free access requires a minimum of intermediate goods/components from
Britain. Rules of origin are set up to ensure this, embedding red tape, but
more importantly, a high risk that manufacturers in Britain, plugged into the
global supply chain, must retool production lines to achieve the target of
domestic content. Furthermore, in the future manufacturers may not be able to
switch suppliers as it might upset the balance between British and non-British
components. In the long run, such a constraint might prove costly.
The commitment to maintain a level playing field with EU standards implies that
free trade deals cannot allow goods to be imported into Britain if that
deteriorates standards.
The most obvious illustration is the EU ban on chlorinated chickens and
hormone-fed beef, preventing the U.S. from selling to Europe, which it dearly
wants to do. Negotiating a free trade agreement, Britain will face American
negotiators asking for this ban to be removed. That will not only pose a
problem for the British government vis-a-vis consumers, but the risk that EU
erect barriers for British farmers and food companies.
It is not clear how much Britain will benefit from FTAs with non-EU countries.
Britain’s comparative advantage lies in the service sector with a surplus at
£83 billion and a deficit in goods of £34 billion. As was the case with the EU
agreement, non-EU countries may desist to open their service sector, making it
difficult to spot major opportunities for Britain.
3. Societal models.
The Conservative Party stands for a free market model with a low regulatory
system (the environment and working conditions) closer to the American attitude
than the European one that tilts towards a social welfare model. History will
one day tell that the British membership was an attempt to see whether these
two models could be reconciled. The answer was that they couldn’t.
Not surprisingly, the EU has been adamant to insert paragraphs in the
Brexit-agreement preventing Britain from social dumping to enhance
competitiveness through lower standards. The EU’s “safety clause” is a mutual
commitment not to lower existing standards and a mechanism to achieve the same
for future standards. In case of significant divergences that impact trade
patterns, measures to rectify the distortion of comparative advantages can be
introduced.
This point may in due course turn into a contentious issue that will sour
Britain-EU relationship. A strong argument for Brexit was precisely that
Britain could set its own standards. In theory, Britain can do so, but the
agreement—at least in the eyes of the EU—prevents a tangible difference from
arising. It will be a hard one to swallow for Brexiteers who may say “why did
we leave the EU and then commit ourselves to apply EU standards without any
influence on how they are set—be rule taker instead of rule maker?”
4. Sovereignty. Inverse proportionality.
Britain wanted the right to set lower standards while at the same time
getting access to the Single Market. Accommodating such a demand would amount
to give a non-member more favorable access than is the case for member states.
There was never any chance that the EU would do so, which forced Britain to
choose. Either apply its own standards without access to the Single Market. Or
get access to the Single Market on the condition of shadowing EU standards and
accepting a mechanism to settle disagreements. Sovereignty and access to the Single
market were inversely proportional. And this is where Prime Minister Boris
Johnson was caught between the devil and the deep sea. He knew quite well the
high cost of being cut off from the Single Market, but also the challenge to
his authority in the Conservative Party, if he was not seen as regaining
sovereignty. Time will show whether he is capable of navigating between Scylla
and Charybdis.
5. Scotland and Northern Ireland.
Both Scotland and Northern Ireland voted to remain in the Brexit referendum
(2016) with 62 percent respectively 56 percent.
Scotland looks to Europe and in particular Northern Europe with social welfare
societies instead of the Conservative Party’s courtship of the free market. The
dissatisfaction of being together with the predominantly conservative England
opened the door first for devolution (1999), then a referendum about
independence (2014) with 55.30 percent opting for staying as a member of the
United Kingdom of Great Britain and Northern Ireland.
Brexit has exacerbated the tendency to turn an otherwise smooth relationship
into an adversarial one. The Scots are not amused that the English drag them
away from the rest of Europe and even worse into a socio-economic model they
resent. The Conservative government in London has not helped itself to keep the
realm together. November 2020, Boris Johnson allegedly told a virtual meeting
of Conservative MPs ‘that devolution had been a disaster north of the border’
forcing the leader of the Conservatives in Scotland to openly deny and
contradict the Prime Minister. An opinion poll found that most members of the
Conservative Party would be happy for Scotland to become independent if that
meant delivering Brexit.
Scotland’s First Minister, Nicola Sturgeon heading the Scottish Nationalist
Party (SNP), reacted to the Brexit agreement saying it was time for Scotland to
be “an independent, European nation.” It is more likely than not that Scotland
succeeds in getting a second referendum and this time gives the green light for
independence. The latest opinion poll reveals support for independence running
at 58 percent.
For a long time, Northern Ireland’s status as part of the UK was underpinned by
a majority of Protestants plus higher income per capita compared to Ireland.
Both these factors are now changing. Analysts predict that at the next census
due in 2021, Catholics will outnumber Protestants. Income per capita is now 2.5
times higher in Ireland than north of the border. Based on history and what has
been seen over the last fifty years, it is difficult to project a trajectory,
but not so difficult to predict that the end can only be a unification.
A special point is the British nuclear deterrent, which more or less
“legitimizes” its role as a permanent member of the U.N Security Council. The
base, Faslane, is in Scotland! Some kind of agreement may be negotiated between
England and Scotland, but SNP is known for its opposition to nuclear weapons so
it cannot be taken for granted. Even if an agreement is struck, it will
certainly make the deterrence less credible and force England into acrimonious
considerations of whether to build a new base, extremely costly, or give up its
nuclear deterrent. It is already a heavy burden on the defense budget with the
four nuclear submarines to be replaced from 2032. The official cost estimate is
£30.1 billion, but some unofficial estimates point to a sum five times higher.
It will be one more thorn in the flesh of the Scots if continued membership of
the UK compels them to contribute to an extremely costly program they don’t
like. If Scotland secedes and forces England out of Faslane, the cost of
maintaining England’s nuclear deterrence may soar beyond imagination.
6. Britain’s role in the world.
Globally, Brexit will catapult England into an uncertain role vis-a-vis the
EU, Scotland having seceded and Northern Ireland on its way to unite with
Ireland. Wales will probably stay, but may ask
for a higher degree of devolution. England will look for a closer relationship
with the USA, but soon discover that an amputated Britain is less attractive
than Brexiteers imagined. EU membership gave Britain leverage that cannot be
replaced. The same message will come back from the Commonwealth. Many countries
will be ready and willing to negotiate trade agreements, but know that England
outside the EU needs such agreements more than they do and put the foot on the
brake when England looks for liberalization of trade in services.
Joergen Oerstroem Moeller is a former state-secretary for the Royal Danish Foreign Ministry and the author of The Veil of Circumstance: Technology, Values, Dehumanization and the Future of Economics and Politics, ISEAS, Singapore, 2016.
Link: https://nationalinterest.org/feature/brexit-deal-will-it-make-uk-stronger-175308
or https://nationalinterest.org/ and google
*Brexit Deal: Will It Make the UK Stronger? *