Monday, August 15, 2016

The EU Referendum (Part 3)

It’s been nearly two months since the EU Referendum, and I’m still trying to get my head around what has happened. Fifty-two percent of the voting public chose to vote to leave the EU again forty-eight who voted (like me) to remain. As a result, we have been left with an extraordinary and difficult situation, with a nation divided like never before. 

The first thing to note is that what was supposed to happen in the event of a leave vote was that the day after the referendum, David Cameron was supposed to formally trigger Article 50 – the EU legislation that formally confirms a member-state leaving the EU. What was supposed to happen subsequently is that said country then would have two years to subsequently complete the exit – a ‘Brexit’, in Britain’s case (the country could spend longer than two years, depending on a vote from other EU countries). What happened, of course, is that Cameron could not bring himself to trigger Article 50, instead passing on the poisoned chalice to his successors in a cynical move designed deliberately to get one over his rival Boris Jonson. In the chaos that followed, Johnson and Michael Gove could not bring themselves to trigger Article 50 either, despite being the main cheerleaders for the Leave campaign. To put it bluntly, none of them had the balls to actually go ahead and do it.
We now know that the baton for triggering Article 50 has been passed to Theresa May, the new Prime Minister. She, too, cannot bring herself to trigger Article 50, on the grounds that she has to wait first for ‘trade deals to be formalised’. The problem is that trade deals can take years and years, during which there is never likely to be a ‘perfect’ time to trigger Article 50. By refusing to actually go ahead and trigger it, the UK has been placed in a dreadful limbo status, affecting areas such as science research, which rely on cross-EU collaboration and funding, irrevocably. In turn, UK science graduates will now find out that their chances of work will be cut off considerably – despite Philip Hammond’s assurances to the contrary. This limbo state is massively irresponsible for the UK economy, and a perfect illustration of why the referendum should never have taken place in the first place.  

If Article 50 does ever get triggered, the UK would essentially face two options. The first option facing the UK post-referendum would be to join the Single Market as a member of the European Free Trade Association (EFTA), the regional free trade area that comprises non-EU member states Iceland, Norway, Liechtenstein and Switzerland. The UK left EFTA in 1973 in order to join the European Economic Community (EEC), the forerunner to the EU. Post-referendum, however, there is an argument for it to rejoin EFTA. What unite the four EFTA countries with most EU member-states are two things:

- they are all part of the Schengen Area, guaranteeing freedom of movement – with the exception of the UK (which is still an EU member state for now) and the Republic of Ireland, which share their own Common Travel Area (CTA); and the exception of Romania, Bulgaria, Croatia and Cyprus, who have a legal obligation to eventually join Schengen;

- they are all part of the European Economic Area (EEA) – in essence, the Single Market - with the exception of Switzerland; the EEA also includes all EU member-states (except Croatia, the newest EU member-state, which is a provisional EEA member).

Joining the Single Market would require the UK to accept freedom of movement – one of the four pillars of the Single Market – and join the Schengen zone, something which the UK has never done, having previously gained an opt-out, as mentioned above, along with Ireland. It would mean, too, that many of the xenophobic promises that the Leave campaign paraded – that EU immigration to the UK would be cut dramatically – and which Leave voters chose to believe, would be dashed.  In addition, Norway could veto the UK’s return to membership of EFTA, fearing its loss of influence in the organisation with such a large member joining among small nations (Norway, Switzerland, Iceland and Liechtenstein between them in total have a population of 13 million compared to the UK’s 65 million). Theoretically, the UK could be a member of EFTA but not the EEA, which is the position that Switzerland, a former signatory to the EEA, who then left, is in; but this would be hugely complicated, and would mean that the UK would still not be part of the Single Market via the EEA.

The second option for the UK is to not sign up to either EFTA or be part of the EEA. This would mean that the UK really would be on its own in Europe. If this happened, the UK would have to revert to WTO rules regarding trading, which could be a hugely bumpy grounding. Free trade agreements (FTA) are hugely complicated, drawn-out procedures; to give one example, the EU-South Korea FTA takes up a mammoth 1432 pages. Similarly, the controversial EU-Canada CETA deal has taken at least seven years and is still subject to negotiations. What would happen to the interim is a moot question: the UK would essentially be starting from the beginning again, in contrast to Canada, who could rely on NAFTA (their FTA with the USA and Mexico) financially while CETA was being negotiated.

Problem is, since Thatcher’s reign, the UK economy has shifted from one based on manufacturing to a services industry – particularly financial, with the country’s economy bound up with the deregulated City. The UK’s economy has become inexorably tied-up with deregulated finance and a housing bubble, rather than keeping a strong manufacturing base, as in Germany. If the UK leaves the single market, which it would do so if it formally left not just the EU but also the EEA, and didn’t join EFTA, the lack of access to the Single Market would hit the City, with many financial firms choosing to relocate to Dublin, Paris and Frankfurt – all cities within EU member-states. The UK could respond to this by becoming essentially a version of Switzerland or Singapore, becoming a nation-wide tax haven, but is really what we want? The bottom line is that, unlike Norway, or Commonwealth countries such as Canada and Australia, the UK does not have vast amounts of natural resources to exploit any more, having squandered the proceeds from North Sea oil on tax breaks for the rich. For this reason, membership of the Single Market is paramount for the UK’s economic future whether we like it or not. 

The reality is that the EU holds the cards here. It exports much more to the UK than the UK exports to the EU, and as a bloc of 27 nations has vastly more clout than the UK on its own. The UK has to accept that remaining in the EU is always going to be the best option for our economy.

The response to Leave voters to this is that Brexit is all about ‘sovereignty’. What they are missing is that in the twenty-first century, most countries are too bound up in international treaties to fully be called ‘sovereign’. Even if the UK leaves the EU, it will still be bound up in supranational treaties from NATO, the UK, the IMF, the WTO, and a host of others – all of which make some rules for which the UK government has to obey in order to thrive in the modern world. The alternative is to be North Korea.

Instead, while we were part of the EU – and which are still a member of, for now – we had an extraordinarily good deal, with opt-outs on the rebate, the Euro, and the Schengen zone (which I've spoke about already). This has meant that the UK has essentially afforded a special status. Yet that has still not been enough for the Daily Mail, The Express and The Sun, who have spent the last forty years promoting a clich├ęd, anti-European agenda (spearheaded by Boris Johnson, among others), all in the name of ‘sovereignty’, which the UK never lost, and a sense of superiority. This anachronistic viewpoint has missed the endless benefits that the EU has provided, from pumping money into deprived areas (some of which then voted Leave, paradoxically), to regulation on clean beaches, to the opportunity for British citizens to live and work in twenty-eight member-states – the latter of which may never be known by future generations of Brits.  Instead, we can look forward to insular Britain, which could be even smaller in Scotland leaves – not to mention Brexit complicating the peace process with Ireland, the UK’s one land border, a process that could even theoretically lead to Northern Ireland rejoining the Republic (except for Ulster). The irony is that this break-up could be triggered by the same Leave voters who wave the Union Jack, a symbol of a Union which could be no more because of Brexit.

Instead, the only answer is to abandon Brexit, and look to Europe, the continent that we are geographically tied to despite being an island. The UK’s future is in Europe, and as such, the triggering of Article 50 should be rightly recognised as madness.