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  • Writer's picturePhilipp Requat

The Dream of Splendid Isolation

Updated: Apr 2, 2019

The Brexit referendum will set a new precedent. Those who expect special treatment may be in for a surprise.

by Philipp Requat (Op Ed, Metropole, 01.06.2016)

The year is 2018 and the United Kingdom is no longer a member of the European Union. After an overwhelming majority of voters opted for ‘Brexit’ two years earlier, Scotland declared its independence, the banks quit London, EU immigration ground to a halt and millions of British pensioners were forcibly repatriated from Spain and France. The free trade agreement with the Commonwealth, announced with such verve by Prime Minister David Cameron’s successor Boris ‘BoJo’ Johnson, is still laboring – India, Canada and Australia appear to be too distracted by their relationships with bigger markets to focus on it.

Once a leader in finance and an important voice in world politics, Britain has become the Cuba of the North Sea – economically, politically and scientifically isolated, but less sunny.

‘A nice problem to have’

Looking back at the events leading up to the June 23 British referendum on EU membership, David Cameron may well come to regret that he was not more careful what he wished for. Facing an uphill battle in the May 2015 general election, an adviser to the prime minister reportedly spoke of the Brexit vote as “a nice problem to have.”

Cameron promised to hold the referendum in the hopes of quelling long-standing strife within his own party and containing the rise of Nigel Farage, leader of the isolationist U.K. Independence Party (UKIP).

Much to his own and most observers’ surprise, however, he decisively won reelection. Since then, the Brexit cause has morphed into a powerful national movement that dominates public debate, with Cameron assuming the not-entirely convincing role of an impassioned “Remain” campaigner.  Despite the government’s successful, albeit modest, renegotiation of the terms of British EU membership, polls suggest that as many as 41 percent of the population will vote to leave on June 23, with 12 percent still undecided.

Since the recent settling of the rivalry for the designation of the official “Out” campaign, euro-skeptic momentum has only grown – buoyed by the ongoing refugee crisis and the terrorist attacks in Paris and Brussels.

For months, Brexiteers had been distracted by bitter infighting; split into rival groups named “Leave.EU,” “Grassroots Out” and “Vote Leave,” they were unable to either access £600,000 in earmarked public funding or spend the millions they had raised themselves. The Electoral Commission’s finally decided in favor of Vote Leave (an organization backed by London’s mayor, Boris Johnson), which could now argue more coherently in the final stages of the campaign for the UK’s future outside of Europe.

The flawed case for Brexit

Whatever their petty differences, though, those who want Britain to leave the EU share a desire to reclaim national sovereignty and are confident that this can be done with little or no economic risk.  It is a case centered on two premises that, in all likelihood, are mutually exclusive.

Safeguarding British prosperity after Brexit implies continued access to the EU’s single market, the largest in the world and the U.K.’s principal trading partner. Prominent ‘Outies’ like Johnson speak admiringly of a Swiss or Norwegian solution while sidestepping the terms: both of these countries are net contributors to EU budgets and subject to EU-wide norms and regulations without being able to influence them.  Any benefits of enhanced national sovereignty would be largely symbolic with such an arrangement.

The United Kingdom may be able to reduce regulation from, and financial transfers to, Brussels, but not without reciprocal exclusion from perks like the Common Agricultural Policy or EU research funding and collaboration. Thus being more like the “not-quite” EU members, Norway and Switzerland, may actually not even save money. For one thing, both countries are fiscally healthier than the U.K. and offer substantially greater domestic subsidies in lieu of European programs. Norway and Switzerland come first and second worldwide in state support for agriculture, with farmers receiving 63 and 60 percent, respectively, of their income from subsidies, according to 2013 data from the Organisation for Economic Co-operation and Development.

Yet more importantly, Britain may not be offered as favorable access to the EU single market as Norway and Switzerland have upon departing the EU.

Cherry picking not acceptable

Much to European leaders’ chagrin, Cameron’s gamble comes at a time when the European project confronts multiple threats. Many are resentful towards what they perceive as an opportunistic attempt at “cherry-picking” to extract more British privileges. Even if just to discourage a domino effect, policymakers in the remaining 27 states would face intense pressure to punish the U.K. for leaving.

This was certainly the tone taken by EU leaders at a conference held by the think tank Open Europe in January.

“We should not encourage other populist forces […] such as the National Front in France or Podemos in Spain,” said former Polish Deputy Prime Minister Leszek Balcerowicz, quoted in The Guardian. “The common interest of remaining members is to deter other exits. This should have an impact on the terms Britain gets.”

Germany’s Stefan Kampeter agreed. “There is no such thing as a free lunch,” warned the former deputy finance minister, emphasizing that Brexit affects not only Britain, but every country in the EU. “Cherry picking is not acceptable.”

Unperturbed, the “Out” campaign has attempted to reassure the British public of their bargaining power by pointing to the United Kingdom’s weak trading balance (“we import more from Europe than we export to it”). By severing economic ties, they argue, Brussels would be cutting off its nose to spite its face.

Britain does indeed boast the largest current account deficit in the EU, a dubious honor that, until 2010, was traditionally reserved for Greece. It seems unlikely, however, that London could dictate the terms of a breakup solely on account of British business’s lack of international competitiveness.

According to a House of Commons briefing paper, the EU absorbed 45 percent of total British exports in goods and services worth £230 billion in 2014, making it the country’s largest overseas market by a wide margin. While the U.K. imports more cars from Italy and Germany than it sends abroad, what remains of the national automobile industry is still highly dependent on European customers.The EU has invested heavily in the United Kingdom – nearly £500 billion by 2014, representing 48 percent of total foreign investment – and provided Britain with a hefty 53 percent of their imports that year.

If Britain left the Union, it would receive 16 percent of exports from EU countries to non-EU countries, at current trade volumes. This is a significant sum, just ahead of the United States at 15 percent, but a far cry from indicating a one-sided economic dependency of European capitals on London. Crucially, it fails to take into account that EU members trade much more amongst each other than with the rest of the world. If one looks at the full picture of all exports from the bloc including intra-European trade, the argument of Brexit advocates that the UK holds the better cards at the Brexit negotiating table falls apart: Aside from Ireland and Cyprus, not a single EU member exports more than 10 percent of their total goods and services to Britain.

These figures debunk the myth perpetuated by Brexit supporters that 27 deeply interwoven continental nations are more economically reliant on the United Kingdom than the other way round.  If London actually pulled up the draw bridges over the channel, the principal victims would be British consumers and workers whose costs of living would rise and whose job opportunities would diminish. London’s financial and professional services industry would be hit hardest, as they depend disproportionately on the European single market for business.

Should June 23 really become Independence Day, as some have begun to call it, the Outies will struggle to fulfill the lofty expectations they have created for a post-Brexit future. The dream of a splendidly isolated Britain, more sovereign and no less prosperous, may prove to be only that. And David Cameron may well have come to regret that he was not more careful what he wished for.

Oscar Wilde could have told him: “When the gods wish to punish us they answer our prayers.”

Original Article

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