Richard North, 17/04/2017  
 


The Financial Times is on the case the rainy bank holiday telling us that Brexit is a problem not only for Britain but for the EU as well.

Dredging up an interesting factoid, the paper tells us that the British economy is as big as that of the 20 smallest member states put together. So it is as if 20 of 28 countries were leaving the bloc at the same time.

That is the FT "take", treating this as an economic issue. But this is a political issue and the UK does not carry the same weight politically within the Community as twenty countries.

Nevertheless, pursuing its flawed thesis, the paper argues that Brexit "destroys the European equilibrium, rendering otiose minority rights in the European Council".

Here, it is calling in aid the Lisbon treaty specifies that a blocking minority needs 35 percent of the EU population. Together with the UK, the so-called "Deutschmark bloc" (Germany, the Netherlands, Austria and Finland) has a population of exactly 35 percent. These are all countries, the FT says, that are in favour of free trade.

But the paper isn't taking account of two things. Firstly, "free trade", as such, is not something that is known to the Germans. They pursue their own economic advantage under whatever title other people choose to give it. Free trade it is not.

Secondly, the FT is doing some rather suspect arithmetic. Compared with the supposed "free trade" bloc, the countries surrounding the Mediterranean, which have traditionally been more reliant on protectionism and state intervention, have a population of 36 percent. This, it says. is also a blocking minority.

By that reckoning, the Lisbon "balance" has been destroyed. The first block shrinks after Brexit to a population share of 25 percent. The "Club-Med" countries extend theirs to 42 percent.

Using this argument, the thesis is that this sub-bloc may now seek to turn Europe into a trade fortress – as if it wasn't one already.

But the crucial mistake here is in assuming that the group dynamics, post Brexit, will remain the same. In the first instance, there is bound to be a realignment of voting weights, in what must be a secession treaty. The balance that emerges from this is not necessarily going to be the same as it is now.

Secondly, in the absence of the UK, there is every reason to believe that the EU will strengthen the Franco-German nexus. In a spirit of solidarity, we can expect to see the so-called "motor of integration" reassert itself, to ensure the continued functioning of the Union. The FT idea of a trade-related polarisation is pure speculation.

If, however, you accept the FT thesis, then it becomes logical to accept their argument that there will have to be new negotiations of the existing EU treaty, alongside the Article 50 negotiations, rather than waiting until afterwards. The EU, it says, should re-organise both the internal relationships within the EU and the relationship with the UK.

But all this does is affirm what we've being saying for many, many months: as well as the Article 50 settlement (and any free-trade or interim deal that has to be formalised), there will have to be a secession treaty. This is necessary for precisely the reason the FT is setting out – to regularise the voting weights and all the other consequential changes attendant on the departure of the UK.

Where this get really interesting though, is if the "colleagues" do treat these issues as something more than simply administrative changes, and start seeking to renegotiate the Lisbon settlement – changing the whole basis of the voting structure.

The consequences of this could be extreme, because it could distract the "colleagues" from what we believe to be the main event – the Article 50 negotiations – and turn them inwards, where they expend the bulk of their energies on their own internal affairs.

Without fully realising it, therefore. the FT is identifying yet another element of uncertainty into a mix which is already fraught. The paper thinks that playing around with such ideas as the pursuit of a "two-speed" Europe could antagonise Poland, as well as Denmark, Sweden, the Czech Republic and Hungary.

Then, responding to Brexit by giving the eurozone more state-like structures is to separate the north and east and draw a dividing line through the ancient divisions of Mitteleuropa, while making the northern eurozone states paymasters of a new Latin currency union.

But this is taking it too far for the moment. Doubtless, once the dust has settled on the mechanical processes of Brexit, the EU will return to its central obsession with structural change, and will be looking to float a major and long-overdue treaty.

That then raises yet another issue. While we are currently negotiating with the EU (or just about to), the EU with which we finalise an agreement will not be the same as the EU which emerges from its next treaty. In that sense, we should be trying to second-guess their intentions, because it is this altered EU that we will have to live with.

For the UK, therefore, this makes an interim solution an even better option. We can hardly conclude an agreement on a long-term relationship with a body, the nature of which could be very different in a decade or so.

But then there is also the process of globalisation to deal with. There, the FT is locked in the "little European" paradigm, where trade and related issues are played out in Brussels, with European nations calling the shots.

Yet, while "little Europe" is more or less self-sufficient in food, it is a net energy importer and, if it wasn't for the fact that it was importing so many finished goods, it would have serious shortages of basic raw materials such as metal ores, coking coal and other basics.

Europe as a whole, therefore, is not in a position to go it alone. The idea of protectionist walls being erected – more so than exist already – is a myth. Global trade is a reality and the European Union is at the forefront of trying to control and manage the globalisation process.

All of this, though, is way beyond the pay grade of the "little Europeans", who have more in common with the "little Englanders" and their close cousins, the "Ultras" than they would like to think.

No longer are we dealing with "free trade" versus protectionism. The balance of power in Europe has already moved from Brussels to Geneva – as the gateway to the world. The issue is how we manage globalisation, and the degree to which we are able to retain control of the process in the face of the demands from the emerging economies.

Interestingly, in a picture that is becoming a cliché, the FT chose as its illustration, the line of lorries outside Dover (top). That, for many, is how trade is seen from these shores – although the container port is another pictorial cliché.

Yet, given the current trade deficit in goods, and the fact that we are seeking to sell high value goods to our partners, in return for basic commodities, as many as two-thirds of those trucks may be empty. In the container ports, a significant number of those boxes may contain nothing more valuable than waste, intended for sorting and recycling.

And if the pictures need to change to reflect the reality, so too must the thinking. That, however, will prove a lot harder.






comments powered by Disqus














Buy Now





Log in


Sign THA
Think Defence





The Many, Not the Few