LONDON – Britain will have a new prime minister today – but the country’s post-European Union future remains uncertain. Indeed, prolonged delays are likely in implementing the voters’ decision to leave the EU.
The first uncertainty is the date when exit negotiations will start. The process should be completed within two years of invoking Article 50 of the Treaty of Lisbon; but the incoming prime minister, Theresa May, has already said she would not want to trigger negotiations until the end of the year.
The second uncertainty is whether the negotiations can simultaneously resolve the United Kingdom’s terms of exit from the EU and its future trading arrangements with Europe’s single market. While the UK will claim that, under Article 50, negotiators should be “taking into account the framework of future relationships,” the EU trade negotiator is insisting that future arrangements can be discussed only after Britain leaves.
Access to single market
The third uncertainty is Britain’s negotiating objectives. Will it seek full access to the single market (the Norwegian option), or to part of it (the Swiss option)? Or will it go for the Canadian low-tariff option, or just trade with Europe on the same terms that all World Trade Organization members do?
The fourth uncertainty arises from voters’ concerns over immigration and the extent to which any new EU trading arrangement must be conditional on restricting the free movement of workers. The new prime minister has said she would not accept engagement in the single market without a deal on managing migration.
In theory, the Norway option – membership of the European Economic Area – could be stretched to include a Lichtenstein-type protocol on limiting residency permits, or involve use of the EEA’s safeguard clause, which might allow restrictions on migration if inflows rose too quickly. But, fearful that others would demand a similar dispensation, the EU would find it difficult to agree to such a change.
The fifth uncertainty is the EU’s own negotiating stance, starting with who will lead the negotiations, the European Commission or the Council of Ministers. German Chancellor Angela Merkel has already made it clear that she will not give the Commission carte blanche to negotiate on Germany’s behalf. Beyond this question lies another: whether Europe will agree on its final negotiating stance before France’s presidential election next spring and Germany’s general election next autumn.
The sixth uncertainty is the economic circumstances under which the negotiations will take place. Britain appears to be sliding toward recession as companies put their investment plans on hold. Business pressure on the UK government to move more quickly will thus grow, as a longer wait means a further ebbing of confidence and, in turn, a weakening of Britain’s bargaining position.
The seventh uncertainty is whether the UK itself can survive. Lord North is remembered for losing the British union with America. Two centuries on, the outgoing prime minister, David Cameron, may be remembered for losing two unions – with Europe and between England and Scotland. Whereas Conservatives want Scotland to be in a Britain without Europe, Scottish nationalists want Scotland in a Europe without Britain. And with Northern Ireland’s Republicans, led by Sinn Fein, demanding a vote to reunite with the south, the very existence of the UK is now squarely on the agenda.
There is one way to lessen uncertainty and risk: The government should quickly announce that it will be negotiating with the EU on the basis of the Norway option of membership of the EEA. And it should make clear that EU nationals resident in the UK are welcome to stay.
This avenue would give Britain what businesses want – access to the single market. While the UK would still have to contribute to the EU budget, it could repatriate responsibility for agriculture and fisheries policies and negotiate its own trade deals (for example, with China and India). Joining the EEA would offer an additional advantage – giving Scotland the level playing field it wants in trading with the 27 EU members.
It is also essential to resolve the vexed issue of migration. Any genuine solution must include a fund to help communities whose health facilities, schools, and other public services are under stress because of above-average population growth. Tougher enforcement of minimum-wage and other legislation protecting workers is needed as well, so that we allay fears that migrants are forcing a race to the bottom. And EEA negotiations should begin on the basis that our membership would include a protocol on migration and the ability to use the safeguard clause if pressures grow.
An eighth and even greater uncertainty, however, concerns Britain’s future global role. In particular, how will it respond to the irreversible shift in the global economy’s center of gravity toward Asia, and to the technological innovations that are revolutionizing industries and occupations – and thus increasing voters’ anxieties about their employment prospects and future livelihoods?
The referendum result revealed high concentrations of pro-Brexit sentiment in towns once at the center of the British industrial revolution but now awash with derelict factories and workshops, owing to Asian competition. These areas rebelled against the advice of political and business elites to vote “Remain” and instead demanded protection from the vicissitudes of global change. The “Leave” campaign’s very slogans – centered on bringing control back home – aligned it with populist, protectionist movements that are fracturing old political loyalties throughout the West.
Response to globalization
The result has exposed a Labour Party divided between a leadership that elevates anti-globalization protest above winning power and a Parliamentary group that knows it has to explain how globalization can be managed in the public interest.
But the governing Conservatives are also split on how to respond to globalization. Some believe in a global free-for-all; others believe that Britain should be free of foreign entanglements; and a third cohort wants, like Labour, to be part of the EU, viewing it not as the problem, but as part of the solution to managing globalization. But, because of these divisions, none of the leadership contenders have put forward any proposals that address in any meaningful way the grievances of those who feel left behind.
So post-referendum Britain needs a more comprehensive debate on how it will cope with the challenges of global change and how it will work with the international community to do so. A viable program for managing globalization would recognize that every country must balance the autonomy it desires with the cooperation it needs.
This would include coordinated monetary and fiscal policies across the G20 countries; renewed efforts to expand world trade; new national agendas addressing inequality and promoting social mobility; and a laser-like focus on science, technology, and innovation as the key to future growth.
As long as globalization appears leaderless, anti-globalization protesters will stifle reform, shout down proposed trade deals like the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership, and make national economies less open. Now facing life outside the EU, Britain cannot ignore or sidestep these global issues. The UK must now decide whether it will stand up to the protectionist impulse that drove Brexit and what part it can play in making globalization work for all.
(C) Project Syndicate