Sunday, July 15, 2018
The Complexities of Brexit and British Prime Minister Theresa May
Prime Minister Theresa May and the Complexities of Brexit 71.8% of United Kingdom voters went to the polls on June 23, 2016 in a referendum on the European Union. Polls strongly showed they would vote to stay in the UK and reject Brexit. Polls in the United States presaged an overwhelming victory for Hillary Clinton. The UK and US polls were wrong. Both ballots reflect a rejection of the status quo globalism of the establishment. British voters were motivated by three main concerns unaddressed by the establishment, overlapping those in the United States. First was economic. The professional class and finance industry in London were prospering, but the traditional working class was left behind and ignored. Second was the edicts and regulations, especially on employment and environment, coming out of Brussels. Anonymous, unelected bureaucrats in the EU were telling Britons what to do. England, which had successfully defended its independence since 1088, was losing its sovereignty. Third was the edict to accept masses of refugees. England, like France and Belgium, was overwhelmed by the refugees, some of whom engaged in terrorist activities. A backlash was growing throughout the EU over the refugees. The vote to leave was 51.9% to exit and 48.1% to remain. The British were dived. England (53.4% - 46.6%) and Wales (52.5% - 47.5%) to exit, while Scotland (38% - 62%) and Northern Ireland 44.2% -55.8%)voted to remain in the EU. Major divisions exist within the EU with the risk the Scots would opt out of the UK. The establishment, led by Conservative Prime Minister David Cameron, strongly pushed for retention in the EU. He resigned shortly after the vote. Theresa May, his successor, also opposed Brexit, but vowed to implement it. A complete break with the EU may sound easy, but it’s not 1776. Complexities exist. The first is the currently open border between Northern Ireland and Ireland. That border would have to be closed under a total Brexit. Second is the custom free trade within the EU. Many UK manufacturers, such as the auto industry, depend on just in time inventories with parts imported from throughout the EU. The free movement of goods between the EU countries and lack of tariffs would end, causing supply bottlenecks and disruptions. The third is the problem of expatriates. An estimated 1.2 million UK citizens live in other EU countries and conversely 3.7 million EU citizens reside in the UK. Can they stay, who will continue to pay their pensions, and cover their medical expenses? The fourth is the European financial industry, which is currently centered in London, and is a large provider of jobs and economic wealth in the UK. The fifth is that of the 28 countries in the EU only three, Cyprus, Ireland, and the UK are common law countries. The other 25 are civil law countries. The laws and constructs vary greatly between the two legal systems. The sixth is that the British Establishment still opposes Brexit, and the Prime Minister is, at best, lukewarm about Brexit. The British are very upset with decisions by the European Court of Human Rights (ECHR), especially in terrorism cases. The ECHR though is based in Strasbourg, France and is independent of the EU in Brussels. A split with the EU would not affect the relationship with the ECHR. The European Court of Justice is part of the EU. She has been frightened by the Apocalyptical tales of economic disaster if Britain withdraws from the EU. She wants to keep the UK economy closely tied to the Continent’s. The Conservative Power, Tories, are split over Brexit. The establishment members are “Remainders,” remain in the EU. Then comes the hard Brexiters, for whom out means out. In between are the soft Brexiters, out for some purposes, in for others. A soft Brexit is not a full Brexit, perhaps a ¼ - ¾ Brexit, but probably closer to a “remainder.” The idea would be to selectively keep the best of the EU and ditch the rest. Article 50 of The Treaty on European Union requires a two year notice for countries to withdraw from Brexit, but is silent on the terms of withdrawal. Parliament gave notice. The UK will leave the EU at 11PM, London time, on March 29, 2019. Preliminary negotiations with the EU reached agreements on three points. 1) The amount the UK owes the EU- £39 billion; 2) UK expatriates in the EU and EU expatriates in the UK; and 3) Northern Ireland borders. In addition, an agreement was reached to include a 21 month transition period to December 31, 2020. Prime Minister May originally said “Brexit means Brexit.” She said she wanted “a clear exit.” She made a major political mistake by calling a snap election for June 8, 2017. She expected the Tories to increase their majority in the House of Commons. Instead, they lost their majority and rely on the 10 votes of the Democratic Unionist Party of Northern Ireland to form a coalition government. She expected to strengthen her hand in negotiations with the EU. Instead she holds a weaker hand with reduced leverage. The Prime Minister summoned the Tories to Chequers, the country home of the Prime Minister, two weeks ago. She announced on Friday, June 30 an agreement by the MP’s. She had laid down the law to the MP’s. Either they were united in supporting her proposal for leaving the EU, or they could welcome Jeremy Corbyn, the Labor Party leader, to 10 Downing Street as the next PM. She basically said “It was her way or the Corbyn Way.” She proposed a soft Brexit, centered on keeping the UK in the EU single market and the EU Customs Union. She argued her plan was “the best way to honor” the Brexit vote. Prime Minister May proclaimed “it would take control of our money, our laws, and our borders.” She said the UK would no longer be subject to the jurisdiction of the European Court of Justice. The Prime Minister called it a reasonable and credible proposal.” She has said to the British people “I will not let you down.” She exclaimed with her proposals: “They voted for us to take back control of our money, our law, and our borders. That is exactly what we will do.” Or not? The devil is always both in the details and what the EU will ultimately agree to.. Her plan includes a common rule book on industrial and farm products, but become independent in services. The common rule book for trade will not be from London, but from Brussels. She proposed a non-regression clause. The existing EU rules on climate change, environment, social and employment, and consumer protection will be adopted by law in the UK, subject to the right of Parliament to later change them. Defections quickly followed Unity was short lived. Foreign Secretary Boris Johnson, the flamboyant former Mayor of London and perhaps future PM, called it a “turd,” hardly a proper term for a high government official. Boris was one of the leaders of the Brexit campaign and a strong advocate for a full Brexit. He said the proposals amounted to a “semi-Brexit” with the “status of a colony. He added “The dream is dying, suffocated nu needless self-doubt.”” Boris Johnson and David Davis, Brexit Minister, quickly resigned from the Cabinet, as did several other hard Brexit officials. Ian Duncan Smith, a former Tory leader, stated “I voted to leave, not to half-leave.” The government subsequently issued a White Paper, “The Future Relationship Between the United Kingdom and the European Union.” It proposes an “Association Agreement” between the UK and EU. 1) The UK will follow common rules on trade in goods; 2) The UK will collect duties at the ports on foreign goods entering the UK in commerce and duties on goods in transition between the UK and EU. The UK will thereby be a partial tax collector for the EU, with duties often different between the UK and EU tariffs. 3) Commitment to ongoing harmonization with EU regulations 4) UK-EU disputes will be decided by an independent arbitration panel 5) Payments to the EU It leaves open four areas for future cooperation: 1) An economic partnership between the UK and EU; 2) Security cooperation; 3) Future cooperation in areas, such as aviation and nuclear power; and 4) An “institutional framework to enforce the agreement.” A possible “reciprocal’ with the EU for payment of limited benefits and social security. Dominic Raab, the new Brexit Minister, called the White paper ablueprint for a “principled, pragmatic, and ambitious partnership between the U.K. and the E.U.” The Prime Minister said the White Paper “delivers on the Brexit people voted for.” She’s not putting it to a new referendum though. Many opponents of the PM’s proposals view them not at Brexit or soft Brexit, but as Brino, “Brexit in Name Only.” The strum and drang is not even about an actual bill. It is simple an opening negotiating proposal, for which the EU will respond. The “White Paper” is simply an opening offer to the EU. Rumors are that the EU powers are unhappy with it, but are holding off formally responding. They believe time and leverage are on their side. Prime Minister Theresa May wants to selectively pick and choose the parts of the EU she wants to continue. The EU officials may be quiet now, but they previously indicated that approach is unacceptable. The UK will not be allowed to pick the best parts and walk away from the remainder. Yet the U.K. has leverage. We should assume that in these troubled times for Europe that its leaders would not welcome the chaos involved in a hard, drop dead Brexit on March 29, 2020. The UK is too big an economic market currently integrated into the EU to ignore. The PM’s negotiating posture seems to be that of President Obama; 1) Start with strong words; 2) Follow them with a soft proposal; 3) Give them the money in advance, and not use as negotiating leverage; 4) Respond to objections by the other party to softening them more; and 5) Basically concede to the opposing party. Presidents Obama and Trump have unsurprisingly taken opposite positions on Brexit. President Obama received little criticism for intruding in the British electoral process, while President Trump, unsurprisingly, had been roundly criticized by the American media. President Obama warned the British voters prior to the Brexit vote that if Brexit passed, the UK would then be “at the back of queue” of future trade talks with the United States. President Trump criticizes the Prime Minister’s negotiating technique and warned that if her proposal is approved then there would be little chance of a bilateral trade agreement between the UK and US. He said her plan is not what Britons voted for. The British survived and proposed for 1,000 years, including building a great empire, by retaining its sovereignty independent of Continental Europe. Much of the global market lies outside Europe. The European Union is not a unitary body. Norway has an “association” participation and 9 of the 28 members, including the U.K., retain their own currency. Successfully navigating Brexit through both the U.K. and the E.U. would be a challenge for the greatest of politicians. It’s a long road to March 29, 2020. We will see if the Prime Minister is up to the challenge.