Details Matter in Governing- Brexit Edition

With the victory in Great Britain of the “Leave” campaign there has been continuing debate, amongst citizens, politicians and economists about what the ramifications are, writ large, for the country. Obviously there is some strong disagreement on that issue, with the campaign claims from both sides continuing, but with many on the “Leave” side essentially walking back expectations of what the ultimate outcome will be. (Boris Johnson post Brexit column, “Britain is Part of Europe”)

So where should our focus be in this debate? An interesting question, with the cross currents of politics, economics, Trumpism, trade, globalism, and striking out at economic elites all coming into play. Plenty to talk or write about, but for now I want to look at one of the areas that all sides appear to agree on, British access to the Common Market. It appears to me that all sides agree that such access is significantly important to the British economy, and that pre-election both sides argued that a vote for either would protect that access. Regardless of the actual rank of the E.U. in terms of trade with Britain it is a significant and important trading partner to the country. But there is a second part of that equation that brings major disagreement, which is the E.U. immigration rules, i.e. the “free movement of people.” Access to the “Common Market” has required adoption of the E.U. rules, even for non-members like Norway. The “Leave” campaign has been emphatic in putting forward the idea that Britain will be able to negotiate a Brexit deal with the E.U. that maintains Common Market trade access but gives Britain the ability to shed E.U. immigration rules, as well as getting rid of or modifying its financial obligations. Brexit advocate, and Conservative M.P. David Davis, said in a conservative publication:

This leaves the question of Single Market access. The ideal outcome, (and in my view the most likely, after a lot of wrangling) is continued tariff-free access. Once the European nations realise that we are not going to budge on control of our borders, they will want to talk, in their own interest. There may be some complexities about rules of origin and narrowly-based regulatory compliance for exports into the EU, but that is all manageable.

Reflective of the Davis position I saw a comment from a poster over at the Economist that summed up the “Leave” position fairly succinctly.

Unobstructed free trade with Europe plus free movement in Europe for British citizens plus restricted immigration into Britain from Europe, plus an end to adherence to European standards and fees paid to Europe. This is the plan sold by Brexiters.

Is this a realistic possibility? Britain has been locked in negotiations with the E.U. over the unique status that Britain held, and hoped to improve through negotiations. Prime Minister Cameron came back with a deal, but that deal was not enough to satisfy many members of his own Party, but may be instructive as to how the Brexit negotiations will go. No need to get into the weeds on that issue, (the link handles that) but suffice to say that the E.U., after reaching a deal with Cameron, likely feels put upon and will not give much more in the Brexit negotiation, despite the claims of “Leave” proponents. It is my belief that David Cameron wells knows this, and may be one reason he hit the exit doors so fast. At his last E.U. Summit Cameron heard this directly from the E.U. From the Wall Street Journal story on that Summit.

At a meeting described as sad and occasionally emotional on Tuesday, Mr. Cameron said discontent over the EU’s principle of free movement of labor, which has led to heavy immigration into the U.K., was a driving factor behind last week’s vote to leave. He urged the EU to be flexible on the treaty rule that grants EU citizens the right to live and work in other member countries if it wanted to maintain close economic ties with the U.K.But European leaders, including German Chancellor Angela Merkel and French President François Hollande, spurned that call with a simple message: Full access to the EU market means accepting free movement.The differences encapsulated the central dilemma for the U.K. as it moves toward negotiations with the bloc over their future relationship: For Britain to secure a close trading relationship with the bloc, the more obligations it will likely have to accept—including many that are unpopular with Britons who voted to leave.“To access the internal market, [a country] must respect the four liberties: liberty of circulation of goods, of capital, of services and people,” Mr. Hollande said. It must also contribute to the EU budget, he said.

There are a host of other issues involved that makes the British negotiating position exceedingly difficult, including the status of Scotland , as well as the ultimate status of Northern Ireland and the impact of Brexit on the Good Friday accords. On immigration the problem is not limited to immigration flows INTO Britain, but include the status of British nationals working within the E.U. So what is my point? That Brexit was a poor choice? We are going to find that out eventually, but maybe we can focus on how unprepared Brexit leaders were for the eventual victory. I do not mean to pick on new Foreign Minister Boris Johnson, but he embodies the buffoonery that the pro-Brexit group has exhibited since victory. Where was the plan? It is my belief that they will not be able to get the E.U. to agree to Common Market access while limiting the free movement of people. Not sure how they solve the Scotland and Ireland problems, and I am not sure the “Leave” folks have any good ideas at this point. So the default position is that we need to “wait” before we file Article 50 (Treaty requirement to notify the E.U. a member state is leaving), to develop a coherent negotiating position.

The “Leave” campaign is one of ideological broad brush, unconcerned with those pesky details. I am not saying that campaigns should be in the policy weeds, as that, especially today, does not work. But allowing detail averse politicians to simply make emotional appeals without even a hint that they have ANY clue on the ramifications of that advocacy is not without danger to our democracy. Unfortunately it is becoming the norm.

Finally, will Brexit work for Britain? The E.U. has a myriad of faults, one of which is the arrogance of the Brussels E.U. infrastructure. The E.U. has indeed brought some of this on themselves. I do believe that if the British were able to negotiate access to the Common Market, shed all of the “bad” E.U. regulations, and reach trade agreements bilaterally with major trading partners such as the U.S. and China they would indeed have hit the lottery. I just do not believe that is likely, and I believe that invocation of Article 50 will be delayed because the new Prime Minister in Britain does not believe it either.

Tony Blair on the ramifications of Brexit. 

Eric Schnurer on Brexit

Krugman on the economics of Brexit 

 

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