Brokes-It

"A pick and mix approach for a non-member state is out of the question.

We are not going to sacrifice these principles. This is not in our interest."  

EU Council President, Donald Tusk, responding to U.K. P.M. Theresa May’s initial Brexit demands in March

Right-wingers, even within the UK’s ruling and otherwise “right of center” Conservative Party, are pushing for that “hard” Brexit. A clean break with the European Union. No common economic ties that would subject Britain to any extra-territorial rules under EU practices. Or if there is to be a middle ground, one that is simple a tariff/customs pass through and not much more. No open migration. No dispute resolution before EU judicial and administrative bodies. Free to make bilateral trade agreements other than with or through the EU.

Even as UK Prime Minister Theresa May and her negotiators press for some sort of accommodation to bring the UK’s March 29, 2019 departure from the EU to a smooth and easy-to-swallow transition with minimal economic disruption, the EU is pushing back. The leadership of many EU nations, necessary voters to render any accommodation, do not believe that it is the EU that must bend rules to meet May’s demands – after all the EU did not vote to expel the UK; the UK decided it wanted out. The UK is the supplicant, in their view, and must act accordingly.

Already, large financial institutions and international manufacturers are leaving the UK in droves, moving massive numbers of their staff from London to other European capitals. To qualify for EU benefits, absent an increasingly unlikely really-soft Brexit, these companies must operate with licenses as bona fide EU-located businesses. And that probably eliminates a London base of operations as qualifying. Panic is beginning to quiver all across the U.K., as little “rumor -horribles” pop up like unwanted pimples across a British press that loves to dig and probe.

Yet UK leaders continue to spout unwarranted optimism, but as the new documents present a “worst case” survival scenario to the public, it was becoming increasingly clear that the laws of unintended consequences could easily grip the UK as it slides to its post-Brexit world, a reality with certain very negative growth realities for mainland Europe… and significantly worse economics for the UK herself. As pure-Brexiter Boris Johnson quit May’s cabinet, as his buddy Donald Trump (very unpopular in the U.K. these days) seems to cheer the UK’s Brexit decision as a smart “UK-First” move, joining in America’s isolationist populist policies, a more objective analysis shows that Britain could easily be the “biggest loser.”

Oddly, one solution being bandied about, very much contrary to any Trumpian view, is a pure free-trade agreement between the EU and the U.K. Meanwhile, the August release of the U.K. government’s documented “hard Brexit” contingency plans only seemed to fan the panic flames. These plans paint a pretty ugly picture.

“Britain leaving the European Union without an exit deal could mean substantial disruption to everyday life, the government said [in mid-August], from higher credit card payments to a loss of banking and pension services and even to redesigned cigarette packages… The government emphasized that an exit deal with the bloc of 27 other nations was still expected by early next year but said a series of technical documents would provide contingency plans in case no deal is reached.

“In addition to financial services, the documents on planning for no deal cover areas including medical products and extra customs checks and duties at borders.

“Dominic Raab, the secretary of state for exiting the European Union, tried to strike an upbeat tone during a speech in London in which he unveiled carefully worded ‘technical notices.’… ‘I am confident a good deal is within our sights,’ he said. ‘That remains our top priority. It remains our overriding priority.’

“The ‘Brexit’ chief also addressed concerns… that have appeared in the British press about a so-called sandwich famine that would be caused by an ingredient shortage in a no-deal scenario… ‘Let me assure you that, contrary to one of the wilder claims, you will still be able to enjoy a BLT after Brexit, and there are no plans to deploy the army to maintain food supplies,’ he said.

“Raab stressed that he remained confident a good deal was not just possible but well within the government’s grasp and that the documents were merely contingency plans so that all eventualities are accounted for…

“The documents are the first of a series of papers that the government will be publishing in the coming months aimed specifically at dealing with what happens if the two sides cannot agree on what their future relationship will look like… They cover a range of industries from farming to the financial services and medicine, and they represent the first time the government has so plainly laid out what could happen to the post-Brexit landscape if no deal is reached.

“New health warnings would also have to be designed for cigarette packets, as the current images are copyrighted to the EU, and medicines would have to go through a ‘national assessment’ process before they could be sold in the U.K., which could cause delays… Health Secretary Matt Hancock urged drug companies to stockpile six weeks’ worth of medicines in case certain routes through the EU face delays if no deal is reached.

“Chancellor Philip Hammond, Britain’s finance minister, said in a letter to the Treasury Committee, also published [in mid-August], that there could be a 7.7% hit to gross domestic product if Britain leaves the EU without an agreement about how goods and services will flow after Brexit…

“There has been rampant infighting within May’s Conservative Party over what Brexit should look like and incessant rumors about leadership challenges. Two high-profile Cabinet members — former Foreign Secretary Boris Johnson and former Brexit Secretary David Davis — resigned in July in disagreement over the way the negotiations were being handled.

“And despite May’s attempts to unite the country with her Brexit strategy, polls show the general public appears to be virtually as divided as it was the day after the 2016 referendum in which 52% of the country voted to leave and 48% voted to remain… May has maintained that leaving the EU without any deal would be better than leaving with a bad deal, but until recently that seemed to be more rhetoric than reality.” Los Angeles Times, August 24^th.

There’s even been a rising chorus for another popular vote to ratify whatever the P.M. ultimately negotiates with the E.U., another replay of the highly divisive June 23, 2016 referendum that gave rise to the Brexit decision in the first place. While hardliners within the EU, whose votes are necessary to implement any compromise, expect Theresa May and Dominic Raab to don knee pads for what they believe to be a humiliating “begging fest,” U.K. Brexit hardliners are hoping such threats unify the British people against any larger-scale compromise.

Combined with America’s withdrawal from international trade agreements, pressing for a world of bilateral treaties that fly in the face of modern global trade practices while assessing harsh new tariffs, these Brexit woes could easily trigger the next major recession. All parties to the Brexit negotiation admit that there will be no winners. But on balance, it seems that it will be the U.K. that gets hurt the worst… by far. Like it or not, the United States is very much impacted by the major economic realities of lands thousands of miles away.

I’m Peter Dekom, and as we witness rising pockets of regional populism all over the world, we are equally faced with the fact that there are severe global consequences to these seemingly local decisions.