It’s been a while, but: Brexit, again, plus CANZUK and an opportunity for Canada

The normally raucous political turmoil in Britain got even louder last week when it was revealed that Prime Minister May has proposed that Britain will (may?) pay upwards of £45 Billion (over several years) to leave the EU.

Is that unreasonable or outrageous?

Some, of course, think so, but The Spectator, generally a conservative journal, takes a more moderate tone that is, I think, about on the right track. “There will be howls of outrage in some quarters,” that journal says, “if it is confirmed that the government has offered the EU a ‘divorce’ bill of up to £50 billion (over several years). Some on the leave side of the debate insist that the bill should be zero. They ask: does the EU not owe us some money for our share of all the bridges we have helped build in Spain and railway lines in Poland? But it was never realistic to think we could leave the EU and maintain good relations with the bloc without paying a penny — even if 46698d4fc34e20d3dbf31a72761ffd16a House of Lords report did seem to suggest that this would be legally possible.” But The Spectator, very reasonably suggests, Britain is “in the process of creating a new relationship with the EU, not ending it altogether.” That, I think, is the key: Britain is not trying to abandon Europe and recreate the 19th century, it just wants to be on the large, bottom tier of a restructured European Community, returning to the layered wedding cake analogy I have used before in which a few countries are bound together very, very tightly by e.g. a common currency and things like the Schengen Agreement (a real, albeit only partial, European Union at the top layer) while all are bound, but only loosely, by a free(er) trade area ~ a European Economic Community.

Having agreed an EU budget which stretched until 2020, it was right to fund these programmes until the end of that period,” the article goes on to say, because that, “after all, is only a year after our departure. Thereafter there will be ongoing pension obligations, but a fraction of what we would otherwise be on the hook for … [and] … The government’s offer is a mark of serious intent, proof that we want constructive and co-operative relations as we start to discuss the terms of a free-trade deal. The money, payable over many years, is still a saving when compared to the ever-rising sums which we would be required to pay had we decided to remain in the bloc.” The reason paying for an amicable separation is a good idea, The Spectator says, is that “Brexit was never just about cash: indeed, most people who voted to leave were prepared for a costly, painful process. They also thought it would be worthwhile. By the time we leave we will have regained our freedom to make our own trade deals with outside countries. Provided that we use this freedom, and build new export industries without compromising our existing EU trade, we should be able to grow the economy in such a way as to make the leaving bill seem like good value.

CanzukAll that gives me an opportunity to return to Dr Andrew Lilico’s idea ~ which was taken up, in part, by Erin O’Toole during the Conservative leadership campaign ~ of a CANZUK agreement which goes beyond just free(er) trade and includes e.g. freedom of movement (visa free travel, study work and perhaps even more) for the citizens of those four countries and which might include a defence agreement.

I, personally, think CANZUK makes good political, social, economic and strategic sense, especially given my (and many others’) concerns about the near to medium term future of America’ strategic leadership of the West. I see CANZUK as much more than a free(er) trade zone but far, far different than a return to the “old dominions” of the British Empire.
I appreciate that Prime Minister Justin Trudeau’s current priorities are:
  • Trying to salvage NAFTA from being trampled underfoot as the Trump regime seems intent on doing; and
  • Pursuing free(er) trade with China ~ a course of action that has its own political and economic risks.

I agree with those priorities, although I think he should be looking beyond China and towards free(er) trade with more of Asia ~ getting into the RCEP trade deal, for example.

I also appreciate that, despite its reported widespread support, CANZUK might not be a political winner in Quebec.

The Spectator concludes its report by saying that, for Britain, “Brexit always was going to be a step into the unknown, and no one can predict the consequences with any accuracy. More-over, Brexit itself will not make the country -richer or stronger — it is merely the removal of a constraint. What happens after Brexit will depend on the quality of decision-making in 10 Downing Street. When it no longer has to process EU diktats (which take almost a third of its time, by some of estimates) there will be room for more decisions. They’d -better be the right ones … [and] … For months, the future has seemed to be a matter of either/or — either we trade freely with the EU or we make our own way building new alliances elsewhere in the world. If the result of the government’s offer is that trade talks can begin and we can now -contemplate both of these things, it will be a price worth paying.

Canada has a newly signed trade deal with the EU – the CETA –  which still includes Britain, and we are, right now, negotiating, albeit not, apparently, in good faith or, at least not with very good manners, negotiating with Australia and New Zealand as part of the renewed TPP talks, so we have the basics of some sort of a CANZUK free(er) trade agreement in place.

download (5)Understandably Britain’s top priority must be a Brexit that preserves preferential access to Europe’s markets. In the normal course of events I would say that Britain’s second priority ought to be to secure a free trade deal with the USA ~ but President Trump has changed the normal political and economic calculus. Perhaps Britain’s second priority ought to be Asia: especially China and India or, perhaps, CANZUK makes better sense because, perhaps, again, CANZUK, as a “block” might get better access to China and India that Australia, Britain or Canada will, on their own. Some wags have suggested that after 18 months of squabbling  amongst themselves the British Tories are finally ready talk with the EU. In fact. the Financial Times says that Britain and Europe are on the brink of a deal. But reports on Monday, suggest that there are still some hurdles to be jumped, including the issue of the border between Ulster and the Republic of Ireland. Some people think the Irish want the EU to do what the IRA could not …

But Britain may have to do its Brexit without a full scale agreement with the EU and some well informed experts think that may not be the worst things in the world because, as Roberto Azevedo, Director General (head man) of the World Trade Organization says, “If Britain fails to strike a free trade agreement (FTA) with the EU ahead of March 2019, when we’re scheduled to leave, then UK-EU trade reverts to WTO rules. While some claim this would be a disaster, not least parliamentarians determined to frustrate Brexit, Azevedo disagrees … [because] … “About half of the UK’s trade is already on WTO terms – with the US, China and several large emerging nations where the EU doesn’t have trade agreements,” he says. “So it’s not the end of the world if the UK trades under WTO rules with the EU.”

But The Economist is not so sure, and notes thatreverting to WTO rules is not simple. Britain was a founder of the organisation but now belongs as an EU member. To resume WTO membership independently will require a division of EU import quotas, notably for beef, lamb and butter. A first effort was roundly rejected by big food exporters like Brazil, Argentina and America. The WTO proceeds by consensus among its 164 members. Were Britain to leave the EU on acrimonious terms, negotiating its resumption of full WTO membership could be difficult.

In the end, however, Britain, on its own, remains the fifth largest single economy in the world, after America, China, Japan and Germany … Canada wants to be quick off the mark to reach a favourable trade deal with Britain no matter how Brexit plays out because, Señor Azevedo says, “After Brexit, Britain can be “more flexible in its approach and quicker to react within the WTO, as you don’t have to coordinate with all the other members of the EU”, observes Azevedo. “You will lose the weight of the EU as a market, but the UK is by no standards a minor economy or a minor player in the multilateral system.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s