Risk & Economy » Brexit » Brexit- a road to uncertainty

There are deep paradoxes lying at the heart of the Brexit debate. Understanding and resolving those is important to anybody who wishes to predict the long-term consequences of Brexit. These paradoxes are not new, but have been part and parcel of political divisions regarding the European Union since the early 1960s.

Many on the left have long been suspicious of the EU, regarding it as a capitalist club. Indeed, though it had corporatist elements from the beginning, the objectives of promoting the free movement of goods, services, capital and people is certainly something with which supporters of free markets are comfortable. Indeed, in F.A. Hayek’s The Road to Serfdom, the free-market, Nobel Prize Winning economist argued in favour of a supranational federation that would restraint the power of national governments in these areas.

It is therefore not surprising that, up until the early 1990s, support for the EU tended to come from the moderate wing of the Labour Party, as well as Conservatives. Then things began to change. Those who supported a more planned and regulated economy began to embrace the centralisation of regulation and the expansion of EU competences. Instead of restraining national governments, the EU became an arm of governance itself and one that was increasingly in favour of greater regulation of economic life on an international scale. As the power of the EU grew, the Labour Party became gradually more supportive of the EU and supporters of free markets in the Conservative Party gradually more sceptical.

But, there are still free- marker supporters of remain, who believe that the EU’s influence on free trade, capital movements and migration outweigh the negatives of excessive regulation. And there are Labour supporters of Brexit, possibly including Jeremy Corbyn himself – it is difficult to tell.

This context – both historical and recent – is important because without it we might jump to superficial conclusions about the implications of Brexit (if it should happen). It is thought by many people that votes for Brexit were necessarily votes for isolation or a vote for nationalism: that was not the case.

Whilst it is a simplification, it is not unreasonable to think of Brexit supporters being divided into three groups. The first and the second overlap and the second and the third overlap but there is little overlap between the first and the third.

The first group of Brexit supporters were deeply concerned about issues such as migration. They were rather like many supporters of Donald Trump in the last US presidential election. Trump received a lot of votes from working-class, white voters who were not very geographically mobile – indeed, 13 per cent of Trump’s voters had voted for Obama. A lot of Trump voters had been Democrats and they were in favour of protectionism.

The same was true of Brexit. Though there is little support for trade protectionism in the UK, this group of Brexit supporters was opposed to migration and had been Labour voters (or did not vote at all) and were not geographically mobile. Hull, for example, has three Labour MPs. It is a staunchly Labour area yet it voted two-thirds for Brexit.

The second group could be summarised by the Brexit campaign motto “take back control”.

The EU is perceived, with some justification, of controlling vast quantities of regulation which inhibit business and also as having too much control in relation to taxation, migration, energy, fisheries and so on. There is also a widespread view that the EU is bureaucratic and that it would be better to determine policy in relation to EU competences in the UK.

On the day after the referendum, one newspaper ran a headline “The EU’s top ten pointless decisions the UK can now get rid of”. This included an EU rule that stated that all bananas must be “free of abnormal curvature” and cucumbers were to be “practically straight” and bent by a gradient of no more than 1/10. These frivolous examples are often given (some of which are apocryphal), but there are EU rules that cause serious problems such as those relating to sex discrimination by insurance companies or regulations relating to working hours.

Take back control” was a phrase that resonated with a lot of people of different political perspectives. You can be a nationalist and believe in taking back control. You can be a supporter of free enterprise and be opposed to all the regulation that comes from the EU.

I think those people who wanted to take back control will be disappointed. There is not a great deal of difference between the view of the UK government – or any UK government imaginable – and the view of the EU as a whole when it comes to regulation. We have been told by Michael Gove and others that we will not use the opportunity of Brexit to de-regulate the UK economy.

The third group of Brexit supporter are basically globalists. It might be thought strange that people who wish to leave the EU can be globalists. But, in fact, in many ways, the intellectual leadership of the Brexit movement are globalists. There are many globalists who support the EU because it promotes free trade, free migration within its own borders and so on. However, there is a perfectly rational, pro-Brexit, pro-globalist position.

Indeed, some remain supporters forget how insignificant Europe really is. The EU currently has 7 per cent of the world’s population. In 2060, it is estimated that it will have just 5 per cent of the world’s population. In other words, soon, 95 per cent of the world’s population will live outside the EU.

The EU is also shrinking as a share of the world economy. In 1980, the current members of the EU made up over 30 per cent of the world economy. Today, they make up 16 per cent and the proportion is falling quite rapidly.

The Brexit globalisers are also concerned about economic decline and stagnation in the EU and believe that remaining in the EU will eventually drag the UK into this increasingly sclerotic economic bloc. One example of the problem is illustrated by youth and long-term unemployment figures.

In Spain, around 70 per cent of young people who are employed have a temporary job – in other words, only around 18 per cent of young Spaniards have a full-time permanent job. In France, just 50 per cent of young people who have a job have a permanent job. Youth and long-term unemployment is a huge problem in continental Europe and that is in addition to disastrous demographics that make some people think that the future economic relationships should be orientated to the rest of the world.

Life after Brexit

And it is in this context that we should think about what happens next – that is life after Brexit.

If the globalists have their way, after Brexit, the UK would become a great champion of global free trade. That would include eliminating EU protectionism.

The EU requires the UK to impose tariffs on a whole range of products that are detrimental to UK consumers. This includes tariffs of 10-20 per cent on many foods which affect poor consumers the most and 17 per cent on footwear.

And this is where we come to a crucial choice. Will life after Brexit lead us to seek the same sort of trading relationship with the EU that we have now? We could try to have a long-term relationship which keeps us in the customs union and which requires us to have the same trade arrangements with the rest of the world as the EU has: this is Brexit-lite.

Alternatively, we could break free altogether. We could have a free trade agreement with the EU but also free to have free trade agreements with the rest of the world too – including with the US. The globalist brexiteers want the UK to have the freedom to promote freer trading relationships with the US, Canada, India, African countries and so on – in other words that 95 per cent of the world that is not in the EU. In addition, of course, they want free trade with the EU as well.

The globalist brexiteers want to throw off the EU tariffs and develop much deeper trading relationships and international relations with other countries.Prof Philip Booth, Dean of the Faculty of Education, Humanities and Social Sciences at St Mary’s University, Twickenham

What will happen? I suspect that the UK will go down the path to greater international openness when it comes to trade, unless we tie ourselves into a customs union. But protectionist interests will be trying to influence policy. Less certain is our attitude towards issues such as migration.

Unlike in the US, there is not the same pressure for trade protectionism more generally – but there is not a strong consensus around policies that encourage high levels of migration. But we have got to get there first. In fact, almost any leave scenario, if pursued two years ago, would have left us in a better position than the current uncertainty.