Brexit blues



For Great Britain, Jan. 1 marked far more than the advent of a new year. Four years after a fateful referendum mandated Britain’s withdrawal from the European Union (after 50 years of membership), Brexit became a reality. A nightmare scenario — an unconditional abrogation of Britain’s ties to the EU with incalculable consequences — was avoided. After prolonged tortuous negotiations, the two sides reached an 11th-hour, 1,200-page EU-UK Trade and Cooperation Agreement. That meant that products traded between the EU and Britain would not be subject to tariffs. That is a big deal. It meant, for example, that major auto assembly plants located in Britain and employing thousands of British citizens could stay open. Those plants built by Japanese, Koreans and Americans were there because Britain offered tariff-free access to the European market. End that privileged access and kiss the plants and their jobs goodbye.

But the trade agreement, despite its impressive page count, left huge issues unaddressed. The three most consequential ones are trade in services (not goods), relations with the world beyond Europe, particularly the United States, and the implications of Brexit for the very existence of the UK as we know it.

A great benefit of membership in the EU was that it fostered the emergence of London as one of the world’s premier financial centers. For many reasons, including its highly educated English-speaking workforce, London is a natural location for international banking — but only if there is unfettered access to Europe. Last year, financial services contributed $178 billion to the British economy while employing over 1 million people. The services sector more broadly accounts for over 80 percent of Britain’s GDP. It is not just bankers; it is lawyers, accountants, architects, consultants and more. These professionals sold their services into the EU without hindrance. Trade in financial and other services netted Britain a $24 billion surplus in 2019 while trade in goods produced a $129 billion deficit. There is almost nothing in the trade agreement that gives any solid assurances to Britain’s bankers and lawyers whose livelihoods depend on access to Europe. Their future will depend on whether the British government can negotiate a series of sector-by-sector arrangements with the EU covering services. For the most productive sector of the UK economy, Brexit looks far more like a threat than an opportunity.

An important part of the sales pitch in favor of Brexit was that it would give birth to a brave new “global Britain,” free to reach economic and other arrangements with countries around the world — unencumbered by EU rules and constraints. First on the Brexit wish list was a free trade agreement with the United States. President Obama repeatedly tried to warn British voters that they were being sold a fantasy. Britain inside the EU was far more important to the United States than otherwise. A post-Brexit Britain would actually be behind the EU (with its vastly larger market) when it came to negotiating free trade with America. The same dynamic would play out around the world as British trade delegates find themselves waiting in the lobby while EU negotiators are at work in the conference room.

The third major area of concern involves the very viability of the United Kingdom comprising England, Scotland, Wales and Northern Ireland. Already Brexit has created major strains with regard to Northern Ireland. Logically, following Brexit, Northern Ireland would have left the EU along with the rest of the UK — and that would have required a “hard border” (border controls, customs checks) between Ireland (inside the EU) and Northern Ireland. With Britain’s EU membership, that border has been open to the unrestricted flow of goods and persons. That open border has been crucial to negotiating and preserving the Good Friday agreement that finally ended the Catholic-Protestant bloodletting in Northern Ireland. The imperative to retain an open border led to a complex, jerry-rigged arrangement whereby Northern Ireland will be treated by the EU as if it were still a member and the “hard border” will move out into the Irish Sea. No one likes the arrangement, but no one had a better solution. The Republic of Ireland is now tugging at the fabric of Northern Ireland’s ties to the UK by offering Northern Irish citizens special access to some EU benefits via Ireland.

Scotland poses a more serious and more immediate threat to UK unity. The people of Scotland voted decisively against Brexit and the government of Scotland has been very vocal in its objection to being dragged out of the EU “against our will.” Scotland’s formidable first minister, Nicola Sturgeon, is already demanding a popular referendum on Scotland’s secession from the UK. Current polls show that her demand for Scotland’s independence would carry by a significant margin. It is an open question how long London can resist calls for a vote.

So where do things stand overall? Most experts expect Brexit to reduce the future growth of the British economy — not by a little, but by a lot. Britain’s standing in the world — and its influence — will also diminish. Washington, for example, will look across the Atlantic and see Germany and France as more important 21st century partners because they represent the EU as a whole. And then there is the question whether there will even be a United Kingdom with four parts. In sum, Britain is likely to emerge from Brexit as poorer, smaller and weaker. It is no surprise that most polls now show a British public opposed (too late) to Brexit.

There is a lesson here for Americans. Brexit is the product of inept government and a populace animated by illusions, division and diminished self-confidence. None of this was necessary or inevitable; it is a self-inflicted wound.

Marvin Ott is a professor at Johns Hopkins University and senior scholar at the Woodrow Wilson Center of the Smithsonian Institution. He is a summer resident of Cranberry Isles.

Marvin Ott

Marvin Ott

Columnist at The Ellsworth American
Marvin Ott is a professor at Johns Hopkins University and a Public Policy Scholar at the Woodrow Wilson Center of the Smithsonian Institution. He is a summer resident of Cranberry Isles.
Marvin Ott

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