The end of the European Union as we know it
Last week, British Prime Minister Theresa May triggered the long-awaited Article 50(2) to start the formal process of withdrawing the United Kingdom (UK) from the European Union (EU). After 44 years of at times tumultuous, often tense relationship, the UK has decided to make its own way in the world once again.
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Britain’s quest for a role in the world after losing its once global empire, as former United States (US) Secretary of State Dean Acheson put it, received a renewed boost. But what does the future hold for UK and the EU?
An uncertain future
Doom-saying ‘Remainers’ believe the result can only be catastrophic; euphoric ‘Brexitiers’ claim a new dawn has broken and sovereignty will be repatriated back to Westminster. Despite complaints about the loss of sovereignty, the EU was not an imposition on the UK by its European neighbours: it was the UK that barged in, even after its membership application was twice rebuffed by France’s General Charles De Gaulle in 1963 and 1967.
On hindsight, De Gaulle’s reasons for opposing Britain’s membership appear prescient. At a press conference in January 1963, he questioned Britain’s commitment to being inside a common tariff union and its genuine willingness “to renounce all Commonwealth preferences, to cease any pretence that her agriculture be privileged, and, more than that, to treat her engagements with other countries of the free trade area as null and void”. Renewed interest in the World Trade Organisation, the Commonwealth and bilateral trade alternatives prove De Gaulle’s instincts were right. Geography and history made the UK a risky member of a closed EU in the long run, just as De Gaulle had predicted.
Fundamentals are unchanged
However, questions as to whether Britain will survive outside the EU are rather moot. Of course it will; it did before accession and it will after Brexit. As a country of laws, systems and trade, it will continue to exist no matter what happens. However, what Brexitiers who are painting a picture of a gilded past and a rosy future ignore is that the UK was a non-member before joining the EU and we all remember what it was like then. There was a reason the UK joined the economy and access to the largest trading bloc, and none of these have changed fundamentally.
Prior to accession, the British economy was characterised by high-wage inflation, industrial strife, low productivity and output which earned it the sobriquet of the ‘sick-man of Europe’. While all European countries were rebuilding their economies after a catastrophic second world war, Britain’s recovery appeared sclerotic and over-burdened. Joining the EEC was seen as the only hope for economic revival, especially as one after the other Britain lost hold of its ex-colonies.
What is at stake?
Although Britain’s economy has prospered since accession, it would be a stretch, even inaccurate, to attribute all of it to membership of the EU. Structural reforms by Mrs Thatcher and successive governments, the discovery of North Sea Oil and globalisation have had greater impact. Still, membership of the EU contributed to greater prosperity for all and economic regeneration in the poor and ignored old industrial towns in the North of England, Wales and Northern Ireland. Farmers and the landed gentry have done well out of large subsidies and consumers have benefited from lower tariffs and an abundance of supply. Free movement of capital and labour signed into law by Mrs Thatcher as part of the Single European Act shored up the financial services sector which accounts for one-fifth of the British economy and underscored the City of London as a pre-eminent global financial centre.
Much of this is now at risk with Brexit and the fear of a possible return to the Britain of the 1960s and early 1970s. If the promises of new trade pacts with other countries are real, attractive alternatives, why did Britain not take advantage of them prior to 1973?
The greater fallout from Brexit, however, may well be the collapse of the EU as we know it. Not, as commentators argue, because of the rise and possible triumph of right-wing populist parties in the elections in France and Germany, but under the EU’s own weight of burden.
The future of the EU
De Gaulle foreshadowed this in his 1963 press conference when he argued that the entry of Great Britain [and other states], an expanded Common Market of “11 and then 13 and then perhaps 18, would no longer resemble the one which the Six built”. The EU has 28 members now and the departure of one of its largest net contributors to the organisation’s annual budget will have a destabilising financial impact.
To thwart the Franco-Germany axis from hurtling toward ever-closer political union favoured by both former German Chancellor Helmut Kohl and French President François Mitterrand, British politicians successfully persuaded the EU to admit former Eastern European states after the fall of the Berlin Wall. After years under communism, it was no surprise that many former Eastern European countries climbed unto the raft the EU offered and haven’t looked back since.
The reality though is that all the former Eastern European countries plus Spain, Portugal and Greece are net recipients of the EU budget and it is open to question how long the net contributors will continue subsiding them. While the original Six got together to foster trade and mutual development, it does not require much imagination to fathom that the attraction of many of the EU’s recent members was the inward investment and subsidies dangled before them. With Brexit and the loss of the EU’s third largest net contributor, the burden will fall on fewer countries and that is not sustainable. If net recipients are forced to make greater contributions, many will no longer find the trade-off between the EU’s burdensome regulations and economic benefits attractive or as reason to bear and grin continued membership. The EU may well shrink to a club of 10.