Month: October 2016

…The chances are we’ve gone too far,
You took my time and you took my money,
Now I fear you’ve left me standing,
In a world that’s so demanding…
— New Order, “True Faith”

In this post, I discuss the options for the UK in its relationship to the EU after the Brexit vote, particularly in light of the fact that Theresa May’s government has decided that freedom of labour movement is to be sacrificed on the altar of the hostility towards immigration–which is held to have driven much of the support for Leave. It is also increasingly clear that the EU will take a harsh view of British attempts to separate trade access to the EU from the access of EU citizens to British work opportunities. I argue that, overall, this position is justified and mostly reflects an EU leadership representing the interests of their citizens in the face of a United Kingdom that, for whatever reason, believes that it can take what it believes to be the beneficial parts of its relationship with continential Europe and leave behind what it mostly (and wrongly) considers to be the costly parts. I make this argument despite a dislike of and disagreement with some of the governing attitudes in continental Europe: The historic demands of conservative, Eurosceptic UK politicians would have exacerbated what is bad about the EU and attenuated what is good about it.

The Taxonomy of Brexits

In practice, the European Union is actually a constellation (or maybe nebula) of treaty-defined entities. An EU member is a country that participates in a certain subset of them, but not necessarily all of them (there is of course a more formal definition, but I am talking about the institutional mechanics)–the UK is one of the exemplars of this choice. Conversely, there are countries that participate in some of the EU institutions, but are not members–the best exemplar of this is Norway, which participates in the single market, the unified visa area under Schengen, in the scientific bodies, and pays a significant charge in lieu of membership dues.

We are now months after the Brexit referendum returned a clear Leave result (52-48 is not a small margin, and immediate do-overs after buyer’s remorse is a democratically terrible idea), and the United Kingdom faces a choice in how to implement the referendum. The taxonomy of choices resolves to two major taxa of future possibilities: “hard” or “soft” Brexit. Under a “hard” Brexit, the UK effectively reverts unilaterally to a mostly exterior relationship with the countries of the European Union without (much) special status or access to EU-related institutions. The UK becomes like a nearby Canada, in other words. There’s no question that the border will remain open for Brits to visit the EU, but they will likely do so under the same visa waiver terms under which Canadians and Australians live, which generally excludes labour competition with EU citizens and permanent residents, outside of designated priority professions. Goods and services will have to be negotiated by treaty separately, but they will have to be agreed-upon by the entire EU, meaning that everything, absolutely everything, would be on the table, and more favorable terms than the current access to the single market would not be on offer.

Under “soft” Brexit, the UK becomes, in practice, mostly like Norway. That is, it would retain access to the single market, have to pay dues, and remain a participant in many of the institutions–but will emerge from the direct, if often only superficial, supervision of the European Commission. Much less, in terms of the UK’s real capabilities, would change, but some aspects of internal policy and regulation become officially independent of EU authority, and much influence in EU institutions would, of course, be lost.

The division between these two types of Brexits turns out to revolve around one issue: The separability of the Four Freedoms of the European Single Market. These are: freedom of movement of (1) goods; (2) labour; (3) capital, and; (4) services. These freedoms, presently well-entrenched in the EU treaty framework, are supposed to guide convergence towards a fully-implemented, single market (meaning: It’s not fully implemented). If, as a Leave supporter, your problem with the EU lies elsewhere, for instance, in its economic regulatory framework, then you would still be willing to accept the Four Freedoms, and soft Brexit is an option that other EU partners would accept in overall good faith, especially since the departure of Britain from the rest of the EU’s convergence framework would enable other agenda items, that the UK has deliberately hindered, to go forward with minimal overall disruption.

Economic Freedom as Compromise

If, however, your problem with the EU is with the implementation of the Four Freedoms, then, Houston, you have a real problem as a Brexiteer. Because every country in the EU has some significant sectors vulnerable or sensitive to one or more of the Four Freedoms. The Four Freedoms establishes a relatively simple guiding framework for compromise among these issues. I hope that it is not too difficult to see that allowing countries to withdraw in spirit and practice from one or more of these freedoms, while retaining full privileges on the rest, is a recipe for disaster for the entire Single Market project, because some countries would become “free riders” to the detriment of the other countries, which would in turn cause the disadvantaged countries to withdraw from other freedoms, in a downward spiral that would dismantle European economic unity.

The Four Freedoms and the regulatory framework that accompanies them makes the Single Market a far superior trading arrangement to treaties like NAFTA, and, yes, TTIP. The common regulatory framework, needless to say, impedes (however, does not prevent) the degree of race-to-the-bottom behaviour that you see in NAFTA-like deals, by creating a regulatory and arbitration system that is, yes, considerably more accountable to the public than the infamous investor-state dispute settlement (ISDS) that is a common practice in bilateral treaties. European, particularly British critics, decry the European Commission and its institutions as being very distant from popular sovereignty, and the criticism is true, to some extent; but that the road to accountability is long does not mean that there is no road at all, in contrast to international arbitration tribunals, which are sensitive to very little.

But more importantly, the free movement of labour is essential if you decide you want to have free trade at all. It is increasingly clear that trade deals like NAFTA, alleged to lift poor countries out of poverty by exporting low-skilled economic activity to these countries, actually have deleterious effects on developing countries. Mexico has experienced a great labour dislocation from exposure to competition from sectors that were domestically important but more productive and heavily subsidized in the US. Free movement of labour at least slightly ameliorates this by permitting workers in sectors negatively affected by this dislocation to find work in countries that directly benefited from it (overall). Because NAFTA does not lift border controls on the free movement of labour, Mexican workers who go where the work has gone (to the US) cannot send back remittances that reflect the higher US value of their labour, because they live under a wage-suppressive environment of immigration control. Needless to say, US workers do not benefit from the immigration controls as much as they are told.

What UK Eurosceptics are demanding, when they demand immigration controls for EU labour while retaining access to freedom of goods, capital, and services, is that UK business be able to profit from access to new markets in Bulgaria and Romania, countries that cannot yet compete in productivity with the UK, and yet fail to offer Bulgarian and Romanian workers the ability to improve their lot and their skills in higher-wage, higher-productivity environments with UK domestic labour protection, such as exist. It should not be hard to see why this is toxic.

European Unity and Freedom of Movement

The choice that Theresa May seems to be making is for a hard Brexit, particularly as signaled by some public pronouncements suggesting that existing EU-citizen workers in the UK would not be fully protected and grandfathered into the post-Brexit arrangement–that is, they are being designated as bargaining chips. The only condition under which it makes sense to use their status as a bargaining chip is to make an attempt for the UK to have privileged access to the EU without accepting any reciprocal obligations. (Whether it is actually possible to use them as bargaining chips this way is another matter.)

For the choice to be something in the middle between a hard and a soft Brexit, the EU would have to allow cherry-picking among the four freedoms, and therefore its own demise as a political project. I have described some of the reasons for this above. The EU is not going to passively accept its own demise at the hands of right-wing British Eurosceptics, some of whom have made no secret of their desire not only for Britain to leave the EU, but for the EU project itself to fail.

The mistake of British Eurosceptics, at least those who care about maintaining a privileged economic relationship with the European Union, is to fail to understand many continental politicians and bureaucrats, and significant portions of the continental public really “mean it” when it comes to European convergence. While the spectre of WW2 hangs in the air, somewhat faded due to the inevitable passing of those who survived it, continental Europe has still had regular reminders that it, the originator of colonialism, is in the modern world now itself susceptible to divide-and-conquer politics steered by greater, exterior powers. Critics of the EU say that the democratic legitimacy of its institutions is undermined by the non-existence of a European “demos,” but policy-makers are well aware of that. That is the whole point of the convergence process. The EU, in fact, has programmes to encourage social relationships between citizens of member states, precisely out of a desire to ensure that a European demos emerges in a future generation, and, yes, the United States of Europe can thereby be finally constructed.

Freedom of labour movement is a element of the unification of peoples explicitly envisaged by the construction of the European Union. In addition to its role in helping the Single Market to be mutually beneficial, the workplace is a key element of social integration and the building of trust between peoples at an individual level. Among younger British people, the policy has already shown signs of working–one of the complaints of younger Brits about Brexit is precisely that they were the generation that had both the most developed European identity and the highest intention of taking advantage of freedom of labour movement, of educational movement, and other related European freedoms.

National and Personal Factors

I would be remiss if I stayed only at the “high” institutional levels when discussing the dilemma into which the EU must now force the UK. There is certainly a personal dimension that cannot be ignored. British Eurosceptic politicians and media, both UKIP and Tory, have attacked what most continental Europhiles, both official and otherwise, see as the emotional core of the EU project, and did so consistently and constantly, so much so that EU immigration is seen as a prime driver of the Leave vote. Indeed, so much so that Theresa May feels compelled to choose it over Single Market access. Anyone who believes that such a consistent attack on a core belief and life work of many European politicians and bureaucrats would have no effect on how the negotiation proceeds is fooling themselves. Greece’s and Syriza’s offense during the 2015 negotiations was to attempt to step off script and make it politically impossible for German politicians to sell the band-aid to their own public; this is nowhere near as offensive as a direct political attack on free labour movement. If the UK gets off this with less visible damage than Greece, it is only because the UK is, for various reasons, economically much stronger than Greece–and not a member of the Eurozone.

Furthermore, it evidently became a bad habit in UK politics to blame domestic policy failures on the EU. The UK was never a member of the Eurozone, and there is nothing about the EU that prevents the UK from running a more social-democratic economy than it has. It was always within the power of the UK to handle its own housing crisis, its economic inequality issues, its infrastructure issues, and so on. What flaws the EU has (and it definitely has flaws!) cannot be blamed for very many of the problems now viewed as causing the political alienation that has led to the Brexit vote. Now, yes, it is a common sport across the EU for national politicians to blame Brussels officials for preventing them from doing things, and this is often true: The Commission has known democratic legitimacy issues, even if it is better legitimized than ISDS arbitration tribunals. Eurocrats are used to serving as the “distant scapegoat” function. The problem is that UK politicians did not, apparently, know when to pull back, or they knew it and chose to go over the cliff anyway, because an internal Tory party battle was more important than keeping the European project together. EU negotiators are human; they are not going to simply accept that they were the cruel masters from whom the British people needed freeing.

Therein lies a major, unavoidable issue. There are parties, particularly in countries like France and the Netherlands, that would likewise wish to scapegoat Brussels for whatever goes wrong and sell an EU breakup as a panacea. Former (?) colonialist countries like France have populations that share the imperial nostalgia issues that right-wing British Eurosceptics do. It would be actually irresponsible if EU negotiators simply attempted to go for the narrow-sense, economically most mutually beneficial deal with the UK possible. It must be seen that the EU was not the author of British woes, but at worst neutral. This is quite a different situation from Greece and the Eurozone, where, in material terms, the structure of the Eurozone acted as a real straitjacket on Greek well-being and Greek fiscal democracy.

Brexit, Boiled Hard

If there’s anything underhanded about the EU position on these matters, the blame goes principally to the people who set up the EU treaties well before this point. The article 50 exit procedure is deliberately designed to disadvantage the exiter by turning the tables: Exit is turned into exclusion, and exclusion happens automatically after the (too-short) deadline. No negotiation is possible until the country in question puts on the article 50 dunce cap and sits in the corner of shame. The architects of European convergence have always been especially careful to ensure that convergence is a one-way procedure wherein departure is so costly as to be better to be avoided at all. This was done, to put it in Ianwelshian terms, because they thought it was the right thing. Otherwise, European convergence would not be externally credible, and its lack of external credibility would be a further invitation for foreign powers to play wedge games.

One may argue that a hard Brexit also damages Europe as it disrupts the flows that currently exist, and this is always costly. European leaders have made it crystal clear that the project is more important to them than the short-term cash flows. Just as the British say that they can find substitute buyers and sellers, so can the rest-of-EU–with, in some ways, greater efficiency, because manufacturing still significantly exists on the continent. And everyone, even German industry, knows that the destabilization caused by separation of the four freedoms of the Single Market would, in the medium term, be more costly than putting up tariffs against the UK, to be negotiated down in a later and less UK-favorable process than full UK membership.

In this instance, I do explicitly take a strongly EU-sympathetic position on this. The aftermath of the Leave campaign has shown that anti-immigrant hysteria, nationalist nativism, and colonial/imperial nostalgia had a major impact on the shape of this, not a major desire for either libertarian economics or left-wing fiscal expansion. These are real dangers and ought not to be rewarded by political victories. Even under a hard Brexit, it still remains fully within the power of UK politicians to ensure that ordinary people are at least exposed to only minimal immediate suffering, and if they are not willing to use their means to protect their people, we know, once-and-for-all, that the woes and alienation of the people of the UK were never because of Europe.