Monday, October 3, 2016

Brexit Means Whatever I Want it to Mean

As Martin Sandbu pointed out last week, Brexit has to mean less free trade, despite what Liam Fox says, because less access to the single market means greater barriers to trade (whether tariffs or the more relevant 'non-tariff barriers to trade': regulations, rules of origin, and so on). Any potential gains (new free trade agreements) are in the future, and moreover not that convincing in any case (because of Britain's weak bargaining position, the loss of access to trade agreements through EU, and the time and costs involved in reaching agreements).

Moreover, the Brexit coalition (a bare majority of voters, though a tiny minority in parliament) is deeply divided on what follows Brexit.

-        On the one hand, free traders like (supposedly) Fox and more coherently Daniel Hannan see the EU as a source of restrictions on market freedom, and therefore argue that leaving will reduce regulation and improve economic performance. (This is entirely implausible, since most EU regulation is about reducing barriers to market access, and the UK already has low regulation by international standards). To the extent that labour market freedom is part of this package, it would not imply any reduction in immigration.

-        On the other, the UKIP/Tory nationalist strand of the coalition is vehemently opposed to any restrictions on UK control of borders. This implies restrictions on the ‘labour’ part of market freedom (heavier regulation to achieve fewer immigrants) and control/regulation over goods and services entering the UK (leaving EU customs union). This implies lower immigration, but also less trade, and potentially the death of the UK’s recent model of high openness to FDI and speculative capital.

The incoherence of the Brexit position has so far been resolved by a combination of wishful thinking and bullshit. The wishful thinking part revolves around the notion that the EU needs the UK so badly that it will let us keep all of the privileges of EU membership without any of the obligations. The bullshit part involves simply refusing to understand the incoherences of the Brexit position (in particular, the idea that you can have free trade whilst voluntarily exiting the world’s largest, and our nearest, free trade bloc).

What both of these positions have in common is their solipsism. The obvious inconsistencies in Brexiter thinking are resolved by assuming an Anglo-centric view of the world in which others will willingly submit to our demands, however unreasonable, or in which simply by virtue of being who we are, the contradictions of Brexit just don’t actually apply.

Examples of the former are: Germany sells us cars, so they will not want us to impose tariffs (we sell more cars to the EU than Germany sells to us; Germany has not hesitated to undermine other export markets, eg the Eurozone periphery, when it suited them; tariffs are actually required under international law unless the EU as a collective decides to offer a comprehensive free trade agreement within two years).

Examples of the latter are: Britain can now freely export all around the world, free of EU shackles (we have no obvious competitive advantage to draw on – we are a high wage, low skill country a long way from non-EU markets); France will still buy our jam, because it’s really good (so is Bonne Maman); we had free trade without immigration in the 19th century, why not now (we ran an Empire).

This solipsism is otherwise known as nationalism. In a complex world where we face huge challenges (paying off our debts when we don’t actually produce many attractive goods and services, coping with the turbulence and social disruption brought by our heavy dependence on financial inflows, the skill shortages and demographic imbalances that act as a pull factor for migration), it is comforting to retreat into a nationalist vision of the world in which bad things are caused by our enemies, and if only we could shut them out, things would be better.

The UK is not alone in this: Trump in the US and the various right-wing demogogues prospering in Europe at the moment all draw on the same ideas and sentiments. But the UK has an added toxic ingredient: our imperial past. The US, as a real existing Empire (albeit in decline) can actually elect a Trump and this would possibly represent a greater danger to others than to the US itself. The UK has a collective memory of being in this situation, of being able to doing whatever it wants, backstopped by military might. But it is no longer the case. India will buy our exports if we buy its exports, not because we tell them to do as they are told.

The option of closing our borders whilst forcing others to open theirs to us is no longer on the table for the UK. It is imperative that the younger generations who have most to lose from this harsh reality wake up to the fact, and deny the largely older Brexit voters the pleasure of torching the fields on their way out just to remember what it was like to be young.