BY: M. STEVEN OSBORNE
To survive a “No-Deal Brexit” (an exit from the European Union with no trade arrangement agreed to), the United Kingdom (UK) will need to be less reliant upon its geography for international trade. The European Union (EU) is the UK’s largest trading partner, which leads many to conclude that a No-Deal Brexit would spell doom for the UK economically and politically. Some have gone so far as to suggest that Brexit must either involve a deal with the EU or the referendum should be overturned. This thinking reflects an overreliance on proximity for trade, which is a luxury that, in an increasingly interconnected world, the UK does not have. The UK will need to better develop its long-distance trading networks in order to weather the storm that is coming upon its final exit from the EU.
The UK must demonstrate it is prepared to survive without the EU in order to either be prepared in the event that there is no deal, or to get the best deal possible. Dissolving political ties while simultaneously preserving robust trade is not an easy task. The UK and EU have fundamentally different perspectives of the recent negotiations. The EU views this as a divorce settlement, and it aims to get maximum concessions. Publicly stating that the only two options are a trade arrangement with the EU or a second Brexit referendum weaken the UK’s negotiating position.
To demonstrate preparedness, the UK should aggressively cultivate its long-distance trading networks. In addition to its current Commonwealth partners, it should aggressively engage with growing markets in Asia and Africa. Likewise, it should expand its trading relationships with the United States. The UK should have every level of government deliver the message that it is open for business.
Israel is instructive to the UK in this regard. Surrounded by historic rivals, who question the legitimacy of its presence in the region, Israel does not have the luxury of geographically close trading partners. Yet, Israel aggressively pursues trading relationships with the biggest global trading partners. Israel has allowed the once sleepy city of Tel Aviv to become a major innovation hub. It has been referred to as the “start up nation” due to its record of attracting investment and developing commercial relationships. The message that Israel is an eager trading partner is communicated from the highest levels of leadership. One would be hard pressed to find a speech by Prime Minister Benjamin Netanyahu that does not contain a sales pitch for Israel, either as a destination for investment or as a trading partner.
By its own admission, geography factors heavily into current UK trade policy, with the level of trade increasing based upon geographic proximity. This must change if the UK is to survive a “no-deal Brexit.” The UK must be open geographically and willing to be realistic in terms of its trade decisions. The UK must be willing to “trade promiscuously” in order to create as many alternatives to the EU as possible.
This openness to trade may require the UK to pursue relationships it otherwise would not pursue. Accordingly, the UK cannot afford to ignore China as a trading partner. Former Prime Minister David Cameron courted China for increased investment and trade. Upon becoming Prime Minister, Theresa May appeared to change course regarding closer ties with China. Though her more recent moves suggest she is now pursuing a closer relationship with China since China is a large and growing market for exporters. Likewise, China has relatively new-found wealth it is looking to spend. This is an opportunity for the UK to invest in a growing market without having to take EU sensibilities toward China into account. While the EU struggles with the prospect of growing Chinese power in Eastern Europe, the UK can nimbly maneuver into a better trading relationship with the world’s second largest economy. Understandably there are serious human rights concerns regarding China; the UK will need to balance its commitment to human rights against the realities of the moment.
At the same time, the UK should aggressively develop its ties to the United States. Apart from the EU, the UK would have more flexibility to conclude bilateral trade agreements with the United States. While historical linkages can certainly aid in this effort, the UK should not become too reliant on it. The UK can and should take advantage of the fact that it is opening markets to American investors without EU regulations. Likewise, the UK still carries weight in the world of finance and should exploit every advantage it can in that regard. While there is a legitimate fear of the financial sector leaving London, recent events in Paris and across the EU may cause the finance community to reconsider any plans to leave the relatively stable environs in the UK.
The need to exploit these advantages effectively necessitates strong leadership. The UK needs to have pragmatic and decisive leadership that can steer it through what will be rough waters in the event of a No-Deal Brexit. While the libertarian supporters of Brexit often point to Singapore as a model, they usually only focus on items such as the city-state’s relaxed regulatory regime and its lower tax rates. They do not focus on the way in which decisions are made and the manner in which corporate entities receive the active support of the state.
Singapore’s parliamentary system bears an institutional resemblance to the British Parliament. However, the Singaporean parliament has been under one-party rule for the past fifty years. It does not have the level of political friction or disfunction that currently plagues the UK Parliament. Prime Minister Theresa May is weakened by the reality of parliamentary division. The recent no-confidence vote, decided in her favor by a 200-117 vote margin has allowed her to survive but not thrive when it comes to making a deal with the EU. Her subsequent pleas for the EU to adjust the deal to provide her with something that can pass in Parliament fell upon deaf ears. Her political distractions at home hamper her ability to negotiate abroad.
Lee Kuan Yew served as Prime Minister of Singapore from 1959 to 1990. During this long span of time, he was able to spearhead many of the reforms and implement many of the measures that would propel Singapore into the global commercial powerhouse that it is today. Because Singapore was effectively under one-party rule, he was given a free hand to make the necessary changes. Currently, the UK political dynamics are not conducive to a strong prime minister capable of making changes in the manner of Lee Kuan Yew.
The UK may consider creating an apparatus whereby trade deals can be negotiated outside the legislative branch of government. Even in the United States, the president negotiates trade agreements, which should then be ratified by Congress. The UK could empower someone to fill that role on its behalf. Perhaps the UK could create a royal commission that would negotiate trade agreements which would then need to be ratified by parliament. While one does not see the British monarchs personally negotiating trade agreements, having the negotiations operate under their auspices would be a helpful way to prevent foreign powers, be it the EU or any other power, from exploiting or attempting to wait out political divisions.
Furthermore, the UK may seek greater integration with its fellow Commonwealth of Nations partners. This integration should be organic, with UK businesses encouraged to build greater commercial ties, but on some level, it can also be institutional. The Commonwealth of Nations has a slight imperial veneer in that the Queen is considered the head of the partnership. While the Queen has never wielded the authority within that organization that Prime Minister Churchill and other architects of the partnership likely envisioned, she serves as an important point of unity. Queen Elizabeth II and her family can use the goodwill surrounding them and their understated political clout to promote the UK as an investment destination and trading partner and to strengthen integration between the UK and other Commonwealth Nations.
The UK can survive a No-Deal Brexit; however, in the short term, geography is its enemy. The UK must expand its trading relationships with more distant countries by having a more pragmatic approach to partnerships, communicating with strength and clarity in negotiations, and leveraging its existing strengths. In the coming months and years, we will learn whether the UK is prepared to rise to the challenge.
Steven Osborne is an attorney with Adams and Fisk, PLC. He holds a Juris Doctorate from Liberty University School of Law and a Bachelor’s Degree in Politics and Policy from Liberty University. In addition to his legal practice, he is involved in foreign policy analysis and advocacy with a focus on domestic and international politics, economic opportunity, and human rights.
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