The stunning June 23 referendum in which Britons narrowly voted to quit the EU was followed by what turns out to have been a false summer of U.K. economic stability. Back then, there was talk of a “soft Brexit” in which the U.K. would maintain its trade ties with the EU and continue to comply with the EU’s core value of free movement of people across borders.
In the past two weeks, however, Theresa May, the new U.K. prime minister, has opted for a so-called “hard Brexit,” in which Britain risks being shut out of the EU’s Common Market and is no longer a part of the EU’s unalterable adherence to labour mobility.
During that spell, Theresa May has set March as her deadline for invoking Article 50 of the EU charter – the “nuclear option,” in EU parlance – by which the U.K. irrevocably commits to quitting the EU.
May has publicly criticized the easy-money practices by which Mark Carney, governor of the Bank of England, was able to stabilize the U.K. economy despite the shock to global investors of the June 23 vote.
Citing the “bad side effects” of Carney’s deep-discount interest rates on fixed-income savers, a major Tory constituency, May declared that she now will set monetary policy, “because the Conservative Party can do that.”
May has vowed a crackdown on immigrants, more red meat for her supporters. It was suddenly clear that May wants a “hard Brexit,” in which Britain fails to comply with the EU principle of free movement of people across borders and loses access to the Common Market as a result.
May has also inveighed against “international elites” that control too much of Britain. That presumably includes Magna International Inc., the Toronto-based auto-parts firm that employs 2,400 Britons at nine U.K. plants. And the giant Canadian pension plans that invested heavily in U.K. ports and other British infrastructure and upgraded it.
“The U.K. has to attract vast amounts of international capital to finance [its] current-account deficit,” the Wall Street Journal warned this week. May’s preference for a “hard Brexit” cutting Britain off from the Common Market “makes the country less attractive as a destination for foreign companies and banks wanting to sell across the region.”
May will soon have the global investment community regarding Britain as anti-Europe, anti-immigrant, anti-central banking and anti-foreign investment. Which might align with May’s party regulars, but spells disaster for the U.K. economy.
Yet Britain refuses continued participation in the free movement of people across borders, a core value of the European project. Labour mobility has been key to the prosperity of North America for centuries, and to Britain and the EU in the decades since it was adopted there.
Finally, the gloves are off on the Continent. “You can’t have one foot inside, one outside,” Jean-Claude Juncker, president of the European Commission, said last week. “On this point, we have to be intransigent.”
François Hollande, the French president, is less diplomatic. Insisting Britain must be punished for quitting the EU, he complained last week that “The U.K. wants to leave but pay nothing. That’s not possible. There needs to be a threat, there needs to be a risk, there needs to be a price.”
We’ll see if May does deploy the nuclear option in March, which triggers a maximum two-year period of divorce negotiations. If Britain gets nowhere with those, it abruptly ceases to be an EU member in March 2019, with all its demands and grievances unresolved.
The finality of Article 50 can’t be over-stated. Probably not one Briton in a thousand knows that once Article 50 has been invoked, any subsequent attempt by a chastened Britain to rejoin the EU would require the unanimous consent of the remaining 27 EU members. Latvia alone could block Britain’s re-admission to the EU.
At the G-20 summit last month, Barack Obama, the U.S. president, told May that the U.S. has invested too many years of negotiations in the TIPP to let a bilateral trade deal with Britain jeopardize the much larger TIPP.
The narrow majority of Leave voters certainly were objecting to a perceived influx of immigrants. A great many have come from outside the EU, notably former British colonies in Africa, but never mind.
The EU was a bit of sideshow in the Brexit vote, which was actually a revolt of the have-nots against the haves, plus an ugly display of xenophobia.
The latter has become official policy of Her Majesty’s government. Amber Rudd, the U.K. home secretary, this week said U.K. companies should be required to report the number of immigrants on their payrolls, to shame employers that allow newcomers to “take the jobs that British people should do.”
But where this mess leaves Britain is anyone’s guess. There’s still time between now and March for the Tories to change course, and recognize that the turbulence Britain beckons is entirely avoidable.