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Brexit and the EU: Lessons for both sides

Dec 10. 2018
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By Supachai Panitchpakdi
Special to The Nation

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As an outsider, I am perhaps less qualified to comment on Brexit than those with roots in the UK and the European Union. But having been part of the multilateral world for most of my life, I always feel that wherever we are, we find ourselves in the same global boat. When tidal waves rise anywhere on our planet, they send repercussions to other parts of the world. 

Brexit is a unique phenomenon in our modern era, which is marked by a battle on three life-threatening fronts: preventing a third world war (possibly nuclear), eliminating poverty and keeping inequalities under control, and rehabilitating the globe’s ecology. 

The idea of Europe’s integration was primarily directed at the first front, following the devastating experience of two world wars sparked off in the European heartland. 

Now tensions are growing again. Ethnic hostilities still linger in parts of Europe, where a movement towards extreme political ideologies, the undermining effects of unemployment and poverty, and resurgent nationalism could well lead even this prosperous region “sleepwalking” into another full-blown catastrophe.

Hence it is incumbent on the global community to lend our support to the continued success of European integration. 

That integration now seems to be fraying at the edges. The EU’s extreme austerity measures for debt-laden Greece at one point made Grexit a more imminent possibility than the UK’s withdrawal. After the US-led global recession of 2008, the EU suffered a longer road of double and even treble recessions. The health of some major banks in Europe was strongly compromised, meaning new investment impetus led by strong growth in bank loans after a prolonged period of near zero interest rates has not materialised. And with political upheaval in Italy, perennial concern at an Italian exit from the union is resurfacing. 

What this demonstrates is that the fraying EU can be mended only by addressing the critical economic and social divide between the richer North and the struggling South, as a “United States of Europe”. Europe needs to be able to adopt a pan-European macro-economic discipline, as used to be enshrined in the Maastricht Treaty, that can engineer an orderly adjustment between the surplus-prone members of the community and their deficit-plagued neighbours. The real effective value of the euro, for example, is too weak for the likes of Germany but too strong for the likes of Greek and Italy.

With the bond weakened by all the above predicaments, it is only natural for Europe to make exits from the union as difficult as possible and to punish the leavers as severely as possible. If the UK copes well after Brexit, or even flourishes, others will be encouraged to follow. The only way for Europe to halt the slide towards disintegration is to provide the strongest deterrents to any exit effort. 

UK Prime Minister Theresa May will not accept any European withdrawal proposal that is anything less than what was presented to her as an agreed proposal. That proposal would be the same regardless of who led the UK, since it is governed purely by constraints both sides are facing. 

It is unfair for those around her to be deserting May at a time when maintaining a united front is crucial. Since there has never been a clear-cut plan of withdrawal from any side, it is simplistic and politically expedient to claim that she is not following the script promised to the UK public. 

Any international deal can be reached only if both sides share in costs and benefits. Yet May’s critics appear concerned only with emphasising the costs to the UK economy of Brexit while ignoring the exorbitant economic and social costs that drove the majority to vote leave. 

The victory over the “remain” camp is often portrayed as an expression of resentment by disenfranchised citizens at the lack of attention paid to their plight by elites. Recently, a hard-hitting UN report on poverty in the UK stated: “There is a striking and almost complete disconnect between what I heard from the government and what I consistently heard from many people directly.” At the end of his two-week trip to the UK, UN rapporteur Philip Alston said the government had inflicted poverty on people through austerity and called levels of child poverty “not just a disgrace but a social calamity and an economic disaster”.

The report’s tone may be exaggerated, given the UK economy has done fairly well since the Brexit referendum, with unemployment falling and economic growth nearly normal. But growing public discontent had already been reflected in the Brexit vote (though the hardship cannot be ascribed to EU membership alone). 

Growing calls by elites for a second referendum to undo Brexit are also unjust given that the people have already voted, and rising discontent with Brexit is mainly due to the intricacies of withdrawal negotiations. 

As someone who has the best intentions for both the UK and EU, I humbly suggest that the withdrawal agreement should not be scrutinised in terms of a winner and a loser, since both sides can be both at the same time. The main sticking point of the deal, besides matters such as the Irish border complexity, appears to be the UK’s continued membership of a single customs territory.

Given the fact that the UK would like to have more freedom to trade while maintaining a proximity to the EU single market, further negotiations should be based upon this balanced agreement. For the moment, PM May has achieved a hair-splitting task in keeping that status intact and preventing any further deterioration in case of a no-deal withdrawal. For the EU, the new configuration of economic, social and political cooperation with the UK should be guided by a mutual strengthening, not a destructive process of diluting each other’s strength.

Supachai Panitchpakdi was deputy prime minister (1997-2000), director-general of the World Trade Organisation (2002-2005) and secretary-general of the UN Conference on Trade and Development (2005-2013). 

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