Brexit Ron Oard

PERFIDIOUS ALBION Historic British foreign policy Pre-World War I British Empire Britain never a part of Europe Geographically separate and separate culture Impact of 2 world wars Pyrrhic victories for British economic power

EU History

EEC History 1952 -- European Coal & Steel Community -- make war impossible: Schuman and Monnet 1957 – Treaty of Rome (Common Market) (EEC) France Germany Italy Benelux Britain said “no” 1962 – de Gaulle vetoes British Application 1964 – D-Day anniversary 1965 –Britain joins EFTA -- Outer 7 1973 – Britain and others join Common Market (EEC) 1975 – British referendum to “leave” EEC Voted down 2-1 1982 – Thatcher got a reduction in British budget contributions British was 3rd poorest country, paid 20% 0f EEC revenue. Reduced to 12% 70% of EEC budget for farm subsidies to protect small farmers in EU 2000 – 27-year battle to get chocolate to EU market (EU cocoa butter v British veg base)

EU History 1993 – Created by Treaty of Maastricht Brussels HQ free movement of GOODS, SERVICES, MONEY, PEOPLE 17 members adopt euro Britain keeps the Pound Sterling 2013 – expands to 28 members 500 million people gdp - $16.3 trillion 2007 – Treaty of Lisbon 45 areas have vote weighted to: France Germany Italy Britain Brussels given added bureaucratic power EU decisions incorporated into British laws a major source of “leave” resentment 2007 – Plans for an EU constitution collapsed French and Dutch opposition

WHY WAS A REFERUNDEM HELD??? June 2016 David Cameron promised it in the 2014 Scotland independence vote campaign He assumed that the 1975 vote to “stay” by 2 – 1 margin would be duplicated Nigel Farage -- UKIP most important in campaign for Brexit Conservative Party divided on issue Boris Johnson most vocal WHO VOTED “STAY: London and southeast, Scotland and Northern Ireland “LEAVE”: Cornwall, Wales and Midlands The vote was advisory only 51.9% voted to “leave”, 48.1 % voted to “stay” “stay” MP’s sued in 2016 charging that Parliament must vote to “leave” before Article 50 of EU Treaty can be invoked The British High Court ruled in January, 2017 that Parliament must vote to authorize a move to “leave” February -- Parliament voted 4-1 to invoke Article 50

WHAT MOTIVATED THE “LEAVE” VOTERS? Immigration Brussels regulations that must be incorporated into British law N.B.: 70% of “LEAVE” voters want Brexit to give them conditions no worse than 2016

ARTICLE 50 of EU Treaty DECLARATION TO “LEAVE” EU 2-year transition period STRATEGIES FOR “LEAVE” AFTER DECLARATION “SOFT” versus “HARD” roads to Brexit SOFT -- similar to Norway’s relationship with EU not a member of EU access to EEC market – able to trade across the EU contributes to EEC budget subject to EU regulations accepts free movement of goods, services, people and capital no voice in EU decisions

HARD – taking back controls and likely walking away from the single market EU regulations would be negotiated Migration would be limited EU leaders make it clear that “cherry picking” is not possible If “single market” is rejected, bilateral agreements would have to be negotiated. Both tariff and non-tariff barriers would need to be negotiated with individual states Britain would trade under WTO rules as other nations do WTO and “most favored nation” rule N.B. THIS WOULD BE A NIGHTMARE COMPARED TO THE NORWAY OPTION 44% of British exports go to EU – 12% of British gdp EU exports more to UK, but 3% of gdp UK imports $220b from EU EU imports $117b from UK 25% of food imported from EU

IMMIGRATION AND FREE MOVEMENT OF PEOPLE 1957 – Treaty of Rome 6 members to 28 members No work permits or visas (similar to U.S.) To compliment free movement of goods & services (v i p for all governments and citizens) Cameron tried to get a British exception in early 2016 MOBILITY -- Americans are 3 times more mobile than EU (Established versus Mobile society) Poor south and east EU flocked to N W and wealth Language a barrier Professional qualifications not accepted Since 1990 – 5.5% of East Europeans migrated Romania lost 2.5m people Resentment: Dutch and German politicians want “leave” countries businesses to subsidize to local levels. i.e. pay in E. EU $2 an hour, pay in Britain $10 an hour, E. EU businesses to pay difference Migrants have boosted EU gdp by $45b Ireland benefitted from skills acquired elsewhere and adds to value

Disadvantages of Migration Problems “leave” countries (east EU) hit the hardest stagnant economy public finance down fossilized demography Biggest opposition comes from wealthy countries Britain and France

BRITISH OPPOSITION High numbers after expansion of EU 2004-2007 2015 – 330k immigrants, half from EU Cameron promised 100k, T. May Home Office 84% of British want immigrants to stay 13% of UK foreign born 1.2m British in EU would need protection after Brexit i.e.: Boston, Britain -- 64k pop. Is least integrated 76% voted “leave” (locals lose jobs to migrants) ethnic ghettoes 2000: 3.1% of Pop 2015: 15.8% Portugal in ‘90’s, Poland, Latvia, Lithuania low paying jobs - 3-4 times salaries in East EU - remissions some work 3-4 months and go home Foreign workers in UK: 3.3M in 2015 Hospitality 700k - 1.5m in services and industry

LONDON AS A FINANCIAL CENTER UK resurgence centered on London Financial center for EU 200 foreign banks; 200 law firms; 730k employees London trades 70% of securities in EU 4 times greater than France and Germany 2nd home for all EU and outside banks Goldman Sacks 6,000 staff in London 200 in Frankfurt Asset managers can sell across EU (passport) without est. branches -- $1 trillion managed

AFTERMATH OF “LEAVE” VOTE Business capital spending projects postponed slow growth for 2017 (.6% down from 2.3%) auto plants may move to EU Renault/Nissan expansion on hold 60% of cars go to EU– want subsidy if 10% tariff 62% “leave” vote in auto manufacturing districts RX research – 1/3 of all teams foreign born home building – 10% drop Britain exports services more than manufactured goods (in jeopardy)

AFTERMATH OF “LEAVE” VOTE Public Finance UK needs higher taxes Spending cuts (austerity) Deficit – 4% of gdp budget was to be balanced in 2018 now earliest projection is 2020 Pound Sterling dropped 20%, but rebounded now in decline after decision to go “hard” route Credit loosened: big spending on imports

AFTERMATH OF “LEAVE” VOTE Exports up due to weakened pound aid to business but all consumers pay more Autos Exported to EU imports 60% of parts from EU But weak # and tariffs will offset each other 2017 forecast 2.4% growth will be cut to 1.6% due to uncertainties over Brexit

CORNWALL How ugly could it be… 57% vote “leave” no idea of consequences 1980”s mining collapse EU subsidies currently $890m ($1b by 2020) will be lost few immigrants in Cornwall but fear influx

ALTERNATIVE TRADE POSSIBILITIES Even uglier… Trade with U.S UK gdp 1/6 of U.S U.S. exports more to EU UK exports more to EU (8% of g d p) Services to U.S. questionable due to distance and time-change India: UK trade with India 4% of exports May and Modi Hit a stonewall on trade v migrants

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