1. Brexit
Ron Oard

2. 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

3. EU History

4. EEC History
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 – 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)

5. 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

6. 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

7. 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

9. 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

10. 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

11. IMMIGRATION AND FREE MOVEMENT OF PEOPLE
1957 – Treaty of Rome 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

12. 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

13. 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 k pop. Is least integrated
76% voted “leave” (locals lose jobs to migrants)
ethnic ghettoes : 3.1% of Pop : 15.8%
Portugal in ‘90’s, Poland, Latvia, Lithuania
low paying jobs 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

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. Questions?