03 February 2020

Paul Goldschmidt: The “Brexit” tree hides the forest of the challenges of globalization!

The historical event of the formal departure of the UK from the EU is emblematic in our “connected” planet. It is therefore crucial that both parties consider how their respective negotiating mandates can be integrated within the much broader frameworks of European integration and globalization.

[...]The British government must imperatively take into account domestic political objectives (public reconciliation, the unity of the UK, supporting the left behind parts of the country,…) at the same time as demonstrating the benefits of its new found freedom to strike advantageous trade deals with the USA, China, the Commonwealth, etc.
 
The EU must first and foremost protect the integrity of the Single Market and avoid conceding – under the threat of a breakdown of the EU – any advantages that are the prerogatives of membership (freedoms of movement) or that would confer a competitive advantage upsetting the level playing field of the internal market (State aids, social and environmental norms, health and food security, fiscal incentives, etc.).
 
To the extent these objectives turn out to be non-negotiable, the unavoidable consequence would be the limitation of the scope of any agreement. While its negative impact would be felt by the EU primarily in trade flows and security and judicial cooperation with the UK, the latter will suffer more intensely from the same problems but, in addition, will find it far more complicated to implement two of Boris Johnson’s emblematic promises: a fairer distribution of wealth (currently concentrated in London, a few large cities and the South-East) and avoiding any disruptive border controls in the Irish Sea.
 
The UK must therefor decide rapidly on its priorities: either a dynamic alignment on the rules of the EU, infuriating diehard Brexit supporters but preserving (temporarily) the integrity of the UK, or, alternatively, heading for the deep blue sea becoming isolated and the subject of the whims of the world great powers. The British seem to be prone to self-delusionary beliefs: such as the feasibility of forming an alliance with Paris, Berlin and Ottawa to counter the Sino-American duopoly, as if France and Germany were ready to ignore the 25 other Member States or that Ottawa would consider jeopardizing the recently amended NAFTA treaty! Similarly they continue to fantasize that they can divide the EU 27, forgetting that such a move would prohibit any agreement what so ever.
 
 On the EU side, the necessity to reinforce its cohesion in the aftermath of Brexit, as again recently emphasized by President Macron, means that negotiations with Britain appear less vital. In the light of Trump’s weaponizing of “commercial” threats in order to achieve his mantra of “America first”, one can readily observe his efforts to woo the UK into the USA’s orbit in order to weaken the EU (to the delight of Putin and with the tacit approval of Xi); one should also question the capacity of the UK to negotiate simultaneously on several fronts in a field which is notoriously complex and in which it has had little experience over the last 47 years. Playing both ends against the middle could backfire badly and is liable to create a feeling of mistrust detrimental to reaching an “ambitious” agreement.
 
In parallel to the meticulous preparations of Brexit negotiations by Michel Barnier and his team, an equal amount of care should be devoted to the preparation of the “Conference on the future of Europe” whose two year deliberations should not be constrained by any commitments made to the UK. To reinforce its global bargaining position, the 27 could, for instance, agree to a new treaty article, inspired from the famous NATO Art.5, considering any punitive commercial measure taken against any one Member as a threat to all and empowering the Commission to adopt the appropriate retaliatory measures. The objective would be purely dissuasive and effective only at the level of the EU whose internal market is of a sufficient size to cower the large multinationals and deter the USA from threatening a Member in isolation, as was the case with France over the taxation of the large digital multinationals.
 
The interdependence of major geopolitical dossiers was also clearly visible when the Americans put pressure on the UK with regard to using Huawei as supplier for their 5G network or in their (successful) attempt to dissuade the Swiss contractor from completing the North Stream pipeline, clearly linking overlapping commercial and security interests. In the monetary sphere, the (limited) capacity of major powers to agree measures to curb the domination of the dollar and its use as a weapon, could lead to the further marginalization of the £, reducing further the role of the City as a world financial center. One can also mention unforeseeable events such as the wildfires in Australia, the acceleration of the melting of the icecaps or the coronavirus epidemic, all elements that can have significant repercussions on the world economy and wide political and social consequences.
 
In another register, it is becoming imperative to reimagine the world governance framework so as to integrate – in an appropriate fashion – the major multinationals whose size and power have reached such a level that they are capable of instrumentalizing even the most powerful of governments, in particular those who strive to maintain a high degree of democratic legitimacy to their actions.
 
All these asymmetric but deeply interrelated topics constitute as many arguments in favor of the speedy and deliberate further integration of Member States within an ever closer Union. It must, however, first face up to its own internal contradictions: in France, the disenchantment of the public with the political class as a whole limits severely the President’s capacity to confront the “Rassemblement National” of Madame Le Pen whose “nationalist” program is comforted by the election of Donald Trump, Brexit, the successes of Salvini, Orban or the AfD as well as the economic prowess of several authoritarian regimes, particularly in Asia. The rationality of the pro EU argument has become largely inaudible as a result of the deep political economic and social divisions that are tearing apart most Member States, in particular France, Belgium, Spain, Italy not to mention Poland, Hungary or even Ireland (over Brexit). These internal divisions render the unanimity required for EU reform largely beyond reach, compromises at national level having priority over those – indispensable – to agree on sharing European sovereignty. [...]

Full article on Paul Goldschmidt website

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