Article 50

My big fat European Divorce -1

Published on 14.03.201714.03.2017 in Conflicts 2017 · Crisis 2017 · Economics 2017 · EN · Geopolitics · History 2017 · Nation 2017 · Person 2017 · Skepticism 2017 51 views / 5 comments

GEOMETR.IT ecfr.eu

As Theresa May prepares to trigger Article 50 and begin the two years of negotiations over Britain’s exit from the European Union, we set out the positions of the UK’s negotiating partners. This collection of views from the capitals shows a variety of attitudes towards Brexit, ranging from nervousness to indifference. Several EU partners have vulnerabilities – whether in terms of citizens’ rights or economic interests – to a ‘hard’ Brexit, which the UK will no doubt seek to leverage in the negotiations. But the overall impression is that Europe seems ready to accept some damage to national interests in order to protect the European project. In this context, securing a favourable deal for Britain looks a very tall order for Ms May’s negotiating team.

VIEW FROM BERLIN

by Josef Janning

The truth is that neither economic nor demographic factors will exert much pressure on Germany in the course of negotiations.

After a phase of profound disappointment with the outcome of the British referendum, the debate in Germany has calmed almost to the point of indifference.

Occasionally business associations note the significance of the British market, or city administrations report rising numbers of British applications for German citizenship. But the truth is that neither economic nor demographic factors will exert much pressure on Germany in the course of negotiations.

Germany will certainly notice the economic impact when Britain leaves the single market. In 2015 Britain was Germany’s third largest export destination after the United States and France. But the fact that the US tops this list shows that being outside the single market is no barrier to continuing trade. A future free trade agreement with the UK would likely ease any tariff barriers created by Brexit, and non-tariff barriers should be manageable given the high regulatory convergence between the EU and the U.K.

When it comes to citizens’ rights, Germans make up less than 5 percent of the EU citizens permanently residing in the U.K. And most of the 135,000 German expats in Britain are highly skilled and will remain in demand after Brexit. Moreover, even if they were forced to (or chose to) return home, Germany’s labour market would be able to accommodate them.

Much the same could be said of the over 100,000 British citizens living in Germany. A significant number may want to take up German citizenship, but even if they did not their position in the German labour market would be no weaker than that of US citizens.

In terms of negotiations, the German debate does not focus on ways to punish the U.K. for seeking to leave but rather to control the damage this step could do. German policy makers do not advance particular interests they might have and do not want to engage in exploring special concessions as they do not wish to encourage any other EU-government to do so. Berlin is keen to keep the ball in Brussels rather than to engage in bilateral consultations. In this sense, Angela Merkel’s encounters with Theresa May were meant to alert the British Prime Minister to the consequences of a hard Brexit, but not to secure any special agreement between the two countries.

In Berlin’s view, there is very little room for British maneuver in the negotiations ahead. London may seek to leverage continued security co-operation as a bargaining chip, but the German policy community correctly notes that the UK has its own vested interest in continued partnership in this area. So if Britain wants to leave the single market and the customs union it will have to accept the consequences, including the restoration of fully functioning EU/UK borders – with all consequences that will have in places such as Northern Ireland.

Concessions Margaret Thatcher or even David Cameron could win were grounded in Britain’s membership in the EU and Germany’s strong interest in preserving the integrity of the EU. By leaving the union, Britain has lost that leverage. Downing Street may not have noticed that, yet. But the Chancellory clearly has.

VIEW FROM DUBLIN

by Andrew Gilmore

In both political and economic terms, Ireland is arguably the Member State most exposed to the risks of Brexit.

Two immediate priorities can be identified for the negotiations:

Preserving the status quo in Northern Ireland, including migratory freedom, reciprocal rights, labour mobility and the open border;

Mitigating damage to the trade relationship.

Northern Ireland

Ireland and the UK are co-guarantors of the peace agreement in Northern Ireland, but this peace remains fragile. Brexit is an unwelcome development in a region where political disagreements need little encouragement to become dangerous schisms. Preserving the status quo is a priority – but equally so is ensuring that issues related to Northern Ireland are handled in the negotiations with due sensitivity for the North’s unique circumstances.

For example, after Brexit Northern Ireland will become home to one of the highest concentrations of EU passport holders outside the EU. But this is quite distinct from the broader EU negotiation issue of migration and reciprocal rights for citizens: it is a direct consequence of the peace agreement, which extended Irish citizenship to all Northern Irish citizens.

Similarly, customs and migration controls with the UK are problematic to some degree for all member states, but the hard-won open border with the North has a deep symbolic significance. A return to the borders of the past cannot be countenanced.

Considering the singular circumstances and the high stakes, there is a growing sentiment that the Northern Irish issues must be compartmentalised, lest they fall victim to a potentially acrimonious negotiation. This will require creativity, flexibility and goodwill – but the case can certainly be made that Northern Ireland is a unique case, worthy of unique consideration.

Trade

Theresa May’s Lancaster House speech made clear what was already suspected: damage to the €1.2 billion per week UK-Ireland trading relationship is unavoidable. The only question is how severe it will be.

The UK’s departure from both the Single Market and the Customs Union raises profound questions over the future of bilateral trade between the two countries. Considering the domestic political constraints, and the EU’s own desire to enforce its rules, it may simply be impossible for Prime Minister May to negotiate the ‘associate membership’ of the customs union she has alluded to. Ireland will be caught in the middle: tariffs and non-tariff barriers to trade will be inevitable, and bring with them the potential to wipe-out many cross-border SMEs with low-margin business models.

An acute awareness that Ireland’s economic and political future lies with the EU, and not with its nearest neighbour, is likely to drive Ireland to hold the European line on these issues – but it may come at a heavy price, and the country may be forced to seek aid from the EU for hardest hit sectors.

The future relationship

For Ireland, a swift solution to the future relationship would be ideal, but given the complexity of negotiating such agreements it seems unlikely one will materialise in a rapid timeframe.

In that light, the present debate over whether the negotiations will take place in parallel or consecutively seems less important than securing satisfactory transitional arrangements for the interim period and cushioning the blow of Brexit for the island of Ireland as a whole.

VIEW FROM MADRID

by Borja Lasheras

Although there is no widespread desire to “punish” the UK, there is little appetite in Madrid for any exit concessions, either.

Spain’s overall position on Brexit has not fundamentally changed since the beginning of discussions in the wake of the referendum. Officials remain adamant that the upcoming negotiations pertain to the UK’s withdrawal from the EU (including issues such as the financial settlement, and rights and obligations of citizens), not its future relationship with Europe. The one exception to this “exit negotiations first” mantra is the status of the border in Northern Ireland, given its specific nature.

At a later stage, officials argue, if exit negotiations proceed smoothly and there is a positive assessment of the engagement of the British Government, then there might perhaps be room to initiate discussions – though not necessarily negotiations – on the terms of the future EU-UK relationship. But these terms are not expected to go much further than those offered to other trading partners such as Canada.

Spanish public opinion was strongly in favour of the UK remaining in Europe at the time of the referendum. But while there was some hope after the vote that Brexit might yet be avoided, it is now becoming clear for most Spanish policymakers that the UK and Europe are heading towards a “hard Brexit”. Although there is no widespread desire to “punish” the UK, there is a scarce appetite for any exit concessions, either – especially when it comes to fundamental tenets of the European project, such as freedom of movement.

Indeed, the impression is that further concessions to the UK might have been more likely had it chosen to remain in the union. Instead, the perception in Spain of an increasingly xenophobic, delusional and patronizing attitude of the British establishment is fast destroying any goodwill it once possessed.

Two sensitive dossiers for Spain in the Brexit negotiations are domestic tensions with Catalonia’s pro-independence government, which is looking closely at Scotland, and by the thorny issue of Gibraltar. New foreign minister Alfonso Dastis has been vocal in making the point that any provision on Gibraltar will need to be agreed by Spain. Meanwhile, opposition parties, having accepted concessions a year ago, now take a tougher position than Rajoy’s government.

For most Spaniards, then, Brexit is yet another European problem, and a big one at that, to be managed over the coming years. Some policymakers stress the opportunities for Spain in a potential new ‘EU4’ core group of Germany, France, Italy and Spain, or in deeper integration in defence, which, in their view, might progress now that the UK is unable to block such prospects. But the general view is pessimistic.

http://www.ecfr.eu

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GEOMETR.IT

Old Europe/ Comedy of Errors

Published on 14.03.201714.03.2017 in Conflicts 2017 · Crisis 2017 · Economics 2017 · EN · Geopolitics · History 2017 · Nation 2017 · Person 2017 · Skepticism 2017 156 views / 7 comments

GEOMETR.IT project-syndicate.org

Marine Le Pen, the leader of France’s far-right National Front, claims that the twenty-first century’s defining battle will be between patriotism and globalism. US President Donald Trump appears to believe that it will be between “the very fake news media” and himself, backed by “the people” he claims to represent. They are both wrong.

The battle that will actually define this century will pit long-term thinking against short-term thinking. The politicians and governments that plan for the long term will defeat those that fail – or simply refuse – to look beyond the current election cycle.

China is famed for its supposed long-term thinking, but we do not have to resort to dictatorships to test the point. Some Western democracies have also done the work needed to manage the powerful forces of globalization, technology, and demography – and they have been rewarded with stable economies and political systems largely unchallenged by populists. Others have remained fixated on the short term, and suffered considerably as a result.

To map this distinction, I have developed a new composite statistical indicator for my educational charity, the Wake Up Foundation, called the Wake Up 2050 Index. Unlike, say, the World Economic Forum’s Global Competitiveness Index, the Wake Up 2050 Index looks beyond statistics covering past and current performance to detect clues about countries’ future burdens and the likely productiveness of their main assets, especially their own citizens.

Based on 25 measures, the Wake Up 2050 Index ranks the 35 mainly advanced-country members of the OECD according to their preparedness in five areas: demography, the knowledge society, technological innovation, globalization, and resilience in the face of unexpected shocks. The results are striking.

Switzerland tops the index as the Western country best prepared for the known trends and forces shaping the twenty-first century. The country’s populists are a single-issue brigade – with that issue being immigration – and have far too little support to enter government. What backing the far-right Swiss People’s Party has attracted emerged only after the number of foreign-born migrants reached one-quarter of the Swiss population, almost double the level in the United States or the United Kingdom.

Switzerland’s four neighbors languish far lower on the list – Germany in 15th place; Austria in 17th; France in 20th; and Italy in 32nd – despite their close cultural, historical, and commercial ties to Switzerland. In Austria and France, Euroskeptic, anti-immigrant populist parties have gained enough support to have a real chance of winning power, as has Italy’s more left-wing Five Star Movement. Even in Germany, the populist influence is rising.

Given Switzerland’s reputation for being wealthy, well educated, innovative, and resilient, its success in the index may not seem surprising. But with wage levels among the world’s highest and 19% of its GDP coming from manufacturing (compared with 12% in the US and 10% in the UK), it should, in theory, be highly vulnerable to Chinese competition and job-destroying automation. Yet it has largely shrugged off these challenges.

The same cannot be said of Italy. Though its manufacturing sector accounts for a smaller share of GDP than Switzerland’s – 15%, to be precise – it has suffered far more from Chinese competition. The reason is simple: Italy is producing less sophisticated and innovative goods.

This reflects a serious mistake that Italy, along with France, is making. By over-spending on public pensions to buy off voters in the short term, both countries’ governments have severely limited their ability to invest in education and scientific research. No country can compete effectively in an increasingly knowledge-based, technology-driven global economy, if its government doesn’t devote sufficient resources to fostering the right skills and capabilities among its labor force.

Success also requires a regulatory environment and corporate culture that enable citizens to make productive use of the knowledge they have acquired. In this sense, countries with low female labor-force participation (like Italy) or where the most experienced workers, those over age 65, no longer work (like Italy and France) are at a distinct disadvantage.

The value of long-term planning is perhaps most apparent in Japan. Despite being the advanced economy experiencing the fastest population aging, Japan scores rather well on demography in the Wake Up 2050 Index. One major reason is that, anticipating the demographic shift it would undergo, the country has kept more than 20% of over-65s in the workforce, compared to just 2.9% in France.

The US scores worse than expected on both innovation and knowledge. Poor performance among secondary schools and a low overall labor-force participation rate mean that the advanced technologies the US develops are not used to their full potential. That is a major reason why Trump was elected president – and a bad sign for America’s future prosperity.

To “Make America Great Again,” as Trump has pledged to do, policymakers must think beyond the current election cycle. The same goes for all of the Western democracies. Yet many critics have begun to doubt whether Western policymakers are even capable of such long-term thinking anymore.

But the critics could be proved wrong. Immigration, one of the most contentious questions in today’s political debates, is fundamentally a long-term issue. And while voters in the US have come out against openness, the UK promises to remain open after Brexit, except to immigration from the EU. Elsewhere, openness is still being staunchly defended.

In France, the question of openness is the main battleground of the upcoming election. Le Pen, like Trump and the Brexiteers, claims that openness has been a disaster. But Le Pen’s two main rivals – the independent centrist Emmanuel Macron and the center-right Republican François Fillon – both argue for more openness and freer markets. Who comes out on top will determine the trajectory not just of France, but of Europe as a whole. Switzerland, for one, is more than a little nervous.

https://www.project-syndicate.org