GéopolitiquePrépa HEC

A history of Brexit

A historical approach to Brexit

 

         The United Kingdom is geographically considered as being part of Europe, however its past and its present prove otherwise. On the cover of Michel Foucher’s Fragments d’Europe, Europe is represented by the body of a woman, therefore alluding to the myth of Europa. What is interesting is the fact that the UK does not seem to be part of it. Technically, the UK is in Europe but it would seem that it is a far cry from it. The sea separates Britain from Continental Europe and links it with the world beyond.

 

A conflicted history of the UK and Europe through the course of time

 

World War II served as a major turning point for the UK. The bombing of the country between 1941-1942 was the UK’s darkest hour. The UK was facing Nazi  Germany on its own. Although there was Blitz spirit supporting the British population, the UK was isolated from all points of view. This is the first time that European allies had not offered direct help to the UK in hard times. , he UK had to face this difficult situation alone , before the USA jumped in and helped. Britain therefore learned how to rely on itself and this is perhaps the focal point that explains Modern Day Britain’s psychology.

 

After World War II:

 

Post World War II, it was clear that the UK had no intention of tying links with European countries in order to form some kind of trade bloc. In the Zurich Speech of 1946, Churchill clearly stated that the only way Europe would stand a chance in the world was if the United States of Europe were formed around the franco-german reconciliation. Churchill never mentioned anything about being part of these United States of Europe.

 

In 1951, when the European Coal and Steel Community (ECSC) was implemented, the UK had not the will to join this new organization. This was a dramatic mistake as the production of steel rose by 50% in the first five years. The same rejection applied to the European Economic Community (EEC) in 1957. The UK did not want to be a part of this either and this is underlined by MacMillan’s reluctance to sign the Treaty of Rome in 1957. The main objection at the time was the fact that Britain would no longer be in control of its economy and that it would be potentially at the mercy of the European Commission in Brussels. Another reason why the EEC was not seen favorably was that Britain feared that its relationship with the Commonwealth might be ruined as it would no longer be possible to give preference to Commonwealth goods. Britain also feared to lose its special relationship with the United States.

Seeing the positive effects of the alliance on the economies, the UK started to think about joining. The growth rate of the UK was only of 3% compared to France who had a booming economic growth of 5-6% per year over the same period of time. This therefore bolstered the UK’s wish to finally join the EEC, against their own will. Surprisingly, in 1961, MacMillan, who had refused to sign the Treaty of Rome, announced that the UK was willing to join the EEC. Over this period, Britain was facing balance of payment issues and felt that competition within the EEC would stimulate its industry. The EEC, however, did not receive the UK when it decided to want to join. De Gaulle blocked their entry twice: once in 1963 and also in 1967 when Wilson tried again. Britain made its way into Europe only in 1973 alongside Ireland and Denmark.

 

The reasons for joining the EEC were purely strategic and economic, the UK never had a wish to build a single united European state. This is demonstrated on countless occasions when the UK always stepped back when  the EEC/EU was making headways: they refused to enter the single market, they refused to be part of the Schengen area. The UK was therefore and still is intent on keeping its independence and dealing with its problems on its own. The EEC/Europe Union is only a catalyst that allows the UK to remain the 7th most powerful economy in the world.

 

Whenever conversation spikes up around Brexit, everyone is prone to think that the will to take a step back is new. It is important to understand that this is not the case, the UK has always been an island on its own wanting to retain its independence.

 

 

 

The United Kingdom: the reluctant member

 

 

Even when the UK entered the EEC, the UK  was never a full member. Only 2 years after, the UK decided to have a referendum on the following question: “Do you think the UK should stay in the European Community (Common Market)?” The results were quite mitigated as only 67% of those who voted showed approval about Britain staying in the European Community. To some extent, the question of the EU/EEC has therefore always been a divisive matter in British politics. People continued to fear that British sovereignty would be affected by joining the EU.

From an economic perspective, the same can be probably said, the UK is a fond admirer of “ l’Europe à la carte”. In 1979, the Exchange Rate Mechanism (ERM) was implemented within the EEC. This was introduced in order to link the currencies of the member states and to some extent limit excessive fluctuation of each currency. At this time, the UK decided not to take the pound sterling into the ERM when its economy was booming. However, Britain joined in 1990 as the economy was weaker and the exchange rate was relatively high. The UK therefore always had its own national interests at heart. This is demonstrated yet again in 1980. In order to be part of the EEC, Britain was paying much more than other countries. The budget contribution was of 1209 million pounds, whereas West Germany only paid 699 million and France only 13 million. Britain imported much more goods from outside the EEC than any other country, and this is why the payment was so high.

 

From a British point of view, the EEC therefore stood as some sort of impediment for the development of the country. This is what Margaret Thatcher developed in her Bruges speech of 1988. This is the turning point when Thatcher set out her vision of the future of Europe and more specifically the future of the European Union. The statement was supposed to be positive but contained provocative statements such as “I want my money back” that angered European leaders but also signaled doubts about GB’s commitments.  The speech underlined that the UK have only considered the EEC as a trade association between sovereign countries, and therefore was dramatically opposed to federalism and the idea of ever forming a closer political union.

  

The referendum itself:

 

On the 23rd of June 2016, a national vote was held in order to determine if the United Kingdom should remain in the European Union or not. 52% of the population ended up voting for the country to leave the EU. Turnout across the country was of 78%. However, it is worth underlining the disparities in the votes across the country.

 

 Source: The New York Times

 

 

 

As shown in the map, the Brexit vote puts forward the north south divide that exists in the United Kingdom. Most of the people who voted leave are geographically located in the areas with lower incomes and high unemployment.

The recent challenges the EU has been facing such as the Euro crisis with Spain and Greece as well as the flood of refugees from the Middle East made “leave” a much more attractive option in the UK.

 

 

Brexit procedure:

 

Initial timeline:

 

 

 

David Cameron resigned on June 24th 2016 giving therefore way for Theresa May to come in and swoop the day. She promised in October 2016 the implementation of Article 50 of the Lisbon Treaty. On March 29th 2017, she wrote a letter to Donald Tusk (president of the European Council) invoking Article 50; the 2 year countdown departure for the UK was set for March 29th 2019. As soon as June 2017, Brexit negotiations commenced. The two year transition period ended on March 30th 2019, with no significant conclusion as Parliament rejected May’s withdrawal proposal. No agreement was found, therefore Theresa May asked for the Article 50 period to be extended twice, fixing the current deadline for October 31st 2019. As of now, if an agreement is not met before October 19th 2019, the government will need to seek a third extension.

In May 2019, she announced that she would resign as Conservative Party leader as she was unable to pass her Brexit plans through and since many “no confidence votes” were voted against her. Boris Johnson was set to become the new prime minister.

 

Risk of a no deal Brexit?

This has been the main concern for Britain as well as the EU. This is whether  Britain would leave the EU without making any arrangements with the EU prior to its departure. This would mean that the UK would no longer be part of the customs union and borders would be set in place at the earliest convenience. The free trade agreement would be annihilated and tariffs of roughly 4% would be implemented. No deal Brexit means no customs union and this would therefore make border posts inevitable.

 

MPs (Members of Parliament) are doing their best to prevent this from happening, This is why they passed a new law, called the Benn Act, that requires Boris Johnson to ask for an extension in the case that no withdrawal agreement is reached by October 19th 2019. In this case, a new extension of the Article 50 of the Lisbon Treaty would be asked for by the Prime Minister in a written letter to the European Commission and the date would be set for the 31st of January 2020.

 

The no deal Brexit risk explained through currency:

It is important to underline that British pound reflects the probability of a No Brexit deal happening or not. During the last week of September 2019, the GBP/EUR index gained momentum, it remained stable at 1.13. At the end of August, the exchange rate GBP/EUR was of 1.10. Instead of going down, it surprisingly went up. This reflects the idea that financial markets are confident that the probability of a no Brexit deal is lower than expected and there is some sort of vote of confidence on the British Pound.

 

 

The current Brexit countdown:

 

 

 

The consequences of the referendum and the potential Brexit:

 

The Ireland issue:

     

The issue of a border separating the Republic of Ireland and North Ireland is a major topic as of today. This is a major component to the Brexit deal. It is referred to as backstop. This is to ensure that Northern Ireland will still to some extent remain in the European Union Customs Union and in the European Single Market in order to prevent the setting up of a physical border between Northern Ireland and Ireland. Boris Johnson is aiming to keep Northern Ireland within the Customs Union but not in the Single Market. This has to be approved by the EU.

 

The Scotland issue:

The Scots were fervent of Britain remaining in the EU. As a matter of fact, 62% voted to remain. Days after the Brexit vote, certain politicians expressed their wish to organize a new referendum on Scotland’s independence to make sure that their country would be a part of the European Union.

 

An economic recession:

This is by far the biggest concern if a No deal Brexit takes place. The IMF (International Monetary Fund) made projections and found out that the GDP growth of Britain in the case of a no-deal Brexit would tumble down to 1.6% and bring about a recession. Britain’s economy could potentially cause a £30bn hit.

 

 

 

 

 

Translations:

  • CECA=ECSC (European Coal and Steel Community)

 

 

 

Main quotes to remember:

 

  • Winston Churchill : « Entre l’Europe et le grand large, on choisira toujours le grand large »
  • Margaret Thatcher « I want my money back»

 

 

Links :

https://www.nytimes.com/interactive/2019/world/europe/what-is-brexit.html

https://www.bbc.co.uk/news/business-49027889

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