Interview: Leading academic says Britain can continue global influence with well-handled Brexit
by Peter Barker, Gui Tao
LONDON, Jan. 11 (Xinhua) — Despite the prospect of leaving the European Union (EU), Britain can continue to hold its position as a power with influence across the globe, a leading academic has said, adding a badly handled Brexit would damage the country.
“Britain has the capacity to come out of Brexit still as an international player — it is predicated upon having a constructive exit from the EU,” said Robin Niblett, the director of the Chatham House in London.
Niblett told Xinhua in a recent exclusive interview that a break from the EU was a break with Britain’s “most essential relationship”; geography and history dictated that continental Europe would be the most significant area of engagement for Britain in trade and politics. A rearrangement of the details of that engagement was not the same as a curtailment.
And for Niblett this essential relationship is also a benefit for both parties.
“All Britain needs is a decent deal with the EU and I think it can find its way in two or three years time back to a balance — a slightly lower rate of growth or maybe a rate of growth that might be equal to what it had in the EU, but this is predicated on Britain not having a dysfunctional Brexit,” said Niblett.
BREXIT: SOFT OR HARD?
Current division of terms into soft and hard Brexit were shades of meaning for various aspects of a potential exit, he said, and would be present in any exit plan, but what he warned against was a dysfunctional exit.
“A dysfunctional Brexit is one in which we really do leave, falling off the cliff. And falling off the cliff means we drop straight into World Trade Organization (WTO) status,” he said.
Such a move was modelled by economists and businesses before the Brexit referendum vote on June 23 last year.
Other models included bespoke agreements between the EU and Britain and Britain adopting a model already in play with other European non-EU nations such as Switzerland or Norway. All these offered more favorable outcomes.
The WTO arrangement would imply that no agreement was reached between the EU and Britain after exit negotiations, and that on Britain’s exit there would be a regime of tariffs and bureaucracy regulating trade and movement across the EU border for British businesses and people.
Niblett said: “We would move to a system of border checks that have not been planned and thought through; rules of origin (of parts and materials) start to impact the way people think about the way they should or shouldn’t invest in Britain; the foreign investment, which is so important for Britain, declines.”
The British economy is dependent on foreign investment to maintain stability. Imports and export figures reveal a prolonged deficit that is not in Britain’s favor.
In November, the trade deficit was 12.2 billion pounds (about 14.7 billion U.S. dollars), according to figures released on Wednesday. The trade balance has been in monthly deficit since before the financial crisis.
Niblett feared that if foreign investment declined “then all of Britain’s structural weaknesses” would be exposed.
The high level of home ownership, and corresponding reliance on short-term mortgages, typically two years in length, was one such, said the think tank chief.
The exposure of many households to short mortgages meant that they would have to cut back on spending if interest rates moved higher quickly, with a direct result on economic growth as household spending has been the principal driver of growth.
“If Brexit happens with a hard Brexit, you could see interest rate have to go even higher not least because of the low value of the pound and the increase in import prices,” said Niblett.
However, Niblett was quick to point out that the current uncertainty over Brexit should not be a concern, despite the lack of clarity over what Brexit would mean.
“I am not too worried about the dysfunctionality in the British government today. I think it would be surprising if the British government six months after one of the most unexpected political earthquakes, revolutions, it has had, had it organized,” said the academic.
British Prime Minister Theresa May needed to acquire political capital within her Conservative Party, and in her country at the same time as “preparing one of the most complex negotiations ever undertaken by Britain,” according to him.
It would be in the interest of all parties involved in the coming Brexit process — Britain and the remaining 27 members of the EU — to negotiate a British exit that is favorable for all parties.
“Most EU countries have so many other problems on their plates — refugee crisis, terrorism crisis, eurozone not resolved yet, and their own unemployment and structural growth problems — the last thing they need is a bad Brexit,” said Niblett.
And a good Brexit was possible, according to Niblett, provided that Britain sought an agreement that did not compromise the EU.
“What would undermine the cohesion of the 27 would be for Britain to try to ask for a deal that would look like it had a better deal outside the EU than it had inside. And I just don’t think that is what Britain is going to ask for,” said Niblett.
He forecast that there would be some kind of agreement on movement of labor, restrictions on which are demanded by many in May’s Conservative Party and within her government.
“I think the UK will come to some agreement on movement of labor; in return for British citizens still having the right to work and remain in Europe we will give preferential access to EU citizens into the UK market,” said Niblett.
What preferential mean was open to negotiation, but Niblett was clear — there was certainly going to be big change.
“It will not be the same as today but it will be some quid pro quo. I think Britain will pay then money to the EU budget long term in order to have access to research and development programs, in order to keep some seat on the European Investment Bank,” he said.