Tuesday, 17 January 2017

Theresa May's Brexit Speech


In her much-heralded Brexit speech today, UK Prime Minister Theresa May continued to adopt the pose of the strict headmistress delivering an address on the school’s achievements. She attempted to be bold and proud, but avoided mentioning that no prizes have been won this year and the school trip abroad is now cancelled owing to insufficient funds. The speech was long on rhetorical cliché, yet short on detail that could not have been deduced from what has already been reported. However, there was a clear statement that the UK would not aim to stay in the EU single market after Brexit and, more interestingly, another implicit threat to the EU on what would happen if there were no good deal for the UK in the forthcoming negotiations.
She seems finally to have got the message from other EU political leaders that membership of the single market is part of a broader agreement that includes freedom of movement for people too. She may also have been informed that the existing EU customs union agreements (eg for Turkey) are based on trade in goods. They do not include services, and would not help the UK’s interest in maintaining financial services access to the EU market. So the PM declared that there will be no such membership, and neither will there be any payments to the EU budget for these things. Brexit means Brexit!
Then came the brazen bit: ‘as a priority, we will pursue a bold and ambitious Free Trade Agreement with the European Union’. The great thing about this is that, because it is not called being a member of the EU single market, it will presumably cost nothing! Nothing at all, since although the UK plans to repeal the European Communities Act as part of the exit, it will at the same time ‘convert the “acquis” – the body of existing EU law – into British law’. So, you see, everything can really remain the same. Well, except that, not being an EU member, the UK can avoid paying anything into the EU (except for some specially considered exceptional cases), can control EU immigration and can pay no attention to the European Court. Which EU member state would not see that as completely reasonable?
If the rest of the EU did not agree that this was a wonderful solution to an intractable problem, then there was the threat, one initially posed by Chancellor Philip Hammond in his recent interview with the German newspaper, Welt am Sonntag. The newspaper stated that ‘your government sees the future business model of the UK as being the tax haven of Europe’. Hammond did not deny this, but indicated that it could happen if they were ‘forced to do something different’. Hammond said
‘If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term. In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.’
Theresa May was clearer on this ‘change our model’ option in her Brexit speech when she said that ‘no deal for Britain was better than a bad deal for Britain’
‘Because we would still be able to trade with Europe [even with no deal]. We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain. And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model.’
Britain is the second largest EU economy, and the one with the second largest net EU budget payments after Germany, so it does have some negotiating power. But it is still in a relatively weak position compared to the other 27 states negotiating as a bloc, especially if it does not want to make any payments to the EU. The UK government is obviously not promising to change the capitalist economy, but merely to change or cut some taxes and regulations that would make domestically-based business ‘more competitive’ – meaning more attractive for business. This would be a problem for the rest of the EU, since they would either lose out or also have to adapt to these changes, so it is a credible, if desperate, negotiating tactic.
A big problem for the global capitalist system is that the UK moves are helping to undermine the existing structures of international political-economic relations that have been slowly built up over decades. This makes the international policies of all major states up for grabs, and we can obviously add in Trump's US to the mix. Partly in compensation for this, PM May went on about how much she valued the partnership with Europe and how Britain was important for European ‘security’ in terms of its permanent membership of the UN Security Council, nuclear weapons and ‘intelligence capabilities’.
These are more signs of how the chronic economic crisis is leading to growing tensions in capitalist policy making. In Britain’s version of the economic nationalism being introduced by Trump, Theresa May uses blather about a ‘fairer Britain’, rather than a strident ‘Make GB Great Again’, if only because she knows there is a more vulnerable position to protect and no ability to force unilateral deals. We will see more arguments and conflicts between the major countries in the years ahead.

Tony Norfield, 17 January 2017

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