October 11, 2016
Towards the fifty-first state
The snippets of information we hear about the post-Brexit environment suggests that the UK is headed for systems on immigration controls and trade and investment policy very similar to that of the US. On immigration we are looking at the equivalent of a green-card system. And on investment, the UK is now considering US-style vetting, according to the FT. The point is that they want to make sure to have a process in place to vet investment in sensitive areas, but not the way this is done in France, where such vetting occurs on a more ad hoc basis - considered as too protectionist in the UK. The article says that the policy has not been formulated in full. One question is whether foreign investments should be subjected to a public interest test. Theresa May favours a regime that is transparent and rules-based. She disliked the informality with which David Cameron allowed Pfizer to bid for AstraZeneca - a deal that later collapsed.
Another story that caught our eye came from the BBC according to which the government had planned to publish a consultation paper on Brexit, but has decided not to go down that route. The story does not explain what happened. We presume that they want to proceed without a lengthy consultation process.
Among commentators we noted Janan Ganesh, who strongly supported Remain, and who says that Remainers should accept the hard version of Brexit.
"Sometimes history throws up ideas that are better tested than forever stymied. Britain’s mastery of its own affairs, even at the cost of access to the European market and the political chambers that regulate it, is a big, legitimate idea that has stirred politics for 30 years. If it is not allowed to run its course, even after a national referendum in its favour, it will not disappear, it will intensify in the shadows and return in more fearsome form."
We happen to agree with him on this point. But conversely, if a hard Brexit is the right choice for Britain - that is, after having voted no, and rejected the EEA option - what is the right strategy for the EU? We disagree profoundly with the emerging consensus that the best strategy is to take a hard punishing line on the UK. That could backfire if Brexit turns out to be economically neutral or positive, an outcome we would not exclude. We noted an article in FAZ this morning on an as-yet unpublished study by the IW economic institute in Cologne, in which its director, Michael Huther, argues in favour of a particularly tough line on the UK. Brexit constitutes an existential question for the EU, he argues, which requires a negotiating position that accepts no compromise. His fear is that, if you give ground to the UK, other EU principles will also be sacrificed on the altar of compromise, like Germany's cherished stabillity pact.