There’s no plan, detail or sense of grip in Brexit

Author: George Mangion
Published on Malta Today 8 September 2016

Brexit ; UK ; Malta

The process of transition can be a long and bumpy ride for Boris Johnson but it is in the interest of all the 27 EU members that there will be no recriminations in the negotiations. David Davis the secretary of state for exiting the EU has been accused of appearing before parliament without any details of how the government is planning to embark on Brexit negotiations.

Davis chirped that Britain could be a “beacon for free trade across the world” and a “more glorious country” with an immigration system that controlled the numbers but also encouraged the “brightest and best” to come. He suggested Britain could bring in an even more rigorous immigration system than a points-based system. Ten weeks after the referendum and the roadmap for Britain post-Brexit seems to be no clearer now. There is no evidence of sound planning by the government, no detail whatsoever on the deal it wants to strike, or the strategy for achieving that deal or the reasons for rushing it through parliament. Cynics think it is all smoke, spin and mirrors.

The British media reported former shadow home secretary Yvette Cooper who criticized government and dismissed Davis’s words as an “astonishingly empty statement” with “no plan, no sense of grip, no detail”. Tory backbenchers are fed up with vain promises and have rebuked Davis on the hollow slogan – “‘Brexit means Brexit’.

Understandably they expected some details at the first sitting after the long summer break at the Commons. Prime Minister May is in China attending the G20 Summit where she was quoted to have gone soft on a rigid migration point system. She wants a system where the government is able to decide who comes into the country – a hybrid migration entry policy based on a pseudo points-based system which sets criteria for entry.

Equally troublesome was a fifteen-page letter from the Japanese prime minister warning against the negative effect on Brexit on Japanese investments in UK. Naturally Japanese firms fear for their future. Will Britain retain full access to the single market as Japanese firms can continue unfettered to export from Britain to third countries making full benefit of trade privileges within the EU single market?

As regards migration, the letter calls on the UK to “maintain access to workers who are nationals of the UK or the EU,” saying the European labour market could suffer great turmoil if EU nationals could not freely travel between the UK and continental Europe.
Finally, the threat of Japanese banks exiting from London is serious. These only thrive if they can continue to secure the financial services passport to operate in the EU. A sense of déjà vu takes over when contemplating the angst at the news of the decision to leave the EU on 23 June. As expected it caused the sterling to drop to its lowest level against the dollar in 31 years. There are also questions as to any impact the devaluation of the sterling will have on the economy.

The silver lining is that the UK can improve its balance of payments, as it will need less capital to finance domestic business and a weak sterling will make exports more competitive and consequently increase demand for exports. The decision of companies based in UK to re-domicile abroad could open opportunities for Malta and Ireland – both English-speaking countries. The recent decision of EasyJet to service all its 250 jets in Malta could be the harbinger of other British companies who may be attracted to move here. Typically, Britain, as an EU country promoted itself as the Gateway to Europe for many international companies such as Nissan and Honda. Now there is an uncertainty to whether or not Britain will have access to the single market.

Telecom companies such as Vodafone are considering whether to relocate headquarters into other parts of Europe where they enjoy preferential tariffs. It goes without saying that the UK is a prime contributor to the EU common pot which will in the future have to be replaced or else the budget for 2017 will need some trimming. Malta is one of the countries that could be affected by Britain’s decision to leave the EU. The obvious sector to suffer will be tourism from Britain as visitors now have a weaker currency – some may switch to holidaying at home.

In diplomatic circles, we all know that the UK has been a strong ally with Malta in negotiations within the EU on various subjects including that of tax harmonisation and consequently its departure will make it harder for Malta to have its voice heard in Brussels.  What does it mean for Maltese companies? Some observers predict that the UK may also try to declare itself a Free Trade Zone to heighten competition in the UK and raise productivity.  France and Ireland have already expressed concern on such a move yet somewhat the repercussions on Malta may be premature to predict.

When the UK finally invokes Article 50 and parts company with the EU, America will miss the UK as a privileged partner inside the European institutions. Previously the USA has relied on the UK as a stepping stone into the European Union to help take care of American interests in Europe. To maintain a strong political contact within the EU, given that relationships with Germany has weakened, especially after the Volkswagen affair and the last regional elections in which Angela Merkel lost popularity, it is probable that the USA will try to intensify its relationship with Eastern Europe countries, especially the Baltic ones, since they both have a common interest – that is to keep Russia from expanding economically (and militarily) towards the centre of Europe.

Upon reflection, it has been a bold move for citizens of a democratic Britain to voice their wishes. This comes at a cost but on a positive note other pro-Brexit adherents say that new opportunities will surface which previously were not within reach. The process of transition can be a long and bumpy ride for Boris Johnson but it is in the interest of all the 27 EU members that there will be no recriminations in the negotiations and a win-win solution is negotiated for the benefit of all. It is certainly going to be a chilly winter for David Davis.

Author: George Mangion
Published on Malta Today 8 September 2016
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