Will the UK pursue global free trade outside of the European Union?
The biggest irony of Brexit is that it was only made possible by a funny alliance between metropolitan intellectuals who believe in global free trade and an English working class overwhelmingly opposed to globalisation. Daniel Hannan, Dominic Cummings, and Nigel Farage, the men who made it their lifelong mission to take their country out of the European Union, all saw Brexit as a chance to unleash Britain’s potential as a maritime free trading nation in the mould of Tiger economies such as Singapore.
The agenda of most of the leading Leave politicians couldn’t have been further from ‘Little England’ — Daniel Hannan, for example, passionately believed an independent UK would prosper with unilateral free trade across the globe.
Here is what Mr Hannan wrote for The Spectator in the run-up to the referendum:
I want to conjure for you the vision of an internationalist Britain linked by language and law and history and by custom to every continent and archipelago. Britain raises examples to more distant horizons.
One of the Leave campaign’s major talking points on the economy was that regional trade blocs such as the EU were inferior to rapidly growing markets in South East Asia and South America. At the same time, popular support for Brexit was found strongest in the areas left behind by globalisation — e.g. Yorkshire where almost 58% voted to leave the EU. It is this gap between the Brexit visionaries and the main body of its supporters that makes a British exit from the European Union such a difficult position. With the original architects of Brexit forgotten in Theresa May’s new ‘Brexit Means Brexit’ government, it is uncertain as to whether the maritime free trading dream of the original leave campaigners will ever be realised.
The newly formed bond between China and the UK, one of David Cameron’s bigger achievements, is one potential avenue for Britain outside of the EU. As the U.S. presidential campaign sees it re-evaluate its own relationship with China, Britain may have a unique opportunity to further establish itself as a gateway for Chinese businesses and investors into the Western world. Yet the future of this special relationship will depend on the new government’s stance, particularly whether or not the £18bn Hinkley Point C project goes ahead.
Nigel Farage was always keen to point out the trade opportunities with Britain’s English speaking friends in the United States, Canada, New Zealand, and Australia. Again, a shared language and common law system make trade with these countries in theory much easier than with other countries. On the other hand, the slow pace of international dealmaking (particularly when the UK is at ‘back of the queue’ for future trade deals) remains a major barrier to any immediate rebalancing toward English speaking markets.
Timescale is undoubtedly the most important factor in the upcoming withdrawal negotiations. A decisive deal, one that perhaps ignores other opportunities in emerging markets and the Anglosphere, will likely be wanted quickly by Theresa May to avoid prolonged uncertainty. An extended period of limbo would result in a collapse in investment, potentially leading to long-term, fundamental damage to the economy. Underinvestment is already a big issue and could easily become embedded for the next few decades if Brexit stifles economic growth as expected — the National Institute of Economic and Social Research estimate economic output fell 0.2% in July.
Most economists, newspapers, and civil servants are now expecting a mild recession to follow in the months after the referendum. It is still unclear as to whether this is just short term pain whilst businesses come to terms with June’s result, or a new reality that will take a toll on employment and wages. If the former, leave campaigners within Theresa May’s cabinet may push for a more adventurous future outside of the European Union. If the latter, it is hard to see how a pragmatic Theresa May would not seek a Norway-style deal with the European Union — even at the price of freedom of movement.
The question draws down to security over risk. While abandoning the strict regulatory requirements of the single market would put us in good stead for trade with the rest of the world, the loss of the EU as a major trading partner would almost certainly trigger economic catastrophe. Theresa May is a safety politician and it is therefore unlikely the radical free trade vision of the original Brexit campaigners will ever be realised.
