In yet another “the Brexit situation has developed not necessarily to UK’s advantage” sighting, the Financial Times reported on Saturday that Britain threatens to quit Galileo satellite project, which we strongly urge you to read in full.
The short version is the UK’s ultimatum looks like an effort to rebrand an inevitable loss as some sort of British success. Expect this to become a heavily-worn playbook. From the pink paper:
Britain has threatened to walk out of Europe’s €10bn Galileo satellite project…
Greg Clark, business secretary, is also calling for an immediate three-month freeze of the procurement process…
Bidders are due to put in their best and final offers for the ground control segment of Galileo next week, while a second, bigger tender for back-up satellites, worth hundreds of millions of euros, is expected to be launched within weeks….
In a blunt letter dated April 19, also sent to EU industry commissioner Elzbieta Bienkowska, Mr Clark said that unless Britain had access to secure parts of the Galileo project it could simply walk away. Since the project’s launch in 2003, the UK has funded roughly 12 per cent of Galileo’s annual budget….
The EU has threatened to exclude the UK from Galileo’s sensitive “public regulated service”, an encrypted navigation system for government users. It said that sharing sensitive information with a third country — Britain — would “irretrievably compromise” the service.
Britain’s armed forces were also keen to access PRS, a rival to the US’s GPS which is designed to continue working when all other navigation services are jammed.
However, the Brussels move would make that impossible as under EU rules PRS can be accessed only by member states….
A senior industry executive said recently to the Financial Times that excluding British companies from secure parts of Galileo would mean that they could no longer bid for the software and ground links that control the 30 orbiting satellites.
Airbus manages the ground control system out of Portsmouth….
“The UK is the incumbent,” the source said. “If the tendering rules are not changed within weeks then Airbus would be forced to move work out of the UK. The work would go to France because they have the most relevant expertise.”
One could argue that the security restrictions are Brussels scheming to give EU firms as much commercial advantage as possible, or alternatively, that the UK had decided to leave Galileo when it invoked Article 50 but somehow lost track of that fact.
But sometimes the stated reason really is the main issue, or at least an important issue. With the UK in the Five Eyes and the US being second only to the Chinese in not respecting privacy rights, it seemed plausible that many members of the EU27 were leery of the UK having its nose in the EU security tent and were acting on this sentiment now that they can. Some might regard that concern as even more pressing given that a UK outside the EU is almost certain to become more dependent on the US.
I ran this theory by our Richard Smith, PlutoniumKun, and Clive. First from Richard:
Just one aspect of a much-predicted and horrible trainwreck: this story will just get bigger and bigger thanks to all the other UK touch points with the European aerospace industry, which are innumerable.
PlutoniumKun then weighted in:
The US has long been doing its best to sabotage the Galilleo system. It’s superior to GPS and is out of US control if it wishes to degrade it during a conflict (i.e. to stop an opponent from using it for their own military).
It’s had all sorts of technical and cost issues, and I seem to recall suggestions that some of the problems, such as failing clocks in the launched satellites were not ‘accidents’. And of course it has to be assumed that the UK would co-operate with the CIA with intelligence.
I think the EU have tried very hard to keep Gallileo civilian – i.e. its very firmly an EU project, not a NATO one, even though it has very obvious military potential. So in that sense excluding the UK makes absolute sense in the context of Brexit. It does though raise lots of potential issues with various Anglo-German and Anglo-French weapons projects.
Suspicion of UK intelligence services in Europe goes back a long way, and long predates the Internet. All telephone calls between Ireland and the UK, for example, have been monitored with early word recognition systems since as long back as the 1980’s (this emerged by accident in a court case many years ago). You could actually see the interception dishes in Holyhead, Wales (a small station built under the main microwave tower which linked the Irish and UK phone systems before the days of fibre optic cables). And while the Wikileaks revelations that Merkel’s phone calls were monitored won’t have surprised the Germans or French, that doesn’t mean they were not angered by it.
So I think its probably a reasonable hypothesis that various intelligence agencies in Europe are now taking the opportunity to ‘Europeanize’ systems. There have obviously been increased moves to protect data from the big 5 internet giants and even talk of creating EU alternatives to WhatsApp, etc. Whether all these are part of a concerted policy or its just lots of different countries and agencies coming to the same conclusion (i.e. Europe must protect itself from US intrusion, and the UK cannot be trusted), can only be speculated I think.
And then Clive:
Absolutely.
Right from the instigation of the European project, the EU acting as bulwark against the US was baked-in. Here, although expressed in cold-war imagery, the message and intent is unmistakable in this 1970’s German cartoon:
This ran completely contrary to the UK’s historic and practically implemented policy of being tightly allied to the US. We weren’t called the Unsinkable Aircraft Carrier for nothing – the UK didn’t merely offer diplomatic niceties to the US, they provided on-the-ground resources and support such as the infamous “RAF” (which is really USAF) Menwith Hill.
It is implausible that the US’ interception of EU communications would have been possible without the presence of such US assets in the UK. The EU tolerated this unhelpfully and often unhealthily close relationship and even, to a limited degree, bought into the largely fictional interpretation that the UK, by having a foot in both camps – so to speak – would be a bridge between the EU and the US. Such a bridge being necessary because the EU didn’t trust the US to allow it to grow into anything which might – as the above cartoon inferred – be in a position to stand up for its own interests without interference, but yet could hardly not have any engagement with the US at all or be too overt in its resistance to US influence.
Post-Brexit, the security landscape will change in a fundamental way. The EU will have to respond to that. It would be remiss of it not to.
And for the UK, an all-but unspoken though perfectly clear to those who supported Brexit outcome was that the UK would have to have stronger links to the US in not only trade but also in the things you barter to be allowed preferential trade terms. Which is US bases, US personnel and support for US foreign policy or strategy. This is the same deal I see right in front of my eyes when I visit Japan – they get to trade with the US fairly unimpeded and they get US security support, but they have to toe the US party line and they have a huge amount of US military infrastructure sitting (not always happily with the locals) right where the US deems it wants it to be. This point wasn’t exactly played up by the Brexit campaign because the US isn’t exactly flavour of the month a lot of the time, but it wasn’t played down, either.
I agree with PlutoniumKun – the EU will have to firewall itself off from the UK because the UK will increasingly become a proxy for the US. And the US hasn’t itself (yet) really woken up and dealt with the possibility of an EU which is, I think we can safely say, no longer a geopolitical Cinderella but a comic turn, turned serious. When it does so, and it is a “when”, not an “if”, there will be a fundamental realignment between the EU and the US. It seems that the EU is already preparing for this eventuality, hence the moves to marginalise if not fully cut itself off from UK security services’ information sharing. The Commission’s moves against what are only thinly disguised arms of the US surveillance state (such as Microsoft and Google) is another case in point.
If Clive is right, that a Japan-like relationship with the US is the endgame for the UK, this will make a mockery of the Brexit selling point that that UK would be reclaiming its independence. We’ve repeatedly described Japan as a military protectorate of the US and Clive gave some examples of what that means in practice. And do not forget that the US had disproportionate influence over Japanese policy. It tried forcing Japan to open its markets to foreign firms, as well as pushing Japan to participate in the Paris accord, a concerted and successful effort to greatly increase the price of the yen. That did succeed in reducing Japanese exports to the US, but did virtually nothing to increase US exports to Japan, due to many non-tariff trade barriers, including that Japanese greatly preferred Japanese products because they saw them as better quality.
However, one place where the US did have its way was forcing rapid deregulation Japanese banks. As we’ve described longer-form elsewhere, that made Japan’s bubble and eventual bust much worse than it otherwise would have been. We were in Japan during the 1987 crash, and the Fed told the Bank of Japan to buy Treasuries to stabilize the market. The BoJ dutifully called the so-called “city banks” like my then employer, Sumitomo Bank, who dutifully complied. To put it bluntly, that’s not the behavior of a sovereign country. The US may not pull quite such heavy-handed moves on the UK, but anyone who thinks the US will treat a post-Brexit UK as an equal partner is smoking something very strong.
57 comments
Comments are closed.
Poodledom:
As far as poodledom goes, that publicly came to pass around the time when I was born in 1956 during the Suez crisis; the US thankfully said heel!
I think that when push comes to shove NATO trumps the EU, because the military always trumps. The EU is unable take unified measures regarding uncontrolled immigration when it matters, and therefore demonstrates that it is unlikely to combine in a military crisis.
Pip Pip
Turkey does not support that view.
Re NATO and TKY:
Ah, that ticklish situation; In or de facto out? If they really cuddle up to Boris despite the significant downing a while back, what are the implications? Given America’s history of responses to former allies it has tooled up, I think you can guess where my train of thought is leading me. Maybe the Kurds’ time is coming
Any links would be welcome.
Pip Pip!
Just a point about poodledom – smart poodles (like Japan) take a lesson from Judo and use their opponents strength against them. Japan is a military protectorate, but like others (including at various times Israel and the Gulf States) can use it to leverage matters to their own advantage. You can go back to the Yoshida Doctrine in the 1950’s that Japan effectively ceded control in one aspect (security), while using that to gain dominance in another (economy). It didn’t quite work out as planned for the Japanese, but they certainly made sure they got a good deal for a defeated nation. Many of the Gulf Nations have played similar games and have been adept at using the US to wipe out their enemies.
But I really struggle to think of one unambiguous gain the UK has made from its long time Atlantic Alliance with the US. Yes, various senior members of the establishment have had the red carpet rolled out in Washington for them, and yes they got to buy Polaris and Trident subs, but unless I’ve missed something, they’ve never gained significantly in terms of economic deals or other geopolitical gains. I can only assume its a hangover from Empire that the UK has never been able to sufficiently humble itself to actually play the poodle game efficiently.
I think it’s more a case of, if you’re having to be a poodle — and if you’re a small country you’re going to end up being a poodle of some sort or another, although some Brexit’ers do seem to think bizarrely that post-Brexit policy will end up being something akin to the Juche Idea, but leaving that aside — you want the longest leash and the owner who’ll best understand your temperament (and vice-versa).
Britain has long had bad experiences of great continental alliances and interlocking power blocks. Frankly, they’ve brought nothing but trouble. Conversely, US interventions have been essential for Britain’s survival on unarguably one occasion and possibly in another couple of instances besides. Plus, the Marshall plan rebuilt Britain after WWII (and Europe, and Japan, too). So there have been verifiable examples where the US has put its money where its mouth is.
None of which devitalises the point made — what Uncle Sam can giveth (here’s looking at you Kingdom of Saudi Arabia), Uncle Sam can taketh away again (here’s looking at you Iran). Personally, love it or loath it — and plenty do the latter, no argument on that one — I’d take the US over the EU any day of the week. But there’s no shortage at all of people in the UK who’d be quite happy if the US was to sink beneatht he waves like the lost city of Atlantis, never to be see of or heard of again. If my mother in law was here, she’d say something like why can’t we just keep our head down and not make trouble for either, so that’s another option which got thrown out the window with the referendum.
I think even the WWII example is debatable. It was of course Germany and Japan that declared war first on the US, and arguably the US’s Marshall Plan help was neutralised by the refusal to wipe out the Lend-Lease loans leading to the weird situation where the losers of the war got more money out of it (a notion well sent up in the Peter Sellers film, The Mouse that Roared). The US did of course bail out the British Army in Kandahar and Basra, but the alliance got them into those messes in the first place (thanks Tony!).
You are of course right that Britain’s entanglements in Europe led to what I suppose is an institutional memory that such things are generally a terrible idea, and I’m sure that is one of the strongest intellectual arguments for the Anglo American alliance. Arguably, the UK’s position as a pivot between Europe and the US was the best possible geopolitical position for it to be, and Brexit has blown that out of the water. As we’ve seen so often, the EU leaders seem to have understood this long before the London government did.
And you are right too of course about all small countries being poodles to some extent – ‘everyone has a Master’ as Dylan sang. This is one reason I think why many in countries like the UK and France don’t ‘get’ why citizens of smaller countries are so enthusiastic about the EU – even the Greeks. They know they have to be someones poodle to survive. Much better to be the poodle of an organisation at which you have a seat of the table rather than the neighbour who has more tanks than you.
“everybody’s got to serve someone” is what Dylan sang. And that someone does not have to be your master. It’s a Christian concept that is hard for authoritarians to understand.
Ah yes, sorry, I’m conflating two songs in my head (the other is, I think, a Cohen song, I’ll have to look it up).
The main problem with Marshall’s plan for the UK was, that while it got most money of all recipients, it spent a lot of it on trying to rebuilt the Empire/Sterling area, while pretty much ignoring the infrastructure and the like (I don’t have the investment numbers in my head, but IIRC it was something like French and German spending on infra from MP was twice that of the UK). Also, IIRC, another non-trivial part was spent on imports, often to do stuff like Labours electoral promises, so for example UK building timber imports were paid from that, to build the social housing – which paradoxically meant that US witheld some aid as it was not meant to be used in this way, costing the UK money in the end.
I entirely agree with your last part, to the extent that the small poodles in EU don’t feel the poodledom so much, as they know that for almost everything they will find an ally. Which is a different from a poodle that is all alone with His Master’s Voice ;)
For the UK, their relationships with the US and the EU are not parallel. A “poodle” is nonetheless a nation, capable of playing off their master against other powers – as Japan is described as doing. But the EU isn’t just much closer; it has ambitions to be a nation. (Personally, I don’t think they’ll get there, nor do I think it’s even a good idea – they give up more than they gain. But I’m way over here.) So if it stayed in the EU, Britain (or any other country, except perhaps Germany) would be more like Oregon in relation to the Federal gov’t. US states are granted a certain amount of autonomy, presently being used to legalize marijuana, but it’s conditional and has faded over the centuries. But except for Texas, which is still a bit fractious, none of them were nations before they were states. And still there are rumblings about secession – which I would support if it didn’t involve civil war. For one thing, I think size matters.
Of course, this is exactly the logic that led to the Leave vote. Evidently Clive still supports it. Too bad the Tories were and still are in charge. As Yves mentioned quite a while ago, sovereignty is worth something. Adding to that, sometimes it’s worth a great deal, even if rather qualified; and Britain is now finding out what it costs.
The Tories: the only party that could have delivered the Brexit vote, yet the last party you’d want to deliver the Brexit settlement.
The Marshall Plan is widely misunderstood, thanks in no small measure to effective US PR.
There was a ton of European flight capital in the US thanks to the Nazis. The US didn’t need more investment; it already had built up an excess of productive capacity thanks to war mobilization. So the best use of the money was to send it back to Europe for them to rebuild and the US to have markets for its goods.
I’d disagree about continental alliances.. it’s been a tradition going back hundreds of years that we would act in alliance with continental powers (With Austria against France in 1701, with everyone vs. France in 1789-1815, with France vs Russia in the Crimea, with France and Russia against Germany and Austria in 1914. The UK has almost always been involved in Europe; the exceptional period was 1815-1914 when comparatively little happened, and we got the impression of being a major power acting alone.
The difference now is that Europe is no longer the center of the world, and European powers are no longer world powers. The rest of the world has caught up in terms of both technology and population; the only way that Europe can count as a front rank player on the world stage is via the EU.
Thank you, PK.
There are some Brits, initially from the better educated High Tory establishment, who thought the UK could be Greece to the USA’s Rome. From that same group, there were many anti-Americans, vide Enoch Powell and Alan Clark.
The younger / newer / Thatcherite neo cons, essentially spivs who want to ally with the bully on the corner, see that there are many advantages, especially financial, in doing so. This includes some, but not all, of the top brass, a group despised by many current and former servicemen and women.
Thank you to Yves, Clive, PK and Richard.
The community may recall Jacques Chirac’s warning that the EU would be a vassal (of the US, presumably) if it did not have Galileo.
UK MSM coverage of the issue is often based on the economics, duplication, but never the politics. It’s odd as, often, the same people will say the UK needs to leave the EU and “take back control”, but not be aware that Brexit means (greater) fealty to Uncle Sam. The UK MSM also gloats when the project stutters. It’s the same with Airbus, as if the UK has no stake in Airbus.
Everything that Richard Smith, PlutoniumKun, and Clive said rings true to me. I can also think of something that happened recently that would underline Europe’s desire to disentangle itself from the UK and that was the Salisbury Incident. Because of the ruckus raised by the UK, several European countries expelled Russian diplomats but by now they must surely realize that they have been had and that there never was a Russian chemical attack. It was all a false flag.
Those countries just worsened their relations with Russia for nothing in the same way that following the US’s lead, they have had to wear hundreds of billions of dollars of lost trade with Russia over the Ukraine putsch – a country that the Europeans themselves have decided that they do not want a bar off. Excluding the UK means also excluding a charter member of the Five Eyes which they would see as a win. They are now slowly setting up a European Army as they must be sick and tired of the UK and US bullying NATO/EU countries to send troops to all corners of the world to fulfill decisions made in London and Washington. They cannot be happy about having their troops on the Russian border either.
I regret to say that if you have the UK in an organization you also effectively have the US acting as a silent partner with the UK acting as a front man. Without the UK there might be more of a chance to normalize relations with Russia which effectively opens up the gates all the way to China. I am sure that they have thought about this.
I found the speed with which the Europeans backed up the UK over those expulsions curious. I’m quite sure most were well briefed by their security people that the story wasn’t as cut and dried as the UK tried to make it seem. I can only assume it was almost a reflex action of loyalty. Even Ireland expelled one Russian diplomat, and when interviewed, the normally quite smart and articulate Minister in charge was unable to give a coherent answer as to why the decision was made.
When later it was pointed out that the largest alumina smelter in Europe is in Ireland and its Russian owned (Rusal), and is now in deep trouble due to Trumps trade restrictions, he avoided any answer, most likely because it never crossed anyones mind. That smelter is the main supplier to Europes car industry. If the Russians were to shut it down in revenge, it would cause havoc.
Thank you, PK.
“Most likely because it never crossed anyones mind” is a very apt phrase. Having worked on regulatory change projects from 2007 – 16 and come across civil servants and politicians, your phrase does not surprise me. The increasing level of detachment or plain ignorance is breathtaking. Some civil servants are openly contemptuous of their political masters. One New Labour Treasury minister was called Bungalow by the civil servants.
Mum is a civil servant. She works largely in the Thames Valley now. She worked in Whitehall and, briefly, at the Bank of England from 1973 to 2010. She says the difference in the calibre of ministers is staggering and getting worse. It’s not helpful, either, that civil servants are often thrown at the deep end in their late 20s – and being eaten alive by seasoned pros in Brussels. On that note, it was embarrassing how lead civil servant, Olly Robbins, had to present a load of political rubbish on Ireland to the Commission last week, rubbish rightly thrown out.
I heard similar comments from insiders about the previous Irish cabinet.
I think its an unfortunate by-product of political instability. In a parliamentary system, any cabinet will be a combination of ‘those picked because the PM thinks they can do a good job’ and ‘those picked because the PM owes a favour, or has to appoint because its better to have them inside the tent’. In Ireland, the past few elections have resulted in cabinets where the latter type of politician has been all too apparent.
Although I think the dynamic has been slightly different in the UK. Since Blair, the notion of the Minister actually being competent has become rather quaint. Its all about centralised power in the PM’s office, with Ministers becoming either tokens (like half Blair and Camerons cabinets), or in the current case, appointed purely for short term political considerations. Whatever you think of Thatcher, there is no way she would have let the likes of Boris or Davis anywhere near a position of real responsibility. Even her personal pet, Jeffrey Archer, was kept away from anywhere he could do damage.
Yeah, I found it suspicious the speed that things developed. I had the impression that it was all prepared in advance but not far enough back so that more nations could be pressed to join in. I also have the impression that the entire operation was rushed as a more well-prepared one would not have so many loose ends and weak evidence as has been displayed.
You were talking about aluminium (aluminum to our American cousins) and I was reading an article on Russia Insider at https://russia-insider.com/en/eu-now-pushing-trump-ease-russia-sanctions/ri23255 which mentioned it in connection with the Europeans getting jack having to follow Trump’s dictates on who can trade with whom according to US laws. The times they are a changin’.
Why should such matters cross any civil servant or elected official’s mind? It’s not like there is any price, personal or professional, for going with the narrative, even if the narrative is 100% lies.
Witness the terrible penalties that Tony Blair and all those who pushed for war on Iraq and Libya suffered.
Any thoughts as to why Macron appears gung ho on military and “nation building” intervention in Syria?
Perhaps the US is looking at France as its new nose in the tent?
Make’s you wonder, doesn’t it? Maybe he wants his own ‘special relationship’ with the US. Could he be so stupid as to want to repeat the French Mandate for Syria and the Lebanon (https://en.wikipedia.org/wiki/French_Mandate_for_Syria_and_the_Lebanon) or a smaller version thereof? Maybe too he wants to help with the US occupation of Syria’s oil fields. After all, a main reason that France went into Libya was to liberate the gold and the oil there so France has ‘form’ here.
Yes, I think Macron could be that stupid, cf Tony Blair but with a big dollop of French imperial nostalgia.
What percentage of the total electorate actually voted for Macron?
How many voted for Macron?
First round :
18% of the people registered on the electoral lists
24% of the people who voted (excluding white votes)
= 8,6 millions people
Second round :
20,7 millions people
44% of the people registered
66 % of the people who voted (excluding white votes)
I didn’t think that Syria had much in the way of oil.. It’s a pretty minor player – given the costs of trying to secure the oil fields there, it would probably be cheaper to just buy the oil at market prices..
syria’s main asset is it’s geography. it sits where any pipeline from the middle east to europe would need to cross
Interesting article, interesting discussion. As someone who voted “yes” in the original UK EU entry referendum in 1975, I find this whole rolling shitshow to be horrifying. And IMHO it has only one plausible result – a crash-out Brexit. There are too many incentives on the EU side to be intransigent for any kind of negotiated brexit to happen.
I expect a massive flow of Brit emigration as a result of the inevitable 30% reduction in UK GDP which will occur.
Hmm. While I like disaster movie capitalism projection storylines as much as anyone, your figures would represent a Great Depression style event (assuming you’re thinking this fall in UK’s $2.565 trillion USD (2017) GDP would be a multi-year event; if you’re thinking it’ll be a single-year timescale, this would represent a calamity never before recorded in modern economic history, which does seem a bit of a stretch).
As UK GDP is 14% of EU GDP, this would also result in a c. 5% decline in the EU’s $18.40 trillion USD (2018) output (which, again, if you’re thinking this is a single-year hit would be a slump far exceeding that of the GFC in 2007/8) or, alternately, a GFC-rivalling occurrence if spread over 3 or 4 years.
Ironically, I kind-of wished you were definitely right rather than being almost certainly wrong — impacts of those magnitudes would concentrate minds far more than they are being concentrated on at the moment (especially the mind, if it either has one or else isn’t out of it, of the UK government).
Time, however, will tell all.
Its kinda fun to speculate on disaster scenarios, even if almost by definition its impossible to predict what can happen when things start to go wrong. Sometimes even major economic calamities can lead to surprisingly strong and quick recoveries (such as the Asian crisis in 1997), but others can lead to a long, slow decay – (Japan 1989).
My personal nightmare scenario for Brexit is that the sudden realisation by the markets that its gonna be bad leads to a rapid decline in sterling leading to a sudden upward surge in inflation. If the BoE doesn’t feel it has the instruments to deal with it (and with interest rates so low, this may be right), and a government obsessed with austerity refuses to man the priming pumps, then this could result in a series of cascading failures through the economy (not least in mortgages and car loans defaults on a massive scale). A combination of rapid inflation with a drop in production capacity as manufacturers leave could lead to a once in a century crisis.
But I think more likely I think is a Japan style shock, followed by years of stagnation or sub-optimal growth. Most shocks result in rapid growth as spare capacity is taken up, but if there is a serious outflow of manufacturing and services, this capacity could simply shrink, leading to a permanently smaller economy.
The real question for me though is how quickly the economy can re-align itself. In theory, agriculture could be rapidly reformed to serve the domestic market and a cheaper UK could become an attractive location for foreign investment capital. But I think there has been a huge loss in institutional capabilities over the decades – I really wonder what it would take to make the serious structural adjustments that are necessary.
Thank you and well said, PK.
Your final paragraph is of particular interest.
Some of the leading Brexiteers (James Dyson of the eponymous firm, Professor Tim Congdon and the Bamford family of JCB fame) have been buying up farm land. Farm land, including land that won’t or can’t be used for farming (e.g. Highland sporting estates), is also a shelter from inheritance tax. There are many other landowners in the Brexiteer ranks, e.g. the Earl of Dartmouth, a UKIP MEP, and Ian Duncan Smith’s in laws (in Buckinghamshire).
I heard from a colleague this morning that our employer plans to restart its UK property lending unit, a dozen years after it came to the party late and left soon after in ignominy.
Structural Adjustment Programmes? IMF medicine for the third world and designed to enable imperialism by stealth! I don’t think the UK can adjust that quickly. It’s hollowed out in every way and will need a Keynesian programme on a par with the post-war settlement, so something that neo-liberals and Thatcherites have no truck with.
A rough ballpart estimate is 5-8% drop in the first year, based just on the trade losses (not just EU. The border/customs problems will IMO have impact across the board due to the infra problems).
The main thing is what happens with Sterling. The problem there is that the UK populace is debt ridded, to the levels last seen around 2008 – and most of it’s actully not mortgages this time around IIRC, but unsecured debt.
Any rate increases thus could have killer effect on the economy. To stabilise the sterling, the rates would have to likely shoot to levels unseen for a decade in what passes for a first-world economy, so BoE would be between a rock and a hard place.
Some people seems to bet on Corbyn priming the pump with extremely loose financial policy (“people’s QE”). The problem there is still trade – application to MMT in outputs is still constrained by physical availability of inputs, which the UK lacks and thus are exogenous to any UK’s MMT attempts. Yes, long term it would work. But it would be post-war like reconstruction, which I very much doubt is what most people who voted “out” really voted for (I suspect most of the voted for “it will be like today, except we won’t have to take anything from EU”).
In other words, UK does not have enough clout not to be somoene’s dog right now, and getting anywhere close there would take a generation of hard work and reduced living standards – not just for your neighbor, but yourself.
Yup – 30% decline in GDP is a WAG, a multi-year WAG. It’s similar to estimates I’ve seen of the economic effect of outright independence for Scotland or Quebec – and assumes lack of ongoing economic cooperation from the departed country (UK and Canada respectively). I think we can count on a lack of economic cooperation from the EU in the event of a hard brexit, no? Consider the subject of this article – the Galileo system – from which the UK will likely lose 100% of the economic benefit in France’s favor in the event of a hard brexit. Now multiply this for every industry for which the UK has equal status with its EU competition now and which will utterly lose this in the event of a hard brexit.
I think 30% is optimistic.
Ukraine would be a good example of what will happen to the UK. I hear the Russians claim really big drops in GDP but that includes a war
Thank you, DD.
The figures that I have heard of, but seen, from friends / former colleagues suggest a drop of 10% by 2026.
Let us hope they are right – but like all things brexit, it seems wishful thinking is the norm.
Thank you, DD..
All of the persons who told me about their firms’ number crunching are preparing their parachutes from Brexitannia, especially those with children of school age.
You know what? I believe that a crash-out brexit could actually be good for the UK if…. If it sets an emergency situation and UK authorities act as they have done in past emergency situations. Well-educated tories could easily get rid of the austerity meme (and the not so well educated party companions) and start a real fiscal stimulus program. They just have to recall lessons put in place by their respected compatriot Keynes not that long ago. They would have strong incentives to do so. The BoE, at least can be counted as being (IMO) on of the best CB’s in terms of knowledgeable personnel and it is independent. And out of the EU you can forget about the 3% deficit idiocy and…
On the other hand a soft brexit could result in business as usual.
Outcomes can differ a lot depending on how things resolve.
Further to Menwith Hill, it’s not just that station, there are others, stretching from Cornwall to Yorkshire and to Suffolk. All so called US bases on British territory, including Diego Garcia in the Indian Ocean, are officially UK bases and have a British officer in charge (OIC). That British OIC is a fig leaf and, from my father’s time in the RAF (1966 – 91), often treated with suspicion, if not derision.
I remember December 1986 clearly. We were watching one of the John Wayne Rio trilogy just before the BBC news at 9 PM. Dad was called by his CO and asked to prepare for a flight to Lockerbie. When the RAF team arrived, US service personnel were already on site and declined to explain how and why, even when asked by British officers much superior in rank.
Please don’t think that the US won’t be able to influence the EU post-Brexit. A friend of a friend worked at the UK’s Paris embassy a few years ago. I was introduced to him in 2013. The diplomat noted with alarm how the US was wooing France and even then contemplating Brexit. Having John Kerry at Foggy Bottom made that task easier. That alarm was noted in London. Having worked with MEPs, there are many who will take Uncle Sam’s shilling. Sarkozy awarded Microsoft (Ireland) the contact to provide software to the French armed forces.
The infrastructure for Uncle Sam to influence the EU already exists with the German Marshall Fund, European Council on Foreign Relations, Henry Jackson Society etc. Many UK Brexiteer have US links, e.g. Liam Fox and Gisela Stuart at Atlantic Bridge and Kate Hoey at Henry Jackson. It’s little reported how many EU27 politicians, especially German and Scandinavian “Atlanticists”, have them, too.
Over the years I’ve met a few French and other Europeans who work in London (mostly in Finance) and one thing that seemed to unite most of them was a fervent admiration of Anglo-American libertarianism. A self-selecting group, I’ve no doubt. I think Brexit has put many of them in a real bind.
Thank you, PK.
With Macron’s election and, this week, charm offensive in the US, the French ones may be in less of a bind.
The Mac was on Fox yesterday, trying to sound tough like some Hollywood character, especially when asked if he would back down over the strikes.
Talking about Brexit and possible geopolitical ramifications one should keep in mind that Britain isn´t really necessary for the US to influence Europe. Germany is still an occupied country. There are 40 000 US troops there, and when Germany was unified in 1990 she agreed to prolong the legacy foreign forces agreement with the US: The US can by law listen to all communication (ostensably to prevent any “endangerment” of the bases) in Germany and have territorial rights on their bases including airspace.Ramstein is probably the most important USAF base outside of the US. Furthermore (as one commentator noted) the US takes tremendous influence on German politics through various thinktanks, foundation and an organisation called the Altlantikbrücke (Atlantic bridge).
Germany in turn has a lot of Japanlike advantages out of her relationship with the US:
I don´t see the US losing influence in Europe if Britain leaves. What could really and long term damage US influence is a further ratchening up of the confrontation with Russia. German public opinion is dead set against the war mongering out of Washington. Which has been so a long time. But if the US goes yet further German industry will get alarmed. It is already starting and that might indeed – and concurrently with Brexit – lead to heretofore unthinkable ruptures.
lest we forget, the US embassy is literally a stone’s throw away from the élysée palace.
As a UK citizen I voted leave in part precisely to stop ‘us’ being able to interfere with these kinds of things. The UK Establishment is a cancer and the EU firewalling themselves from ‘us’ would be a very good thing – doing so for the City of London likewise.
For me it was always much less about ‘taking back control’, and more ‘stopping us controlling others’.
‘Our voice’ on the ‘world stage’ is almost ALWAYS a bad thing – from obstructing EU arms controls, to pesticide, climate and polution targets – UK influence is always malign – not being a ‘rule maker’ would benefit the UK in the long run.
That the UK – which may very well be just England and Wales in a decade 0- may ‘become’ a proxy for the US would be a worry if it weren’t it’s poodle already.
Interesting argument, but in my experience a bit backwards. Whatever you think of the merits or the results, the UK made a strategic choice in the 1940s, confirmed after Suez, to develop a close partnership with the US as a way of retaining more influence, especially on European security, than its size and wealth would otherwise suggest. Thus NATO – originated by the British, and constructed according to US and British models – has been the basis of British security policy. London has far more influence within the organisation than any other member except the US, and, even today, far more influence with the US than any other member. As a result, the UK has had access to certain technologies and certain types of cooperation which is denied to others, and gets back considerably more than it receives.
Not everyone thinks this is a good idea I don’t) and it was already common to describe the UK as as American “poodle” 25 years ago. It’s true in the larger sense – the British have always made a point of never openly disagreeing with the US if it can possibly be avoided. But the UK also exercises a fair amount of quiet and invisible influence in Washington (I speak as one who has done so), well beyond that of any other state.
The corollary is that European security structures are a threat, because the UK could never hope to have the same level of influence as it does in NATO and bilaterally with the US. Even in 1973, before entry into the EC, there were fears that cooperation with the US might suffer. This was a constant theme in the discussions about a security role for Europe, and indeed in the first discussions in Whitehall about what became the Political Union Treaty in 1991, the objective was to keep security issues out of the Treaty altogether, in order to keep NATO’s monopoly. This was only resolved through some torturous and ambiguous language which nobody was really sure of the meaning of. Since then the UK has acted to stop or slow down every initiative that might undermine its Atlanticist policy. The UK was a very late and reluctant convert to the European Satellite Centre in Spain, indifferent to the A400 project, and bitterly opposed to any kind of permanent military HQ. They also repeatedly refused to contribute to EU deployments in Africa. They were very unenthusiastic about Galileo, which they saw partly as a French plot to undermine the US/UK relationship. The argument internally was there was nothing the UK could get from the EU that it couldn’t get better from the US, and a real risk of raising US suspicions, and Washington cutting off the support on which the UK increasingly relied.
For Europeans (especially France) the UK has always been a Trojan horse because of the US link. As one French official said in my presence many years ago “sometimes I wonder if it isn’t better just to give our secrets to the US directly, instead of waiting for you to do it.” The French, in particular, have massively exaggerated the degree of actual dominance that the US has, as opposed to influence. The recent rapprochement between the French and the US may partly correct this.
The problem of UK dependence on the US has nothing really to do with Europe, but it’s exacerbated by the fear that the US will be annoyed with any European initiatives of which the UK is a part. On the other hand, if we are talking about military cooperation, including technology, this was always primarily bilateral and multilateral, and will survive if there is a common interest, so long as it is not tied to arrangements that are specifically affected by Brexit.
And I’ve seen a lot of the US/Japanese military relationship. It’s not the same: the UK has something to contribute, whereas Japan, bluntly, doesn’t.
Sorry to ramble on. Interesting subject and lots to say.
Thanks for the ‘inside’ insights, David, very interesting. As you say, its a huge and interesting subject.
David, gets back more than it receives?
Sorry, brain failure. “Get’s back far more than it gives.”
Getting Back more that it receives:
That might be soft power. Political equations don’t work in a spreadsheets. Bounded rationality reigns,
Pip-Pip
Very insigthful David.Now, UK will pass the “Trojan Horse” function to Poland I guess.
Brain failure, sorry. “Gets back more than it gives.”
David, I thought that that was what you meant but I did not want to put words in your mouth. Thanks for the clarification. Happens to me, too.
In this article, in spanish, the chief of galileo project, Javier Benedicto, sets the very same points written above:
El jefe del Proyecto Galileo admite que el brexit afectará a este sistema (The head of the Galileo Project admits that Brexit will affect it)
– the role of the UK has been key to Galileo development
– (but) It will be very unlikely that a country out of the EU will have a role on issues regarding security.
-The project is currently searching for industrial solutions outside the UK.
-Apart from security issues the UK will be able to participate in some technologic projects within galileo like Norway or Switzerland.
-Galileo will provide 1) civil services and 2) security services only to EU governments
He says that Galileo could provide “highly accurate” localization signals that would be important for applications like autonomous vehicles… (some sci-fi for mass consumptiom i guess)
There is this comment from Xavier Bettel (Luxembourg) on brexit (cited in spanish newspaper, my translation from spanish):
“when the British were inside [the EU, note the past tense] they were always asking for “opt out” clauses [for instance to stay aside in EU mechanisms involving refugees or justice]. Now they want to be outside but with lots of “opt in” clauses
“under EU rules PRS can be accessed only by member states”
… until NATO tells them otherwise.
Whatever else Yves. Congratulations to such a well informed commentariat. This is really crowd sourcing at its best. Really fantastic and when I am pessimistic about the future of news in the age of the internet your site mitigates my pessimism
Have sent another small donation to NC this morning, mainly in consideration of the unique reporting on Brexit and generally in consideration of the original thinking collected on this page. Many thanks NC.