Brexit: correcting a historic wrong turn

By Pete North - January 26, 2021

Part of the reason the UK countryside is littered with faded plaques denoting EU funding of public facilities was to soften us up to join the Euro. One notes that you don’t see so many of them now. They tend also to adorn the lobbies of late 1990’s business parks and conference centres and when you see them now they look dated – as though our European ambitions have been dead for some time – which, to all intents and purposes, hit a high water mark at Lisbon. From there our trajectory was always toward the exit.

Somewhere along the line though, there was a death of ambition in the EU too. 1995 marked the fiftieth anniversary of the end of the Second World War. Though we commemorated those events, they were used as a vehicle of vow renewal, to spur on the European project. But as that war fades from living memory, so too does the meaning of the EU and the significance of reconciliation. Most people alive now have only ever known Europe at peace and cannot conceive of going to war for the traditional reasons. Those wars are obsolete.

Moreover, as the project’s founders and builders fade into history, the EU is very different animal to what it was. Far from a principled unification project it has become a hegemonic technocratic power hungry beast. A new breed of European politicians have inherited a powerful construct and now that they have that power, they intend to use it. Far from being part of the post-war peace architecture (as its advocates imagine it is), it is a departure from it.

Though my father’s work, The Great Deception, examines the history and origins of the EU, it perhaps needed a companion work to look in the same detail as the formation of the global system of governance, starting with Bretton Woods.

According to Dani Rodrik’s book, The Globalisation Paradox, the system was designed with a respect for national sovereignty. It was a delicate compromise to “allow enough international discipline and progress toward trade liberalisation to ensure vibrant world commerce, but to give them plenty of space for governments to respond to social and economic needs at home”.

International economic policy “would have to be subservient to domestic policy objectives – full employment, economic growth, equity, social insurance, and the welfare state – and not the other way around. The goal would be moderate globalisation, not hyper-globalisation”.

One thereby might invoke Dag Hammarskjöld. “The United Nations was not created to bring mankind to heaven, but to save it from hell”.

Though this ought to apply equally to the EU, it does not. Had Europe chosen a different path, Europe would be a Europe of multilateralism working with, rather than in competition with, the global rules based order that emerged from WW2.

As we have observed, the EU through its elaborate network of trade deals has absorbed the doctrines and rules of the WTO, gradually displacing it as a primary dispute resolution body, shifting the focus to bilateral dealings, setting new norms with each ruling, which then influence the behaviours of others. 

Instead of multilateralism, we went with Monnet. Europhiles like to imagine Monnet hated nationalism but his construct of supranationalism was more in competition with intergovernmentalism – which would create too many obstacles to his design.

Monnet was determined to propagate the idea of integration as a means of ensuring peace and re-establishing the old continent, politically and economically. The great enthusiast of a united Europe believed he had found a formula that would defuse the Franco-German rivalry, through a method capable of gradually achieving a single market upon which political union would be built. In this, ever closer union was not so much a motto as it was a root command.

Contrary to the mythmaking of Europhiles, the single market was not an invention of Thatcher, rather she was sold on it because the dogma of trade liberalisation matched her own free market dogma. She was blind to the subtlety of it as a weapon of ever closer union.

Turning, back to Rodrik, he writes (as we have often observed) that “Trade policy is contentious because it has important domestic distributional consequences, and because it generates clashes between values and institutions in different nations. None of this would matter much if trade policy could be insulated from national politics and remain in the province of a technocracy – the free trade economist’s fantasy”.

That is the very essence of Brexit. For the EU is the living, breathing manifestation of that free trade economist’s fantasy. It does insulate trade policy from national politics.

In the early days, this was not too much of a stretch when couched in terms of an economic community for the free flow of goods. Discussions at the time centred around the harmonisation of product standards and removing technical barriers to trade. But as trade has become a galaxy more complicated, it necessarily redefines the meaning of the word “trade” and the areas of policy it encroaches upon.

This we explored last week, noting that the four freedoms of the single market are not individual freedoms. They are freedoms for capital. Workers rights within the EU treaties are not about pay and conditions for the individual. That is a side effect (and a highly contentious one).

The primary purpose is to create an EU wide uniformity under the guise of the level playing field, to stop businesses regime shopping. They must compete on even terms. Labour rights, therefore, are competition rules – and they care not for individual rights at all – except for the massive propaganda value which still holds sway even after Brexit.

But in confiscating the power over these such affairs, contrary to the original Bretton Woods philosphy, those policy objectives of full employment, economic growth, equity, social insurance, and the welfare state etc become subservient to trade and ever closer union, resulting in one-size-fits all mediocre and often malfunctioning regulation, exacerbating those “domestic distributional consequences” and clashes between values and institutions which brings us where we are today.

What we are then left with is a technocratic enterprise, wielding its considerable power, imposing its will upon Greece and Spain, while exporting that same rigidity through its FTAs, not least the EU-UK TCA that will see a continuation of those stresses as democracy struggles to reassert itself.

The point of Brexit, from our perspective, was to reintegrate trade as a tool of statecraft, reasserting intergovernmentalism over supranationalism. That we have in the first instance made such an appalling mess of our departure is largely because our statecraft abilities have atrophied while in the EU, and we gradually dismantled the national apparatus for diplomacy and external action. What remains is marinated in EU dogma, and it may take a generation to cleanse the system of it.

Despite the EU’s outward appearance of unity and purpose following Brexit, it is nonetheless a weaker entity for it, and its internal stresses and contradictions will ensure that it remains largely dysfunctional. It will no doubt limp on and we do not share the classic Brexiteer view that it faces an imminent demise. It will continue to exist for as long as it is capable of projecting power, particularly against threats such as Russia.

Moreover, it will continue to subvert the original principles of intergovernmentalism. One of the pre-eminent works on FTAs, Bhagwati’s Termites in the Trading System sets out the thesis that bilateral dealings undermine efforts to create global trade governance.

The work is dated and I fear underestimates the threat posed by the EU as it steals the clothes of multilateralism, incorporating WTO tract, but with a view to dominating that system, further motivating the USA to pull back from it, and China to compete with it (or ignore it altogether) while mouthing the usual platitudes of cooperation. Bizarrely trade envoys and diplomats take them at their word.

Though Brexit provides no remedy to this, we are still capable of coordinating ad hoc alliances and financing global initiatives as a reaffirmation of multilateral cooperation. Much will depend on whether the British government realises the significance of the pivot from Brussels to Geneva in the domain of standards and regulations.

As to the potential for revitalising domestic democracy, Brexit of itself is no remedy. We have notionally repatriated the powers to change, but without the desire for change, and while Westminster lacks the ambition and the imagination to think differently, we will likely maintain legacy regulations for some time yet. At least, though, the EU is no longer the go-to excuse for inaction. The impetus for change must now come from within rather than “waiting by the fax machine” to learn what the rules are.

What we have seen in the wake of Brexit is a gradual realisation that sovereignty, as is generally understood, is something of a mirage, but perhaps the best way to reclaim it, is to drag into the light all of the global rule making apparatus presently obscured by the EU. It is generally believed that Brussels is the global hellmouth of regulation, when in reality it is only the middleman.

The Brexit process has pulled organisations such as the WTO back into public discourse, and now enjoys public attention it has not seen since its inception. If we can somehow capitalise on that momentum we can perhaps pick up where we left off and begin to build a global governance system befitting this new and daunting epoch we find ourselves in.