British Prime Minister Theresa May has now passed the point of no return for Brexit by formally triggering “Article 50” – the mechanism for the divorce between the UK and the remaining 27 Member States of the EU. Unlike the original crosser-of-the-Rubicon – Caesar – May is not seeking to move into the heart of the European Empire, but rather leading Britain out of an integrated Europe to stand alone on the world stage.
The process from here involves two negotiations between the UK and EU. The first has a highly ambitious deadline of two years and concerns the terms of British exit, a process loaded with fraught decisions. These include whether or not the British need to pay an ‘exit bill’ (some put the figure as high as €60 billion), question-marks over the immigration status of EU citizens in Britain and vice versa as well as the painstaking rewriting of relevant British policies and legislation.
The second negotiation is to agree a putative new bilateral trade agreement. That negotiation will set the terms of access to the 500 million-strong EU market, especially for sensitive sectors including agriculture, high-tech manufacturing and financial services.
Some European Member States have already declared that the two negotiations cannot be conducted in parallel – potentially leaving the UK without any preferential trade deals at the time of Brexit proper, unless an interim arrangement can be struck. The atmospherics for the negotiations are likely to be tense, to say the least and not likely to be helped by highly significant elections this year in France and Germany.
Back in Britain there are anxieties over the impact that Brexit will have on the UK economy – on ‘Article 50 Day’, the German Chambers of Industry and Commerce released a survey reporting that 1,300 German firms planned to withdraw their investments from the UK and relocate to Continental Europe, and Lloyds likewise announced that it would move its HQ out of London to Brussels.
What does all of this mean for New Zealand? The new British strategy is for “Global Britain”, involving a suite of new FTAs with not only New Zealand, but also Australia, the United States, China, Korea, India and others – although even the most ambitious line-up will be challenged to duplicate the EU market opportunity. (One visionary approach advocated by think-tank the Legatum Institute is for a new “prosperity zone” integrating a newly-independent Britain with trading partners in Asia and Australasia.)
Whatever new prospects lie on the horizon, March 29 was a sad day for regional economic (dis)integration. Whether it was chutzpah or hubris that took Caesar across the Rubicon, in the end that gamble turned out to be a triumph. Only time will tell whether Theresa May goes down in history as a person of similar visionary stature, or whether this will be a defining moment for Britain in a completely different way.
This post was prepared by Stephanie Honey, NZIBF Associate Director