Archive for the ‘Economics of Brexit’ Category

Resist, Rebel and Remain: the nation deserves and demands a second chance

jvrParliament should vote down Theresa May’s Brexit deal on Tuesday. John Van Reenen (MIT/LSE) writes that while the argument for remaining in the EU is fundamentally moral and political, and not economic, it is important for lawmakers to know that Brexit will make their constituents poorer. Ultimately, however, the nation deserves and demands a second chance to stay in Europe and to forge a new path with our allies and reject the crude nationalism and empty slogans of the Brexiters. The British people are better than this, he argues.

Members of Parliament will vote on Prime Minister’s Theresa May’s Brexit deal to on 11 December. Without hesitation, they should vote it down.

More and more people have realised that Brexit was built on a fantasy that we could keep all the benefits of being in the European club without paying any of the membership fees – what leading Brexiter Boris Johnson called the ‘Have Your Cake and Eat It Strategy’. Well, it turns out that having a cake after you have already eaten it once is not so tasty after all. Theresa May has brought back an unpalatable deal that no one likes because it crystallises the reality of what leaving the European Union (EU) actually means. To get easy access to European markets you have to play by the rules of the club – and once a country leaves the club, it no longer gets a vote on what those rules are. So much for taking back control.

The argument for remaining in the EU is fundamentally moral and political, not economic. However, it is important for lawmakers to know that Brexit will make their constituents poorer. Whereas the wealthier can ride this out, it is families on middle incomes and the less well off who will feel the financial pain most sharply. The economics of Brexit are very simple. Being outside the EU inevitably means higher costs of doing business with our nearest neighbours – so there will be less trade, and less trade will make us poorer. The more distant a relationship we have with the EU, the bigger will be our pay cut. This will be hugely painful if there is a disorderly ‘No Deal’; it will hurt to a lesser degree with a softer approach. The formal amounts that the UK pays into the EU disappear in the rounding error compared with these economic losses. (The section at the end of this blog goes into the gory economic details for the truly dedicated reader).

Oh, why EU?

The EU was born from the carnage of the Second World War and has cemented together 28 fractious nations in our troubled part of the world. For thousands of years, European tribes were killing each other in war after war ending in the bloodbath of the first half of the twentieth century. Cooperation within the EU has meant that the fights are now over fishing quotas rather than in battlefields. The challenges facing the human race today require the same spirit of cooperation – on climate change, terrorism and mass migration. These are global problems that cannot be seriously tackled by the UK in glorious isolation – a nation with under 1% of the world’s population (and shrinking).

It has now been well over two years since the EU referendum and the political tectonic plates of the world have shifted. President Trump is the cheerleader of a crude nationalism that reflexively blames all ills on foreigners. His solution is to build higher walls and wreck international agreements. Political bosses in Brazil, Hungary, the Philippines and Russia are stomping their boots to the same beat. They and their cronies are actively undermining global cooperation on climate, trade and terror. This rising tsunami of bile manifests itself differently in different countries, but in the UK, its name is Brexit.

It is our duty to fight against it with all our might.

A plague on pragmatism

The British people are usually a pragmatic bunch. Many pro-Remain MPs may be tempted to support May’s paltry deal fearing that the alternative is a disruptive No Deal, which would be much worse. But the risk of this is low – if Parliament votes the current deal down, Article 50 can be put on hold. This will then create an opportunity for a coalition of MPs to pass legislation for a People’s Vote – a new referendum where the choice is May’s deal, No Deal or remaining in the EU.

I believe that Remain will win this vote. But even if it does not, it is the right democratic course of action. We do not hold an election and then have an eternal dictator. Leavers voted for Brexit because it meant a myriad of different things to different people. Now we have the concrete alternatives, it is right that citizens have the choice to decide whether this is really what they want to bequeath to their children and grandchildren.

Some say that another vote will create more anger and conflict. The reality is that we already have a lot of anger and conflict, which will persist for a long time to come. Many people voted for Brexit because of their fury that they had been failed by the status quo. And they were right to be angry – after inflation, wages are no higher than they were a decade ago. This is a worse performance than during the Great Depression, and radical things are needed to change this. Leaving the EU will do nothing to improve this situation: indeed, by depressing productivity, trade and investment, it will make things much worse.

Others worry that a narrow Remain victory will embolden the far right. But I have news – they are already emboldened. After a Brexit win, they will push for an ever-greater split from our European neighbours, ever-greater attacks on immigrants and ever more authoritarian laws. Throwing meat at a vicious dog does not make it go away. It whets the appetite for something closer to the marrow.

But isn’t it all worth it to reduce EU immigration? As she did when she was Home Secretary, Theresa May will promise immigration reforms to create a more hostile environment for those wanting to come here. Playing the migration card is Brexiters’ favourite tactic when all their other arguments have been debunked. But all this ‘taking back control of our borders’ is codswallop, as we never lost control. We allowed EU citizens to come here in return for the right of our citizens to go there – and also because free movement is the condition of being part of the largest single market on the planet. EU immigrants have not harmed average pay or jobs. In fact, since they are younger, healthier and better educated, they pay in more in tax than they take out in welfare, so they have been subsidising the schools, hospitals and police services enjoyed by us native Brits.

C00 Public Domain

A radical future for rebels

The EU is not a perfect organisation. A commitment to our place within it also means we have a duty to reform European capitalism, which has failed many ordinary people. This requires radical measures to make markets work better for all people. The growth of mega-firms has pushed the balance of power too far away from working families and customers. And the growth of mega capital cities, such as London, has sucked up too much power compared with localities. Redressing this imbalance of power is helped, not hindered by being in the EU. Taking on the tech titans and insisting on protecting our data are better done with a single market of half a billion people than the less than 70 million inhabitants of the UK.

Populist anger can be cathartic. It reflects a hunger for change, especially among the young, and this makes politics more exciting, more febrile and more plastic than I have known in my lifetime. The movement for a People’s Vote has not come from the main political parties who remain timid. It has come from civil society, from social media and from the streets where 700,000 people marched only a few weeks ago to demand a say on the Brexit deal.

By really committing ourselves to Europe, we can reinvigorate our continent and ourselves. Let us fight for the cause of decency and fairness rather than succumb to this tawdry deal and slouch into a gradual and irreversible political, moral and economic decline. Dumping May’s deal is not without risks. But nothing in life ever is. It is clear that we are at a pivotal moment in history. The UK has a chance to forge a new path with our allies in Europe and reject the crude nationalism and empty slogans of the Brexiters. The British people are better than this.

The nation deserves and demands a second chance.

This article gives the views of the author, and not the position of LSE Brexit, nor of the London School of Economics and Political Science.

John Van Reenen is Professor at the Massachusetts Institute for Technology (MIT) and Centre for Economic Performance, LSE.

Now the economics bit

Even though the economic arguments for EU membership are less important than the political and ethical case, I am a professional economist, so here are a few notes for the interested.

It is abundantly clear that Brexit entails an economic loss. The only real question really is how big the loss will be under different forms of Brexit. The best discussion of this is here from the politically independent think-tank ‘UK in a Changing Europe’.

The conclusions are similar to my pre-referendum analysis as well as the recent Brexit assessments by the government, the Bank of England and NIESR. Indeed, all credible independent studies are in broad agreement that Brexit reduces average incomes, but the softer the Brexit; the lower will be the economic losses. This is why there is such a strong consensus among economists that leaving the EU will economically harm the UK.

The strength of this consensus is similar to that among medical experts about the harm caused by smoking or among meteorologists over the reality of climate change. This is why it is so ridiculous that the BBC and other broadcasters in the name of ‘balance’ give equal prominence to pro-Brexit economists as they do to those reflecting the profession’s opinion. The bulk of the UK press is virulently pro-Leave so also heavily promotes the motley Brexit crew, whose models have been thoroughly repeatedly debunked.

Often one hears the refrain that ‘economic forecasts are always wrong’ so should be ignored. A doctor cannot predict the age at which you will die if you start smoking two packets of cigarettes a day, but she is on firm grounds forecasting that your new smoking habit will be bad for your health.

Brexit economic analysis is generally not a forecast of what will be the exact size of the economy post-Brexit, but rather an analysis of the difference in economic outcomes if the UK leaves compared with if the UK remained. Brexit will not abolish the technological progress that the economy has managed to exploit over the last 250 years in order to grow. It will just mean that we are poorer given whatever the state of technology and world demand conditions that emerge over the next few decades.

A variant of the above Brexiter argument is that economists’ forecasts have all been proven wrong by how well the UK economy grew after the vote in 2016. For example, David Davis the former Secretary of State for Brexit said that ‘previous Treasury forecasts had been proved wrong and were based on ‘flawed assumptions’citing in evidence that the UK economy had grown by over 2.8% in the 18 months since the referendum whereas the Treasury had forecast it would shrink.

This is an example of willful misunderstanding. The general prediction was that the economy in the short-term would grow by about 2% less than expected because of Brexit. And in fact, this is broadly what has happened since the vote – the UK economy has slipped from being at the top of the G7 growth league to the bottom. Moreover, observers reckon that GDP per capita is about 2% lower than expected due to the Brexit vote.

It is true that many economists thought that there would be a bigger immediate hit from the Brexit vote, whereas it took a few quarters before the economy started to slow down significantly relative to other countries. Therefore, although the forecasts got the overall hit about right, they got the timing wrong.

There are two reasons for this. First, modelling assumed that the negative immediate impact would come from the rational expectations of consumers of lower future real income growth. However, many people actually believed the propaganda on the Leave side that there would be no economic fallout from Brexit, so they continued spending much as before. It was only gradually when reality dawned that consumer confidence took a knock (for example, when the large fall in the value of sterling started to feed through into higher food prices and more expensive foreign holidays).

The second reason was that the Treasury analysis assumed that Article 50 would be activated immediately, whereas it was nine months later when Theresa May did this. The slowdown of the economy followed this as uncertainty started to spike.

Finally, it is worth pointing out Brexit has not yet happened. The majority of work, including my own, focuses on what happens after Brexit occurs, which is currently slated to be after the ‘transition period’ ends in 2020. Negative effects now are due to expectations about what might happen in the future, and these are notoriously hard to model.

The trouble will really start when true Brexit hits the fan.

 

Prelude to a Lexit manifesto: decoding the new German ideology

German liberal ideology has come to dominate the European Union, but it is fraying as movements for popular sovereignty gather pace. Brexit is the tip of the iceberg, writes Michael Wilkinson (LSE). It represents a chance for the Left to reconnect with democratic socialism and reject an authoritarian Europe in favour of progressive politics.

A spectre is haunting Europe – the spectre of popular sovereignty. All the powers of old and new Europe have entered into an unholy alliance in order to banish this spectre: Pope and President, Tusk and Juncker, French socialists and German ordoliberals.

Where is the movement that has not been decried as populist by the powers that be? Where is the opposition that has not hurled back the reproach of democracy against its adversaries?

In the current moment this situation is largely exploited by the Right, from within the European Union. It is high time for the caricature of popular sovereignty to be met with a Lexit manifesto, a Left-wing project of democratic socialism and internationalism that does not shy from exiting the EU if necessary.

socialism day

Day of socialism … Germany, 2010. Photo: SAV Sozialistiche Alternative via a CC BY 2.0 licence

As a prelude to this task, it is imperative to ask why there is so much resistance to a democratic project of popular sovereignty in general and exit from the European Union in particular. The answer is that nothing less is at stake than the dominant postwar ideology – the new German ideology. This must first be decoded in order to be transcended.

The new German ideology emerges from the mislabeled concept of ‘militant democracy’, mislabeled because it means the opposite of what it suggests; it means that democracy must be limited, tamed, and moderated, forcefully if necessary. It is more appositely named liberal or ‘constrained democracy’, which gestures towards a democracy that distrusts itself. But even this elides its purpose, which is less to consolidate democracy than to restore and maintain a liberal economic order.

The new German ideology is in an important sense reactionary, specifically to the threat of popular sovereignty, democracy and class consciousness unleashed in the interwar period, when universal suffrage begins to threaten the bourgeois state and state-system. Its constitutional character is appositely captured by the sentiment, ‘We are afraid of the people’; in its dominant ordoliberal version, this signals a fear that the people will make irrational decisions about the economic order or about the money supply.

The notion of popular sovereignty as the democratic power to constitute anew is lost, swallowed up into the authority of the constitution itself – ironically in the form of a basic law, protected by specialist constitutional interpreters and constitutional courts. Popular sovereignty is suppressed through the substitution of democratic constituent power with individual economic freedom — a freedom to participate in the market — as the legitimating device for the whole constitutional order.

This represents the ‘original sin’ of postwar Europe because it represents a narrow diagnosis and in significant part a misdiagnosis of interwar breakdown, underlining democratic decay and occluding the central role played by the crisis of capitalism. With the implication that the decline of Weimar accelerates through an excess rather than a privation of democracy, it leads to a great forgetting; liberals and conservatives united to maintain an authoritarian regime in the early 1930s in an attempt to maintain the liberal economic order and forestall any move towards democratic socialism.

The new German ideology is built on related myths, such as hyperinflation leading directly to democratic collapse. It has a profound cultural dimension; fear of democracy infects the social imagination: it is not only that elites are afraid of the people, the people are afraid of themselves. The result is an escape from political freedom. It is institutionalised and zealously guarded in the domestic and international corridors of Commissions and Constitutional Courts, Central Banks and Committees, upscaled through regional and international institutions.

Postwar Europe is characterised by this new form of authoritarianism, more subtle than the authoritarian rule of charismatic leaders but no less de-politicising in form. Frequently conceptualised as part of a later neoliberal transition to a ‘post-political’ or ‘post-democratic’ world, dominated by a managerial and technocratic politics of consensus, it is more properly characterised as ‘authoritarian liberalism’, with politically authoritarian means employed to achieve economically liberal, if now often labelled neoliberal ends. Although this is exacerbated through the period of neoliberalism as the social contract between labour and capital is breached, and it accelerates through the recent Euro-crisis phase as the social contract is ripped up, authoritarian liberalism underwrites the dynamic right from the start of postwar reconstruction.

European integration reflects the new German ideology writ large, locking in liberal economic constraints through its constitutionalisation of the single market, protecting undistorted competition and free movement of the factors of production. This has an acute deregulatory impact over time; through its own legal and constitutional dynamic it severely undermines social democratic commitments at the national level and fails to upscale them to the supranational level. After Maastricht, which lays the ground for Economic and Monetary Union, European integration becomes more and more material to the suppression of political democratic alternatives. With its authoritarian character heightened through the recent decade-long Euro-crisis, it culminates in a political philosophy of ‘no alternatives’. Elections fail to offer any possibility of meaningful change. If democracy begins in constraint, it ends in capitulation – to the markets, or to the European Treaties.

The new German ideology comes to dominate the whole European constitutional imagination, even in places where the story of democratic decay resonates less or not at all. But where constraints are threatened by popular sovereignty from the Left, however democratically motivated and rationally justified, the punishment is severe, and the consequences devastating. Where liberal democratic commitments are threatened from the Right, however authoritarian their form, Europe is impotent, unable to respond or lacking the legitimate authority to do so.

An extraordinary feature of this settlement is that it has locked the Left in to the EU project, from social democrats to Euro-communists. Refusing serious opposition, it is caught between accepting that however neoliberal in character, the default to European integration is ethnic nationalism, or buying into a scalarist eschatology which promises a pan-European socialist utopia if only patience is maintained. Paralysed between lesser evilism and the luxury of intellectual optimism, the concrete political struggles for democratic socialism are avoided.

The new German ideology is fraying. By the time of German reunification and the Maastricht Treaty, it became contested and unstable in its own backyard, with sovereignty claims resurfacing after a hiatus of 50 years and nationalisms rising. This presented a series of irritants to the postwar constitutional order, which over the last decade, emerge into a full-blown crisis. Sovereignty claims multiply and intensify, no longer constrained, but distorted in their disconnect from any democratic base. Matching the centrifugal force of assertions of sovereignty from below is the centripetal force of a ‘sovereignty-to-come’ from above; not one rooted in democracy or social movements, but imposed by a European Central Bank, a putative European Army, spearheaded by a shiny new brand of executive authoritarian liberals.

The new German ideology is struggling to maintain its grip over the imagination; its integrative function is broken and the extreme centre struggles to hold. It no longer has the capacity to close the gap between the European order’s claim to legitimacy and its subjects’ belief in it. It is generating the very symptoms it was meant to suppress, as Right-wing political extremism resurfaces, international solidarity is foreclosed and inter-state domination returns, substituting the German ideology for German hegemony. Europe has never been more disunited in the past 50 years than it is now.

Authoritarian liberalism has incubated the conditions for forms of authoritarian illiberalism, having hollowed out democracy in the drive to create the conditions for markets and capital to expand. If the leading proponents of European constitutionalism imagined their ideas would rule the world, in reality they ruled only a void. There should be no surprise when this void is then filled with the rhetoric of national identity and anti-immigration, a predictable counter-movement after a period of enforced liberal constitutionalisation, marketisation and rigid adherence to austerity. The case of Hungary illustrates the ‘counter-movement in one character’, Orban’s liberal pro-Europeanism in the context of accelerated transition to a market economy shifting into an illiberal reactionary nationalism, within a ‘Christian Europe’.

Where is the Left at this critical juncture? Frequently propping up an establishment in decline; a system in crisis, an order in disarray. Even where it has not been entirely eviscerated, ‘Pasokified’ after its turn to the centre ground, it is largely devoid of ideas, clinging to the German ideology because of its own fear of alternatives. Imagining that the only alternative to a neoliberal EU is right-wing nationalism, it misses that far from alternatives, this is precisely the combination emerging in and through the EU!

The Left must connect with the dynamic energies created by movements of popular sovereignty, radical democracy, and class politics. It must recognise that constrained democracy is historically redundant or conceptually oxymoronic; democracy means the continual and restless striving for collective self-determination. It must recognise not only that the European Union is no friend of democracy, socialism or internationalism, or of labour against capital, but that it is not even serving the purpose of keeping the Right at bay. On the contrary, the Right, having little need of rupture from the European Union to pursue its nationalist political agenda – whether in Hungary or Poland, or Italy – remains inside the state of the Union, largely unperturbed by its bureaucratic apparatus and yet reaping the electoral rewards of Euroscepticism, capitalising on the discontent with neoliberalism. This scenario could well be repeated in the United Kingdom should there be a reversal of the Brexit referendum result.

Britain’s departure from the EU provides an opportunity for the Left across Europe to reconnect with a democratic socialist project and the material struggle for equality. That democratic struggle was interrupted by the postwar resettlement, constrained in a so-called ‘golden age’ when authoritarianism was masked by economic growth, decimated by decades of neoliberalism, and finally dealt a near-fatal blow through the Euro-crisis period. The rupture of Brexit offers a broader occasion to break with this trajectory, to advance a project that combines popular sovereignty with social radicalism, unambiguously internationalist and anti-capitalist in nature.

If it is through Lexit that popular sovereignty might reconnect with democratic socialism, this will be not just in the UK, but across the whole of Europe. Brexit is the visible tip of an iceberg, representing the deeper and wider disconnect between the political class and the citizen across the European Union. But it is within and over the state that concrete political struggles can still most credibly be fought, in connection with political parties and social movements.

It may seem ironic that the Lexit project begins in the country with an advanced neoliberal trajectory, a near decade of self-imposed austerity and without the more radical constraints of Eurozone membership. But just as significantly, it is a country in which the German ideology is least hegemonic, less constitutionally and culturally entrenched, the obstacles to depart from the EU less insurmountable and the potential for developing a genuine internationalist agenda most apparent.

With Jeremy Corbyn’s Labour, the UK now has the biggest democratic socialist party in Europe with the potential to push forward a realistic but radical leftwing economic programme. Brexit presents an opportunity for the UK to free itself from market rule; to develop an alternative plan to fix a broken economic model and offer a new social settlement. Strategies of economic renewal must be replicated elsewhere in Europe, reclaiming sovereignty as a vehicle for progressive change. That the rupture from the postwar settlement occurs with Brexit may be a strange twist of fate; whether its destiny is realised will matter not only for Britain but for Europe as a whole.

This post represents the views of the author and not those of the Brexit blog, nor the LSE.

Michael Wilkinson is Associate Professor of Law at the LSE.

Distress signals: how Brexit affects the Digital Single Market

alison harcourtThe government prizes the creative industries as a key part of the UK’s industrial strategy. Yet some of them depend on the Digital Single Market, which is jeopardised by Brexit. Alison Harcourt (University of Exeter) explains how sectors like broadcasting, online financial services and online gaming could be affected.

A key component of the EU’s Single Market is its Digital Single Market (DSM), which has been a particularly important for the UK. Currently, the UK’s largest export market for digital services is Europe and the DSM enables access to European markets. Brexit is expected to affect the UK substantially in the areas of broadcasting, creative content production, data protection and privacy, copyright and e-commerce.

Post-Brexit there is a risk that UK service providers, such as broadcasters, platforms providing on-demand content, internet sales, online financial services and online gaming, may lose their passports to EU markets. This is because companies need an EU base (i.e. to be headquartered in the EU) to access service markets under Directives and Regulations which contain the country of origin (COO) principle (e.g. under AVMSD, SatCab, E-commerce and Copyright Directives).

Theresa May highlighted broadcasting in her March 2018 speech on the future economic partnership with the EU as an area of key importance for the UK. No fewer than 1523 UK-based television channels target other EU countries (65% of the EU market) and 515 on-demand services such as video and catch-up services over DTT, cable, satellite, IPTV channels, online and mobile phones (20% share of the EU market). Under the COO principle, British-based companies would need to re-locate headquarters to an EU Member State in order to continue to maintain access.

If the UK does join aspects of the Digital Single Market (DSM) under a future bilateral agreement, companies could continue to broadcast to Europe from the UK. However, a number of companies have already left in anticipation of Brexit including Discovery and Viacom. Post-Brexit, the UK would lose voting rights for DSM legislation within the Council of Ministers and European Parliament. This loss of decision-making could affect the UK in key areas: rules governing right of reply, the definition of an economic service, editorial responsibility and effective control; a potential change in definition of the COO; incitement to hatred and the protection of minors; public health, public security, and consumer protection; the loss of subsidiarity for media markets under EU law. Similar to Norway, the UK would move to ‘association status’ in EU coordinated self-regulatory fora such as the Body of European Regulators of Electronic Communications (BEREC) and the European Regulators Group for Audio-visual Media Services (ERGA).

The ‘creative industries’ were named in the 2017 green paper, Building our Industrial Strategy, as one of the five key sectors which the UK government aims to support post-Brexit. The paper was published following a period of consultation, most notably the Culture, Media and Sport Committee inquiry into the Impact of Brexit on the creative industries, tourism and the digital single market. Most respondents pointed out the need to maintain free movement for sector workers – particularly high-skilled workers – the loss of access to EU markets post-Brexit under the COO principle and loss of access to EU funding programmes. In terms of funding loss, the report cited that the EU’s Creative Europe programme had invested €28.5 million into the UK’s audio-visual sector benefitting 82 UK companies and supporting distribution of 84 British films in Europe with another €12.5 million of investment going to training and support activities since 2014. Content producers also expressed concern that UK-produced content could be excluded from national quotas in favour of EU-produced content in catalogues and channels under the AVMSD. Predicted problems with VAT regimes were also highlighted as well as “over-complicated and expensive administration regimes for remittance of international taxes on digital products”.

Importantly, with Brexit, the UK will lose EU-negotiated exceptions for cultural goods under GATT; MFN exemptions for audio-visual services under GATS; and is excluded from EU bargaining in TTIP and bilateral treaty agreements the EU has established with third countries. Exemptions under these agreements include: screen quotas, subsidies, duties, deposits and taxes for film, the transmission of radio and television and video on-demand packages (linear and non-linear). The funding of public service broadcasting is also protected by EU negotiated Most Favoured Nation exemptions to the WTO’s 1995 Agreement on Subsidies and Countervailing Measures which determines whether or not a subsidy can be used by a WTO member. In addition to having to negotiate an independent state on cultural goods and audiovisual services, the UK will also need to negotiate separately from the EU in spectrum policy agreements at international levels (ITU, WRC) and CEPT) coordination bodies and over international standards post-Brexit.

The DSM promotes internet commerce and fintech services via its E-commerce, Services, e-Privacy, GDPR, ODR and Consumer rights Directives and Regulations. Its European Consumer Centres Network facilitates cross-border dispute resolutions. New directives have been proposed on geoblocking, product liability, ePrivacy (including rules on data localisation) and the Payment Services II Directive. The UK government announced that its existing commitments under the PSD II, under which certain powers were delegated to the European Banking Authority, and the GDPR will continue post-Brexit. However, when the UK becomes a third country, its relationship with the EBA and the GDPR’s European Data Protection Board (EDPB) remain uncertain.

Lastly, concerns have been expressed as to whether the UK will be deemed adequate under EU data protection rules for cross-border data transfer. The Investigatory Powers Bill (and existing DRIPA) may not be adequate under the 2016 General Data Protection Regulation, e-commerce and e-privacy Directives which permit the free flow of data within the EU based upon the COO principle. These problems can currently be avoided by the use of standard contractual clauses but there are current legal challenges to the validity of these. Divergence is also expected between the UK and EU on ‘deep packet capture’; analyses of metadata, and the harvesting of location data. For this reason, access to markets for digital services may be the biggest issue, not only for the creative industries, but the UK digital economy as a whole.

This post represents the views of the author and not those of the Brexit blog, nor the LSE.

Alison Harcourt is Professor of Public Policy and Director of the Centre for European Governance at the University of Exeter. She specialises in regulatory change in communications markets.

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