Posts Tagged ‘Featured’

Avoiding a nuclear meltdown: how we might resolve the Euratom question

David Davis admitted last Tuesday that although there is no ‘systematic impact assessment’ of Britain leaving the European Union he did claim that the government had produced a ‘sectoral analysis’ of several industries. One sector that it would be wise to examine the impacts of leaving without any negotiated arrangement would be the nuclear power industry as the UK leaves Euratom. Through examining the UK’s relationship with Euratom before it joined in 1973, Joshua McMullan highlights some potential foundations for a future agreement between the two.

As Britain leaves the European Union through the Article 50 process, it also signalled that it would leave Euratom, the European nuclear regulator, when it leaves in March 2019. However, several MPs and prominent Vote Leave officials, such as Dominic Cummings, have criticised the government’s plans to leave the organisation as a ‘huge misjudgement.’ The government have responded to these claims by producing the Nuclear materials and safeguards issues position paper. However, the position paper does not set out any of the details by which the UK government will ensure the ‘smooth transition to a UK nuclear safeguards regime, with no interruption in safeguards arrangements’. In fact, it does little more than set out why the UK government believes it is within the interest of both parties to continue co-operation – something that has not satisfied those objecting to Britain’s exit from Euratom. Perhaps it is worth noting that this highly technical policy sector was a salient concern for remainers and leavers alike, but highlights how complex and multifaceted the process of disengaging from the EU, and its various associated institutions is. Yet there are solutions outside of the narrow mindsets of vague position papers and membership of Euratom, people just need to look back into the past relationship between Euratom and the UK.

Image: U.S Government, (Flickr), Public Domain.

Most of the discourse so far has centred around the possibility of an association agreement between the UK and Euratom, a solution which many believe will provide the stability and certainty that the industry so desperately needs. However, as Dan Phinnemore and Stuart Butler rightly point out in their respective articles, this is not a credible solution. Firstly, there is currently no such thing as Associate Membership of Euratom. There are ‘Co-operation Agreements’ that exist between Switzerland and Euratom and Article 342 of the Ukraine Association Agreement that provides for extensive co-operation. Nonetheless, these are not association agreements and would not cover the level of co-operation that the UK requires. It would also potentially mean the involvement of the ECJ, a red line in the Brexit negotiations. Then there is the issue of history, I am referring to the difficult and complicated nature of negotiating with the Community, exemplified best by the rejection of UK EEC membership twice and the difficulty in renegotiating membership as David Cameron found out in 2016. Yet, despite this complication, an answer may yet lie in the agreements signed after 1959 leading up to the UK becoming a full member of Euratom in 1973.

Too often do politicians and commentators on all sides forget to study their history. In this case, it would be prudent for UK officials seeking to find an answer to this problem to examine the 1959 Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the European Atomic Energy Community (EURATOM) for Co-operation in the Peaceful Uses of Atomic Energy. This agreement stated the ‘mutual desire for close co-operation in the peaceful uses of atomic energy’, and this was before the UK applied to join Euratom formally in 1962. The agreement covers several areas, including research as covered by Article I through to VIII. As well as Articles IX through to XII, that deal with the supply and use of materials and fuel needed for the research and production of nuclear energy. Although this treaty alone is not sufficient to just copy and paste to the present, it does show two vital points. First, it is a historical precedent for UK-Euratom relations which does not involve the UK being a part of Euratom. Secondly and most crucially, it can provide the foundations for future negotiations with Euratom.

Indeed, there are three other such UK-Euratom agreements between 1963 and 1973, these all show the potential for continued and fruitful relations between the two. The first in March 1963, two months after the British application to join the EEC was vetoed by France, was a contract which saw Britain supply France, the same country that two months before vetoed the UK’s entry into the EEC with plutonium oxide. In November 1964, another contract was signed for the UK to supply France with 45kg of plutonium. Finally, in March 1965, the UK Atomic Authority signed an agreement with Euratom on the full exchange of information in the field of fast reactor physics. These contracts and agreements, made in a time of strained relations between the UK and primarily France, show that not only is nuclear co-operation with the continent outside of Euratom possible, it is also advisable for both parties to make such arrangements. The same is true today with the UK still being the major reprocessing centre for nuclear waste across the continent.

Of course, these treaties alone are not the basis for our future relationship with Euratom; the world we live in today is vastly different to what it was in the 1960s and our nuclear industry is not the size it once was. These old agreements do not cover medical isotopes at all, or nuclear safety regulations to the extent it is now. However, the very existence of these old treaties shows that new agreements that would include medical isotopes can be made. The time between the original 1959 agreement, the suspension of the application to Euratom and then the new contracts shows that such agreements can take place if the political will is present. This is before we even begin to consider the role of the International Atomic Energy Agency has with nuclear power station inspections or the Nuclear Energy Agency, formerly the European Atomic Energy Agency, has in ensuring the safe running of nuclear reactors and the spread of research to member states. There is also something to be said for the role of private industry in finding practical solutions to the continued safety and commercial success of Britain’s nuclear power industry.

It is politically unfeasible for the government to withdraw the Article 106a notification, without it raising questions about the possibility of withdrawing the notification of Article 50 due it being mentioned in the Article 50 letter of notification. Furthermore, ECJ jurisdiction over Euratom, something that crosses one of the Prime Ministers “red lines”, regardless of whether this is right or wrong, would mean that the government would still seek to leave Euratom even if it was possible to withdraw Article 106a. Rather than continue this endless circle of debate, let’s put pressure on Parliament, not just the negotiators to use historical inspiration to be inventive, and resolve this crisis. The 1959 agreement alone would be a strong foundation, something that can be built on over time.

Finding a solution to this problem is vital for the industry. Euratom is part of the global network of agencies which seek to maintain the effectiveness of nuclear power to provide energy for the future, particularly in the climate of reducing our dependency on fossil fuels. Regardless of how the UK government eventually resolves this, perhaps self-inflicted dilemma, negotiators and officials would do well to read up on their history. Not only would it help with Euratom, it could just help David Davis with his impact assessments by understanding what the situation was before joining the Community in 1973. It might just save them a whole lot of trouble.

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

Joshua McMullan is an AHRC Collaborative Doctoral Partnership student at the University of Leicester and the National Archives, researching Britain’s civil nuclear power programme and public communication and inclusion in the twentieth century. 

Book Review: How to Stop Brexit (and Make Britain Great Again) by Nick Clegg

In How to Stop Brexit (and Make Britain Great Again), Nick Clegg offers a short, accessible book seeking to persuade the ambivalent or undecided as to why Brexit should be stopped; to suggest what the average voter can do about it; and to propose an alternative model for relations between Britain and Europe. While this is an engaging and lively read with a number of thought-provoking suggestions, Robert Ledger questions whether the book will succeed in its aim to change minds when it comes to this divisive issue. 

How to Stop Brexit (and Make Britain Great Again). Nick Clegg. Bodley Head. 2017.

Find this book: amazon-logo

Nick Clegg’s new book, How to Stop Brexit (and Make Britain Great Again), caters primarily to the many ‘Remain’ voters who have been asking themselves a very similar question ever since 23 June 2016. Clegg, former leader of the pro-European Union Liberal Democrats and — until the 2017 General Election — MP for Sheffield Hallam, puts forward a number of suggestions as to how Brexit, or at least the hard or cliff-edge variety, might be prevented by citizen action.

Clegg has well-known and often-articulated pro-European views, so one could probably conclude that this book is aimed at Remainers. This is not, however, Clegg’s stated objective. The book is ‘mainly for those people who don’t hold their views for or against Brexit especially strongly’, and ‘who voted for Brexit knowing exactly what they were doing […] but who now see that Brexit is not turning out the way they were promised’ (2). Clegg wants to change these voters’ minds, for ‘there is nothing wrong with revisiting a decision’ (1).

This short, accessible, book is set out into a number of sections: a broad-ranging analysis of Britain’s relationship with the EU to date; why Brexit should be stopped; what the average voter can do about it; and an alternative model for Britain and Europe. Yet, Clegg has no doubt that Britain will remain close to the EU, however Brexit works out:

in the end, a simple truth will prevail: we are condemned by history and geography to be allies, neighbours and friends sharing the same space, the same seas, the same continent and the same values (137).

The historical analysis of Britain’s at-times awkward relationship with the EU will be familiar to many readers. Nevertheless, it provides an informative overview. British policymakers in the 1960s and 1970s saw the European Economic Community as a collective based upon trade, and through a transactional and un-ideological lens. Britain never had the same attachment to the project due to events of the Second World War. When the EU integrated more deeply and expanded ever wider, a hardcore rump of British nationalists, conservatives and Thatcherites — however unfaithful this interpretation is to the Iron Lady’s actual views towards Europe — mounted a long campaign of insurgency to withdraw the UK from the European club. Despite Clegg’s earlier ambition, this analysis will probably already diverge sharply from many of the narratives harboured by Brexiteers. They may also point to — as anti-EU opinion sees it — a ‘democratic deficit’, the stifling effect of European bureaucracy and the assault to British parliamentary sovereignty.

Image Credit: (Steven Lilley CC BY SA 2.0)

The 2016 referendum, why it was called and the conduct of the campaign are also discussed. The Leave Campaign’s claim that the NHS, once Britain was outside of the EU, would gain £350 million a week is one of several used to demonstrate that the British people were sold a false prospectus. Clegg also discusses the assertion that Brexit is an anti-establishment endeavour, stating that the referendum campaign was financed by a shadowy cabal of business people and financiers: ‘wealthy individuals with personal motives’ (135). These are described as the ‘Brexit elite’ (63). We also learn about the negative impact that Brexit, particularly the no-deal version, is likely to have.

Having ascertained that EU membership is in Britain’s interests and that the referendum was fought on a disputed, if not outright dubious, set of promises, the former Deputy Prime Minister sets out how Brexit can be averted. His main points for action revolve around political engagement. Voters are encouraged to join either Labour or the Conservatives, and then lobby its politicians in a pro-European direction. Although this is admirably non-partisan — indeed, both parties’ leaderships are correctly described as being, at best, lukewarm towards the EU — it may come as a surprise to readers that they are not advised to join Clegg’s own Liberal Democrats, who, after all, are the most pro-EU of the mainstream parties. Clegg writes that ‘if 1 in 100 Remain voters were to join the Conservative Party, they would outnumber the current membership of the party’ (103). On the other hand, a quick check of the numbers also shows that if 1 in 35 Remain voters joined the Liberal Democrats, it would become Britain’s largest political party and surely exert more influence than is currently the case. That Clegg avoids partisanship is refreshing compared to the literary work of most politicians. It is nonetheless curious that the author, by and large, does not involve his own party in his strategy.

Finally, Clegg sets out a possible future arrangement between Britain and the EU, and it is this section that readers will find most thought-provoking. Short of full, core, EU membership, the UK could sit in an outer ‘concentric ring’. This is, more or less, the current – if unacknowledged – de facto situation in Europe, where different countries sign up, a la carte, to the various EU initiatives. The idea has influential proponents, such as French President Emmanuel Macron and ex-German Finance Minister Wolfgang Schäuble. Angela Merkel has also signalled she might be open to this kind of arrangement, at least in principle. Clegg moreover suggests that a new relationship could be (according to the concentric circles idea) arranged via a joint UK-EU Convention and co-chaired by, for instance, Sir John Major and current Dutch Prime Minister (and a friend of Clegg’s) Mark Rutte. Major would be an ‘honest broker’ and has previous experience negotiating at the European level: for instance, the Maastricht Treaty (122-24).

How to Stop Brexit (and Make Britain Great Again) will appeal to the general reader — it is written in an engaging and lively manner, and makes a number of thought-provoking suggestions. Whether it will be of interest to those who support Brexit or will achieve its stated intention of changing people’s minds is less certain. There are currently a host of books being published on Brexit, from analysis of the machinations of the 2016 campaign to proposals for the various future directions for Britain and the EU. Nick Clegg’s book provides a fast-paced commentary on the topic. The nature of the subject, however, means that it will not be for most Leave voters, and will struggle to break through the echo chambers that have emerged around the EU issue.

______

Note: this review was published on LSE Review of Books.

Robert Ledger has a PhD from Queen Mary University London in political science, his thesis examining the influence of liberal economic ideas on the Thatcher government, and an MA in International Relations from Brunel University. He has worked in Brussels and Berlin for the European Stability Initiative – a think tank – on EU enlargement and human rights issues. He has published widely on European and British politics, edited the Journal of International Relations Research and is also a regular contributor to Global Risk Insights, a political risk group.

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

How Donald Trump’s populism may threaten the US-UK Special Relationship

President Trump recently promoted the rhetoric of the far-right Britain First organization, which prompted an angry response from the UK’s Prime Minister, Theresa May. Ben Margulies writes that the transatlantic Twitter spat shows that Trump’s appeal to populism and anti-elitism may also draw it against the post-World War II liberal world order that the US-UK Special Relationship exemplifies.

At this stage, there seems to be little more to say about why Donald Trump makes an inflammatory use of Twitter. From his attacks on NFL players and ESPN commentators to how now especially infamous retweets of Britain First videos, President Trump clearly uses the social network to advance a radical-right populist, ethno-nationalist worldview. There’s an enemy. It’s not white. The elites won’t tell you the truth about them, but I will. Rinse and repeat.

However, the Britain First incident had a brief second act which raises new questions about American conservative populism. After British Prime Minister Theresa May condemned Trump’s use of the Britain First videos, Trump openly criticized her on Twitter, implying that she had failed to combat “Radical Islamic Terrorism” in Britain itself.  Now, this reaction may be easy to explain: Trump is notoriously thin skinned, and perhaps his response to May was simply the reaction of someone who will not brook criticism from any source.

But could Trump’s reaction tell us something deeper about the populist mindset? After all, Britain and the United States form a “Special Relationship,” a uniquely close alliance. Even George W. Bush, a president famed for his impatience with multilateralism and the United Nations, treasured and relied on the US-UK alliance. When Obama warned Britons in April 2016 that Anglo-American trade ties could suffer if the UK chose Brexit, Trump praised a “great alliance” and criticized his predecessor. But does Trump truly value the Special Relationship? What does a radical-right populist movement – one predicated on the rejection of elites and extreme chauvinism – mean for a country’s alliances with foreign powers?

Populism is a thin-centered ideology focused on anti-elitism and unfettered popular sovereignty. The radical-right variant is “nativist” and “xenophobic,” and tends to be hostile to multilateral or supranational forms of government, but beyond that, populism rarely lends itself to a specific foreign policy. Like-minded nationalist governments may form close ties, like the Bolivarian Alternative for the Americas (led by Venezuela), or Hungary’s recent rapprochement with Russia.

It would seem axiomatic that Trump’s chauvinism and aggressive nationalism would be the greatest threat to continuity in American foreign policy. However, it may actually be anti-elitism that ends up undermining the Special Relationship. Ultimately, foreign policy, and the established channels through which it flows, are elite matters, handled by professionals in arenas removed from electoral politics. In Wolfgang Streeck’scriticisms of European political economy, he pointed out that the European Union converts much of political life into foreign policy, which is usually conducted secretively, by the executive branch, with little popular input. The US is not part of any supranational entity like the EU, but American foreign policy is not much less insulated from popular politics. The Constitution vests foreign relations in the presidency precisely because it can act with “secrecy” and “dispatch,” as John Jay wrote in Federalist Paper No. 64.

Trump’s administration has already demonstrated it has little particular concern for the professional diplomatic corps, proposing radical cuts and restructuring to the State Department, leading to charges of widespread demoralization in the agency. Typically, presidents choose former generals (George Marshall, Alexander Haig, Colin Powell), senators (Hillary Clinton, John Kerry) or academics (Henry Kissinger, Madeleine Albright, Condoleezza Rice) to run the State Department.  In Rex Tillerson, Trump appointed an oil company CEO who had never held political office, and his ambassador to the UN is a former governor of South Carolina.

Lie Lie Land” by duncan c is licensed under CC BY NC 2.0

In short, it is very easy to paint any permanent structure in foreign relations as an elite concern that shouldn’t constrain the people and – given that we’re talking about right-wing populists – measures to protect the people. Should Trump want to shove the relationship aside because the British are “soft on Radical Islamic Terrorism,” this would not be difficult to justify.

We can see some of this logic in Trump’s announcement that he will recognize Jerusalem as the capital of Israel. Although this move suggests that he does in fact value the alliance with Israel, Trump’s radical break with past practice suggests a disdain for diplomatic convention, and for most other American allies. Trump’s decision has angered the EU, France and other European governments, many of which have their own roles in the Middle East peace process. For his base, there is the satisfaction of antagonizing mostly Muslim populations in the Middle East and North Africa.

Both populism and authoritarianism also rely heavily on the presence of an external threat to justify political activity. Populism needs an Other to define the people, and authoritarianism needs an enemy to justify disciplined rule and set boundaries. In the American context, these trends tend to align with one specific foreign-policy orientation, specifically the long heritage of isolationism. As Walter Russell Mead explains, the Jacksonian populist tradition rejects permanent foreign entanglements without a clear threat. Thus, President Truman could only justify the American leadership of the capitalist camp in the Cold War by citing a Communist external threat:

To enlist [populist] support for a far-reaching foreign policy, Truman and [US Secretary of State Dean] Acheson believed that it was necessary to define US foreign policy in terms of opposing the Soviet Union and its communist ideology rather than as an effort to secure a liberal world order.

In the absence of a clear threat, populists will place less emphasis on a permanent alliance system. Trump’s complaints about how NATO allies “owe” the US for military protection reflect this lack of care for allies. Of course, international terrorism could serve as a threat that binds populists to their allies, which is what Mead predicted in his article. However, that won’t apply to an ally seen as “soft” on the enemy – as American conservatives proved when they turned on France, the country’s oldest ally by far, during the Iraq War. In any case, although Trump supporters tend to be Islamophobic, they are rather ambivalent about the War on Terror: Many veterans supported Trump precisely because he criticized those wars, fought for unclear reasons and without much success.

In the final reckoning, this is just a minor, if rather public, dispute between two world leaders. The Anglo-American alliance is no stranger to personal or policy clashes. Dwight Eisenhower shut down the Suez intervention on its first day; Lyndon Johnson resented Harold Wilson’s refusal to send British forces to Vietnam; Ronald Reagan invaded the Commonwealth realm of Grenada without so much as informing Margaret Thatcher; Obama counseled against Brexit and was roundly ignored.

However, the Britain First incident provides us an excellent opportunity to look at what Trumpism is, and what it might mean for American foreign policy towards the United Kingdom. For the past two years, many liberals have treated Trump and the right-populist movement he embodies as a threat to the liberal world order. This is partly because of Trump’s mercurial nature. But the truth is that populism really does draw itself as the enemy of that very same liberal world order. The thing to remember is that the Special Relationship is very much part of that order – it emerged with it after 1945. If Trump really is here to bury that post-World War II settlement, the Special Relationship could easily be buried along with it.

Note: This article was first posted on our sister site, LSE USAPP.

_______

About the Author

Ben MarguliesUniversity of Warwick
Ben Margulies is a Postdoctoral Fellow at the University of Warwick.

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science.

A deal – any deal – is clearly better than no deal

Now we know: a deal – any deal – is clearly better than no deal. After a frantic overnight scramble to agree the wording and the Prime Minister’s dramatic early hours’ flight to Brussels, the EU’s leaders are now willing to draw a line under phase one of the Brexit negotiations. Below, Iain Begg (LSE) explains the deal that has been struck in more detail.

Whistling up a deal?

Unless something unravels, we can expect the European Council, meeting on the 14th and 15th of December, to fire the starting-gun on negotiations about the future relationship between the UK and the EU. True, the fifteen-page document summarising what was agreed does state, twice, the ‘caveat that nothing is agreed until everything is agreed’, but there is unlikely to be any appetite for prolonging the agony.

Theresa May can take credit for bringing matters back from the brink by finding a formula to placate the DUP and agreeing to go well beyond what she offered as a financial settlement in her Florence speech, barely two months ago. She seems, so far, also to have seen off the hardliners in her own party. However, in classic EU style, there are fudges and ambiguities in the text, some of which may come back to haunt her.

On Ireland, the language about the commitment to the peace process and the Good Friday agreement is stirring and there is an unequivocal statement of the UK’s ‘guarantee of avoiding a hard border’. This sits alongside a statement that ‘the United Kingdom will ensure that no new regulatory barriers develop between Northern Ireland and the rest of the United Kingdom’ without the agreement of the Northern Ireland authorities.

The text refers to achieving these twin aims through the ‘overall EU-UK relationship’, but what is far from clear is how. The inexorable logic of the UK not being in the customs union and having no barriers between Northern Ireland and Great Britain still applies: there has to be some form of border in Ireland. The solution proposed is that ‘in the next phase work will continue in a distinct strand of the negotiations on the detailed arrangements required to give them effect’. To revert to a metaphor often heard during the years of the euro crisis, the can has been kicked down the road.

the UK has largely caved-in to what the EU had demanded

When it comes to the divorce bill, the UK has largely caved-in to what the EU had demanded from the outset by agreeing ‘a methodology for the financial settlement’. There is no explicit figure for how much, but finance ministers in other EU countries will have a pretty shrewd idea of what it means for them.

Whistling up a deal? (Image Public Domain)

Briefings from No. 10 suggest the overall amount, to be spread over many years, may be just shy of £40 billion. The modest rise in the value of sterling this week helps because it means (at today’s exchange rate) fewer pounds will be needed to pay the bill, but the suspicion has to be that the eventual figure will be somewhat higher given what is detailed in the ‘methodology’.

Key elements of the deal are left deliberately vague. For example, in a major concession compared with the Florence speech, the UK has now accepted ‘it will contribute its share of the financing of the budgetary commitments outstanding at 31 December 2020’. This leaves open what the relevant share is.

Similarly, hidden away in footnote 9 of the document is a technical statement about the assumptions regarding the interest rate to be used to calculate the EU’s lability for staff pensions, although the mere presence of the footnote must be interpreted to mean the UK has accepted it will have to pay. In essence, if interest rates return to more normal levels, a lower pension pot will be enough to generate the income required to pay retired EU staff.

For the EU, facing the prospect of acrimonious negotiations about how to fill the hole left in its budget by the departure of the UK, a figure of the order of €40-50 billion will be a great relief. In round numbers, it will mean no need to fret for at least four years about whether the other net contributors have to pay more or recipients receive less.

In Brussels, they’ll be whistling now, but the tune will be Beethoven’s ode to joy

The EU, as many will recall, was once told it could ‘go whistle’ for the money. In Brussels, they’ll be whistling now, but the tune will be Beethoven’s ode to joy.

This post represents the views of the author and not those of the Brexit blog, nor the LSE. It first appeared on The UK in a Changing Europe.

Iain Begg is Professorial Research Fellow at the European Institute and Co-Director of the Dahrendorf Forum, London School of Economics and Political Science, and Senior Fellow on the UK Economic and Social Research Council’s initiative on The UK in a Changing Europe.

Britain’s insistence on impact assessments helped wrap Brussels in red tape

chris kendallThe much-anticipated Brexit impact assessments are rather less detailed than many expected them to be. Chris Kendall contrasts the Brexit secretary’s admission that he is ‘not a fan’ of them with the stringent approach the European Commission now takes to financial accountability. Indeed, it was the UK’s insistence on thorough impact assessments that helped to create a culture of propriety in Brussels. 

On 6 December 2017, David Davis, the Secretary of State for Exiting the European Union, told a House of Commons Select Committee that he is “not a fan” of impact assessments. To appreciate quite how shocking it is to hear this coming from the mouth of a senior British government minister, I’ll need to fill you in on some background.

As a fresh-faced graduate in the early 1990s, I joined the UK’s Department of Trade and Industry as a member of the newly-minted European Fast Stream, a programme designed to place more Brits in the Brussels institutions having first funnelled them through what Peter Hennessy memorably called Whitehall’s “velvet drainpipe”. My first posting was as a member of the team renegotiating the European Structural Funds, the funds delivering support to the EU’s less developed regions. Every Sunday evening, in those pre-Eurostar days, we would fly across the Channel and spend Monday in negotiations in the Council’s former home, the old Charlemagne building. When he wasn’t sending me up to the bar on the 14th floor to refresh his whisky tumbler and cigar case (yes, that’s how it was only 25 short years ago), my boss, the Assistant Secretary, would harangue the Commission and the other 11 Member State delegations with his insistence on “ex-ante evaluation” and “thorough prior appraisal”. I typed those phrases so often in briefings that my fingers still retain the muscle memory. I would watch the eyes roll around the table. “Here they go again.”

berlaymont interpreters

EU interpreters explain how their booth works at an open day at Berlaymont, May 2017. Photo: European Commission DG Humanitarian Affairs via a CC-BY-NC-ND 2.0 licence

The UK is – perhaps was – notorious within the EU for banging on and on (and on) about impact assessments. We were like a broken record. It’s not as if we were pushing against a closed door – no-one disputed the need, and they’ve long been a requirement. One senses that the British were more interested in virtue signalling back home than in delivering meaningful reform to what were already tight rules.

I don’t doubt that there was a time when things were too lax. But that time has long passed. Shortly after I joined the European Commission, in 1999, the College of Commissioners led by Jacques Santer resigned en masse following a financial scandal involving the French Commissioner Edith Cresson. Santer’s move was, I believe, an honourable one that was intended to demonstrate that the Commission was serious about financial propriety. Unfortunately, the gesture fed the widespread popular myth of the EU as a financially irresponsible gravy train – a myth fed by national politicians and the popular press, and not just in the UK. The European Parliament, the EU’s Budgetary Authority, also saw it as an opportunity to exert and extend its power and influence, and it took that opportunity.

The sweeping and stringent financial reforms that followed the Santer démission have changed the European Commission’s culture. What was once a more nimble organisation now labours under burdensome red tape imposed by the Council and Parliament. It’s hard to spend money, which it should be, but perhaps not quite so hard. In 2010 I returned to Whitehall on temporary loan and I was struck by how easy it is, relatively speaking, to spend taxpayers’ money as a British civil servant. If I had to travel somewhere, I took my departmental credit card and went online and booked a ticket. I made sure to keep a paper trail, and would need to justify the travel to my manager if asked, and I could of course have found myself subject to an audit at the end of the year, but the process couldn’t have been more simple. By contrast, as an EU official, booking travel involves jumping through a host of hoops.

I’m conscious that I may be at risk of losing your sympathy, dear reader. Eurocrats wailing about how hard it is to spend your money on plane tickets won’t melt your heartstrings. My point is that the culture of the EU institutions is quite unlike its popular spendthrift image, and that is due in no small part to generations of British politicians and civil servants who have helped to shape Brussels in their own image. Or rather, what they project as their own image. How accurate that image is must be questioned when a senior government minister from the country synonymous with impact assessments tells his parliament that he is “not a fan”.

As a practitioner, I can tell David Davis that I’m not a great fan of impact assessments either, but I accept that they are a necessary part of good government. Impact assessments are what stand between wild, ideologically-motivated proposals and actual legislation affecting people’s lives. One has to ask, why isn’t David Davis a fan of impact assessments, and in particular why does he not see a need for impact assessments when it comes to ripping the UK out of the European Union?

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

Chris Kendall is an EU official and former British civil servant who blogs in a personal capacity on subjects ranging from knitting to Brexit – but mostly about Brexit. He can be found on Twitter as @ottocrat.

Going it alone on trade is like bringing a chocolate spoon to a knife fight

Understanding the Brexit vote: the interplay between economic internationalisation and cultural openness

crescenziThe Leave vote prevailed in regions where local workers do not interact much with foreign cultures – yet some of these places rely on jobs created by foreign firms. If internationalisation in the workplace does not match internationalisation ‘at home’, pressure on local workers to opt out from further economic integration increases, write Riccardo Crescenzi (LSE), Alessandra Faggian (Gran Sasso), and Marco Di Cataldo (LSE) in a recent study.

Some of the key questions floating around in the days after the referendum were: why has this happened? Who are the ‘Brexiters’? Several interpretations have been provided, pointing at some common characteristics of the voters who opted for the ‘Leave’ option. It became apparent that the electorate was split according to demographic characteristics, most importantly age and education. The main story that was told was one of cultural values, with an insurmountable generational gap between the younger “Europhile” generation and the older generation attached to traditional British values, and possibly more xenophobic.

Some commentators went as far as to explicitly discard any economic dimension behind the vote, defining Brexit as a purely cultural/psychological phenomenon. However, the emphasis on cultural priors and values offers limited insights on how further political tensions towards international disintegration and isolation might arise in the UK and in other EU member states. Alternative views claim that economic conditions of citizens and the economic geography of UK regions are at least as important as culture and identity to determine individual attitudes towards the EU and voting patterns at the 2016 referendum.

neither economic nor cultural arguments alone are sufficient to provide a complete picture of the voting patterns on Brexit

It is now apparent that neither economic nor cultural arguments alone are sufficient to provide a complete picture of the voting patterns on Brexit. Purely cultural explanations of the referendum outcome inevitably rely on the strong assumption that people living in areas such as Bradford, Hull or Sheffield (where Leave prevailed) have more connection, devotion or sense of rootedness to their hometowns than strongly pro-Remain locations such as Manchester, Leeds or Liverpool. Conversely, explanations based on economic motives are hard to reconcile with the fact that – for example – peripheral areas relying more heavily on employment generated by large foreign corporations have overwhelmingly supported Brexit. As an example, in the area of Sunderland only about a third of people voted Remain despite the presence of a “giant Nissan factory which exports more than half its output to the other EU countries”.

© Copyright Andrew Curtis and licensed for reuse under Creative Commons Licence.

To understand the deep motivations underlying the Brexit vote we need address the following paradox: although local jobs in many UK regions are highly dependent on foreign economic ties, workers in some of these regions openly rejected internationalisation by voting to rescind their links with the EU, the largest integrated market and investment space of the world. Why?

Domestic workers compete with other workers active in foreign locations via the inflow of imported goods (that can be sold on the local market at lower prices than domestically supplied alternatives thanks to cheaper labour inputs) but they might also be employed by the local subsidiaries of foreign firms (or by domestic firms with subsidiaries abroad). In other words, both foreign and domestic multinationals connect local and ‘global’ labour markets, offering the opportunity to work in more internationalised environments, but also fostering competitive pressures on domestic workers. Therefore, it comes as no surprise if some ‘internationalised’ constituencies voted ‘leave’ to ease this pressure.

However, voters’ decisions are influenced not just by their work-place dynamics but also by their social environment. Areas where social ties are more local and inward-looking, where people tend to get along well mainly with close circles of like-minded individuals are less likely to induce a positive and synergistic approach to the internationalisation of the economy. These socio-culturally inward-looking communities are more prone to see their employers’ internationalisation as a (potential) threat to both their values and their economic stability and welfare, and would take any occasion to vote ‘against economic integration’. Conversely, workers that are part of open and outward-oriented local societies are more inclined to bridge different social groups, understand and embrace multi-national working environments given more weight to the benefits of the economic internationalisation of their local area.

Following this line of reasoning, the result of the Brexit referendum can be seen as the result of a process of ‘split Europeanisation’ whereby Euroscepticism is triggered by the increasing mismatch – in specific constituencies – between internationalised firms (and corporate economic interests) and ‘localistic’ employees (and workers’ attitudes and cultural preferences).

Do data on the geography of the Leave vote support this story?

In order to capture the ‘economic internationalisation’ of UK regions and their ‘EU exposure’ we can look at date on in-flows and out-flows of Foreign Direct Investment (FDI). To get a sense of their ‘social internationalisation’ we can rely on a purpose-built ‘Cultural openness’ index, a composite indicator that combines different variables (looking at the propensity of people to travel abroad as well as their proficiency in foreign languages) that can be considered – when put together – as an overall measure for the cultural internationalisation of voters and their international social engagement.

Figures 1 and 2 show descriptive maps and scatterplot correlations of UK regions by the level of ‘social internationalisation’, as defined by our index, the proportion of inward FDI (‘or ‘economic internationalisation’, and the voting outcomes at the 2016 Referendum. As shown by the slope of the regression line in the left-hand graph of Figure 2, higher levels of cultural openness are associated on average with lower percentages of Leave voters. Conversely, the association between economic internationalisation (as captured by FDI) and Leave votes is much less clear-cut.

In a recent paper Riccardo Crescenzi, Marco Di Cataldo and Alessandra Faggian show that the interaction between ‘cultural openness’ and ‘economic internationalisation’ is the single most significant predictors of the share of Leave votes when tested against all other alternative explanations of the Brexit vote (from the demographic explanations to education, from immigration to unemployment) touched upon in the ongoing debate.

The interaction between cultural openness and economic internationalisation is a key explanation for the share of Leave votes

The degree of internationalisation of the local society – proxied by the cultural openness index – is associated with a statistically significant reduction in the share of voters supporting the UK departure from the European Union. The presence of foreign firms in the local economy also reduces the propensity to vote Leave. However, what seems to be the most important factor to shape local preference for EU membership is the interaction between the economic and the social sphere: the interaction term between the cultural openness index and inward FDI is negative and highly significant, suggesting a strong complementarity between these two dimensions.

These rudimental statistical regularities offer new material for an open discussion on the lessons to be learnt from the Brexit referendum. This matters for a better understanding of the UK society but also – for other EU countries – in order to ensure the political and social sustainability of the process of European economic integration. Even in high-employment countries like the UK, the intensified role of global investment flows and value chains in the economic tissue of EU countries and regions – in particular in the form of the increased presence of foreign firms operating across national borders – poses major societal challenges. If social and cultural attitudes towards integration and internationalisation are not developed in parallel with the globalisation of the economy, tensions are very likely to arise.

This post is based on the article “Internationalised at work and localistic at home: the ‘split’ Europeanisation behind Brexit” by Riccardo Crescenzi (LSE), Marco Di Cataldo (LSE) and Alessandra Faggian (GSSI) forthcoming in  Papers in Regional Science, (DOI: 10.1111/pirs.12350) and freely available (full open access) from the LSE website.  It represents the views of the authors and not those of the Brexit blog, nor the LSE.

Riccardo Crescenzi is Professor of Economic Geography at the London School of Economics.

Marco Di Cataldo is a Post-Doctoral Researcher at the London School of Economics.

Alessandra Faggian is Professor of Applied Economics  at the Gran Sasso Science Institute.

 

Brexit assessments: ignorance isn’t bliss — quantitative forecasts do matter

Costas Milas When questioned about the government’s Brexit sectoral impact assessments, David Davis said there were none, because “economic forecasts do not work”. Costas Milas explains why this excuse does not hold up to reality.

Quizzed at a hearing of the Exiting the European Union Committee, Brexit Secretary David Davis stated that there are no sectoral impact assessments on Brexit. In fact, Davis ‘justified’ the apparent lack of quantitative impact within the notorious 850-page dossier on the grounds that “an impact assessment consists of a quantitative forecast” and “as we have said….economic forecasts do not work”.

Yet, quantitative forecasts are an essential part of our daily routine. Consider, for instance, a simple trip from Stoke-on-Trent to Wembley. Drivers interested in this trip do not have any hesitation to consult the ‘router planner’ of the AA website which suggests up to three alternative routes. These routes are based on a very simple quantitative model which provides three different ‘forecasts’ of the arrival time to Wembley. Ignoring forecasting because, in the words of Mr Davis, “when you have a paradigm change as in 2008, all the models are wrong” is hardly the point. Indeed, by returning to the example of the AA route planner, drivers understand (or should understand) that the alternative quantitative ‘forecasts’ provided are on the grounds that nothing will go spectacularly wrong – say a traffic jam or a car breakdown.

In fact, economic forecasting prior to the recent financial crisis and all the way up to the current time has not gone spectacularly bad. To fix ideas, Figure 1 plots the 1-year GDP growth forecast (this is the ‘mode’, or most likely outcome, based on market expectations of interest rates) produced by the Monetary Policy Committee (MPC) of the Bank of England together with the actual outcome. The MPC has overestimated, since 2006, 1-year ahead GDP growth by 0.8% (based on the Median statistic). Post-financial crisis (2010-2017), however, the MPC’s GDP growth forecast has definitely improved with the ‘Median prediction bias’ dropping to 0.55%.

Source: GDP growth comes from the ONS database. 1-year ahead GDP growth forecast comes from successive Bank of England Inflation Reports.

The main point is that economic forecasters have tried to improve their forecasting performance since the crisis. In fact, the financial crisis triggered a lively debate among policy-makers and forecasters. For instance, the President of the Federal Reserve Bank of Boston, Eric Rosengren, pointed out in 2010 that the seriousness of the crisis was underestimated by economic forecasters because financial links, such as provision of liquidity, to the real economy were “only crudely incorporated into most macroeconomic modeling”. Adding to this, the Head of the Monetary and Economic Department at the Bank of International Settlements, Claudio Borio, noted in 2012 that for most of the post-war period “financial factors had progressively disappeared from macroeconomists’ radar screen”. Building on these very comments, I recently co-authored an academic paper which showed that an empirical model which distinguishes between illiquid and liquid stock market conditions in the UK is able to out-perform the MPC’s GDP growth forecasts.

Obviously, further improvements in our forecasting ability need to be put in place as we move into the complex and indeed challenging Brexit era. Yet, let us not forget that the outcome of the referendum is arguably also based on a ‘quantitative forecast’. Indeed, a 51.9% versus 48.1% vote in favour of Brexit was, in essence, a quantitative forecast of the electorate’s opinion as it was based “only” on a 72.2% turnout.

With this in mind, the pressing question which remains unanswered is the following: why does David Davis appear happy to fully trust the quantitative forecast of the vote but, at the same time, refuse to consider any other UK sectoral forecasts that build on the very Brexit vote? This very lack of information is a serious worry when we try to work out which ‘business model’ is the most suitable to carry forward in our future trading with Europe and the rest of the world.

______
About the Author

Costas Milas is Professor of Finance at the University of Liverpool.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Number 10, Flickr (CC BY-NC)

 

Powered by WordPress | Designed by: index backlink | Thanks to insanity workout, car insurance and cyber security