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Tony Czarnecki

January 14th, 2020

Brexit – a problem or an opportunity for the European Federation?

4 comments | 10 shares

Estimated reading time: 10 minutes

Tony Czarnecki

January 14th, 2020

Brexit – a problem or an opportunity for the European Federation?

4 comments | 10 shares

Estimated reading time: 10 minutes

Through Brexit, Britain wanted to regain absolute sovereignty. Sovereignty means the ability to achieve a country’s goals, such as increasing prosperity, most effectively. However, the effect of Brexit might be precisely the opposite, meaning that Britain has far less impact on the world stage than before, argues Tony Czarnecki.

The UK’s wish to control migration from the EU, expressed in the Brexir vote, could have been achieved even today, if Britain only had seriously applied the available measures, which some EU countries have done for years. Anyway, the level of migration from the EU has already drastically fallen, so that becomes almost a meaningless subject. Regarding the ability to do ‘deals’ with countries outside the EU and in that way compensate for the losses of not trading most effectively with the EU, it is just pure fantasy. About 45% of Britain’s trade is with the EU. Britain has already been trading with the rest of the world for centuries, so it is not starting from scratch. Any extra trade, theoretically possible, will in no way compensate for the loss of trade with the EU because of higher cost of trading with this organisation. Britain’s ability to increase trade in goods is really dependent on the economy’s productivity, which is one of the lowest among the G7 and quite low even within the OECD. Finally, the trade in goods constitutes only about 20% of all British trade with the EU.

It would be very easy to blame the UK as a country for making a deep wound in the European body. I believe Britain was right about political weakness, the centralist and bureaucratic tendencies in the EU. Britain was also right in criticizing the uncontrolled economic migration from the poorer EU countries to those ones that offered higher wages and better benefits. Such a system was unjust and unsustainable. However, it was Britain’s own fault, by delaying any significant EU reforms from the fear that it might lead to closer integration. Simply, the way Britain wanted to turn the tide was utterly wrong. Similarly, the EU’s position to stick to its guns and not to be more flexible in the period of the negotiations before the referendum was also wrong.

After the turbulent three years of post-referendum introspection of Britain’s place in Europe and in the world, the UK embarked on another an election campaign, which was supposed to resolve the British indecisiveness on what to do next. In my view, the EU rather than preparing for yet another extension for negotiating the ‘right’ Brexit, should instead use this interlude in negotiations, for taking a step back and look at Brexit from an entirely different perspective.

The EU and Britain cannot turn back the tide. It is now a damage limitation exercise for both parties. I do not believe that the EU would collapse under the pressure coming from the UK’s referendum result. However, the EU could not afford to plough on at the current pace for some years, being unable to form a viable and well-functioning organization. That is a longer-term danger. Therefore, Brexit might be a trigger for the remaining 27 countries to finally get their act together and do something significant to accelerate their integration processes, which for Britain was an unacceptable direction to follow. By doing that, the EU may come to the conclusion that Brexit does not have to be a big problem. Instead, it could become a great opportunity. This opportunity lies in the creation of the EU Zones (see for further details in my book).

The creation of the EU Zones, may in some circumstances significantly accelerate the process of the EU federalization because of Brexit. For example, the proposed Zone 2 – European Federation Single Market (EFSM), might almost ideally fit the British expectations. For example, that Zone would allow up to 5 opt-outs, retaining own currency, and stay away from any further integration (‘ever closer union’). Therefore, perhaps it is the right time for the EU to extend a helping hand to Britain and invite it to remain within the EU, but in a specially created Zone 2.

For Britain, one of the options out of the current Brexit impasse would be not to exit the EU but instead to revoke the article 50 and remain in the EU on the current terms, until a Zone like the proposed EFSM Zone 2 is created. However, revoking the article 50, as the Liberal Party proposed, would unnecessarily further alienate the frustrated part of the population that had voted for Brexit. Therefore, it seems that a better option would be to make an exit from the EU, even on the basis of the deal that Boris Jonson had negotiated. In that way, Brexit would have been finally made. However, the EU would then propose that instead of negotiating a long-term Trade Agreement with the UK, as outlined in the Political Declaration, it would re-join the EU as the first member of Zone 2. For the UK it would be a minor humiliation and a meaningful economic loss (at least the annual rebate would have gone). However, it would have retained all the current opt-outs, including not to be forced to participate in any further steps towards the EU federalization. The EU, on the other hand, would have been relieved from the British efforts to stop any further EU integration.

Furthermore, the creation of such a Zone would have opened the possibility to invite the countries staying close to the EU, but being formally outside this organization, to join that Zone. The first such potential candidates are the current EFTA countries, i.e. Norway, Switzerland, Iceland and Lichtenstein, which are also members of the European Economic Area (EEA) and full members of the current EU cohesion programme. What’s important about these countries is that their economic performance is on par with the top EU economies, similar foreign affairs policy (i.e. towards Russia or China), similar judicial institutions (EFTA Court), similar democratic principles and economic policies, and the system of human rights nearly identical to those of the EU.

If these countries were to join the EFSM zone, then Europe would have become better integrated with fewer tension spots and increased economic and social benefits. The key attraction for these countries would be the increased security and economic influence they could exert as members of a much larger organization. There would be other advantages for these countries, such as for Switzerland, which has over 200 separate Agreements with the EU, and which might then be replaced by just one Agreement, with eventual opt-outs.

Even if only these additional countries were added, the combined GDP of such an enlarged EU would be about 1/3 of the global GDP, with the population over 500m, being also one of the four military superpowers. That would allow the EU and later the European Federation to execute most of the functions that it would need, to start reducing the existential risks for humanity.

Therefore, establishing Zone 2, initially specifically for Britain, might simultaneously be the first step towards the EU federalization, giving other countries much more flexibility in their relationship with the future EF state. If it is followed by setting up the Eurozone’s budget with its own Finance Minister, then the Eurozone federalization might happen after the next EU elections. It would then lead by default to the creation of Zone 1 for the countries that are currently the members of the EU, but not of the Eurozone.

This post represents the views of the author and not those of the Brexit blog, nor the LSE. It is an extract from the book ‘Democracy for a Human Federation – Coexisting with Superintelligence’ by Tony Czarnecki, published in November 2019.

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About the author

Tony Czarnecki

Tony Czarnecki is an economist and a member of Chatham House, deeply engaged in global politics and the reform of democracy. He is also an active member of London Futurists.

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