Brexit: The good news you’re not hearing
LONDON — On July 24, trade talks began between Britain and America. All right, they weren’t formally called trade talks: As long as Britain is still in the European Union, it is supposed to contract out all its commercial decisions to Brussels. Officially, the United States Trade Representative, Robert Lighthizer, and the British trade secretary, Liam Fox, met for broad discussions about what might happen when Brexit takes effect in 2019.
Still, both sides can see the prize. For decades, there have been fitful negotiations between Washington and Brussels on trade liberalization, but they have always run-up against the protectionism of France and some southern European states.
Between Britain and America, there are few such problems. Each country is the other’s biggest investor: About a million Americans work for British-owned companies, and a similar number of Britons work for Americanowned companies.
A liberal trade deal, based on mutual recognition of standards and qualifications, will bolster both economies.
Prime Minister Theresa May keeps saying she wants Britain to be a “global leader in free trade.” In parallel to the talks with Washington, Britain is starting discussions with China, Japan, India, Australia and others. Global trade deals should supplement rather than replace Britain’s economic relationship with the remaining 27 European Union states. The non-member Switzerland, for example, exports nearly five times as much per head as Britain does, mostly to the European Union, while simultaneously having bilateral trade deals around the world.
The idea of a more global Britain emerging from the European Union may strike you as jarring. Much of the commentary over the past year, at least outside Britain, has portrayed Brexit as a nativist and protectionist phenomenon. I keep reading — often in the pages of this newspaper — that the vote was overwhelmingly about immigration. In fact, opinion polls before and after the vote concurred that the main issue for “leavers” was democracy.
I’ve learned in politics that almost no one listens to the other side. Rather than going to the source, people read allies’ reports of what the other side is supposed to have said. If a British person tells you that the vote was “all about immigration,” I can almost guarantee that you are talking to a “remainder.”
The same confirmation bias can be seen in their determination to find bad economic news. Here is a selection of British reports from the past two weeks: Unemployment fell again, as every month since the vote, to 1.49 million (from 1.67 million in June of last year); manufacturing demand is at its highest level since August 1988; retail sales, official figures show, are up 2.9 per cent on this time last year.
Exports were up 10 per cent year-on-year in May, helped by the long-overdue correction of the exchange rate. People in the “remain” camp like to point to the fall in sterling, but rarely mention that, before the vote, the International Monetary Fund and the Bank of England agreed that Britain’s currency, seen as a haven from the travails of the euro, was artificially expensive.
Continental Europeans evidently still regard the British economy as attractive; more of them are working in Britain than ever before. As for the supposed decline of London, a number of European banks, including Deutsche Bank and ING, have grown their operations here since the referendum. Last year, Wells Fargo spent £300 million (about $392 million) on its new European headquarters — in London. The latest survey from the Robert Walters City Jobs Index, for July, reported that hiring in financial services was up 13 per cent yearon-year.
You may think I’m prone to a confirmation bias of my own. But it’s only fair to contrast what has happened since the Brexit vote with what was predicted during the campaign. “Remain” campaigners told us to expect a recession in 2016; in fact, Britain grew faster in the six months after the referendum than in the six months before. They told us that the FTSE 100 index of leading companies’ share prices would collapse; in fact, British stocks performed strongly after the Brexit vote. They told us that Scotland would leave Britain; in fact, support for separatism has collapsed, and the Scottish first minister, Nicola Sturgeon, has shelved her planned independence referendum.
Most people, whichever way they voted, are celebrating the good news. But a few Euro-fanatics, disproportionately prominent on the BBC and at The Financial Times, are acting like doomsday cultists, constantly postponing the date of their promised apocalypse. First, a “leave” vote was supposed to wreck the economy. Then, it became “wait until we begin the disengagement.” Now it’s “wait until you see what a bad deal we get from the European Union.”
It’s odd. The people who are the most pro-Union are generally the most convinced that the union will act in a self-harming way out of spite. I have a higher opinion of our European allies. But even if I didn’t, I’d still expect a deal. Adam Smith observed that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” It is not from the benevolence of the European Union that we expect a freetrade agreement: Exchange makes everyone richer.
If you want a picture of Britain’s future relationship with the European Union, think of Canada’s with the United States. Canadians have a type of federation on their doorstep that they decline to join, but with which they enjoy the closest possible diplomatic, military and economic ties. Two years from now, in a similar vein, the European Union will have lost a bad tenant and gained a good neighbour.