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Wednesday, June 29, 2016

Post-Brexit In The Western Hemisphere


Tiberiu Dianu

Brexit: The Message

On June 23, 2016, the majority of the United Kingdom’s population –
52% vs. 48% (outside the margin of error, that is) – has decided to
vote for exiting the European Union (turnout was 72%). Apparently,
the vote was marked by a generational divide. Recent polls, starting
with 2015 to date, have shown that 75% of voters aged 18-24 were
pro-stay, while 67% of voters 65 years and older were pro-leave. As
an addendum, the British overseas territories had no say in the Thurs-
day referendum.

In practical and rhetorical terms, this means a vote for: nationalism, in-
dependence, and border security. Consequently, this means a vote again-
st: globalism, Brussels’ bureaucracy, and immigration. It meant also a vo-
te for true freedom of speech, individualism, and assimilationism, and, co-
nsequently, a vote against political correctness, establishment, and multi-

Brexit does not reflect an over-night change in people’s vision, but ra-
ther an embryonic state since the 1973 accession of the UK to the EU,
adding in time layers of dissatisfaction and  frustration. This has evol-
ved from economic issues (trades and tariffs) to national security issues
(the Islamic terrorist attacks in London between 2005 and 2015,  Paris,
in January and November 2015, and Brussels, in April 2016, committed
by either citizens or immigrants, including political refugees).

What's next? Procedure of leaving the EU

Brexit is an advisory vote, and the British government can legally ignore
the referendum results. But the political reality will push the executive to
respect the popular vote. The UK will not exit the EU next week, or next
month, and not even next year. It is a process in the making, and it might
take at least two years until it will have become complete. There are many
issues to be clarified, readjusted, renegotiated, and reconstructed related to:
trade, currency, citizenship, governance, and security, among others. Even
the replacement procedure for the outgoing premier David Cameron will
take at least two months or even longer.

Art. 50 of the 2007 Lisbon Treaty on European Union establishes the pro-
cedures for both withdrawal and rejoining. In short, the executive head (pre-
mier, for the UK) of the member state which decides to withdraw shall no-
tify the European Council (the EU executive branch) of its intention, and
the EU “shall negotiate and conclude an agreement with that member state.”
The agreement shall be concluded by the Council, with a qualified majori-
ty of the member states, after obtaining approval from the European Parlia-

Then, the EU treaty shall cease to apply to the member state in question fr-
om the date the agreement is enforced. However, if the agreement is not acc-
epted by the British people, a second referendum might be held, in order to
see if the voters accept the negotiated agreement. If the voters do not accept
the agreement, there is the possibility for the UK to leave the EU unilaterally,
by rejecting the negotiations. But forcing the exit without agreed terms might
put the UK in a risky position, leaving it, for instance, without a free trade ag-
reement, and being imposed of tariffs on some UK-EU trade. In this last situa-
tion, the EU treaty shall cease to apply to the member state in question within
a two-year period after the notification of that member state.

The idea of a second referendum seems to be favored by Boris Johnson, the
presumptive Conservative leader. Johnson, a former London mayor, has ad-
vocated for Brexit, unlike David Cameron and the current mayor and Trump-
detractor, Sadiq Khan (now copiously booed by the over-joyous Brexiters).
Curious enough (or maybe not), Johnson bears a striking resemblance, not
only in ideology, but also in looks, with Donald Trump. Who, by the way,
during the British referendum, was nearby, in neighboring Scotland, in ord-
er to promote his golf courses, and praised the Brexiters for their victory.

Post-Brexit for the United Kingdom

Brexit has given the UK the possibility to emerge as a new power pole in
global politics. Not that the UK was not a great power before. But now, fo-
llowing a divorce from the EU, the British will focus on creating a renew-
ed architecture from the (former British) Commonwealth of Nations. We
will see in the near future more actions that advocate for more UK engage-
ment with overseas territories, in terms of sustainable development, ocean
governance, immigration, and social issues. These steps will continue pre-
vious similar initiatives, that emerged in the early 2000s.  It has to be men-
tioned that the British overseas territories were not part of the referendum

After the Brexit vote, an immediate effect of Brexit was on the stock exch-
ange and the British pound. My earlier prediction came true, and the pound 
took a significant plunge, by about 8%, to its weakest level in three decades
-- from US$1.57 on Friday, June 26, 2015 to US$1.36 on Friday, June 24,
2016, and US$1.33 in the last days of June.  Globalists should not jubilate,
though. In spite of the initial shock of the stock exchange market, this will
not have long-lasting effects. Most of the large UK stock market compone-
nts (like banks and commodity stocks) will be, in large part, unaffected by
the country’s relationship with the EU, while many British export compan-
ies would benefit from a cheaper pound.

In terms of commerce, the UK can cut trade deals with the EU and other
partners outside the EU. But ultimately, if no deal would be forthcoming,
the country could also cut import duties on its own.

Militarily, the UK has signaled to its NATO allies that national interests are
to be given increased attention over the EU ones.  The EU interests include
Eastern Europe, the Middle East, and elsewhere. Consequently, the country
has shown less inclination to take on global challenges, at least in the short
term. It is also a signal for reviewing NATO’s role, construction, principles,
and goals. It is expected that the upcoming NATO summit in Warsaw, on
July 8 and 9, to reflect exactly that.

Post-Brexit for the United States

On political discourse level, Brexit serves as a predictor for the US presid-
ential elections in November. The debate has been about anti-establishment
bureaucracy and status quo, nationalism, sovereignty, and borders control,
and all these factors are present in the American elections narrative, as well.

Financially, in short and medium terms, Brexit will affect the US dollar, sto-
cks and bonds. The dollar rise (compared with both the pound and euro) will
limit the US exports in Europe. Retirement funds invested in stocks will also
be affected, while treasury bonds will decrease their ability to deliver signifi-
cant income for savers and investors.

The good news for investors is that the Federal Reserve will not raise the sh-
ort-term interest rate (now it is between 0.25% and 0.5%), probably until the 
end of the year.

Mortgage rates and house prices will drop, and the US housing market will
reinvigorate. Tourism in Europe will intensify.

On national security grounds, the US will have the opportunity to enhance
its cooperation with the UK within the  Five Eyes (in short, FVEY) intellig-
ence organization. FVEY, an intelligence alliance established in the last yea-
rs of the World War 2, includes other three English-speaking members (Can-
ada, Australia, and New Zealand). This is important to point out, because the
other EU member states (in particular, France and Germany) have, more oft-
en than not, other regional interests than the US and the rest of the FVEY

Regionally, the Western Hemisphere will have two -- more defined -- major
players, the United States and the United Kingdom. They will divide, to the
most part, the vast areas of the north Atlantic region, the Caribbean basin,
and the Pacific zone.

Post-Brexit for the Caribbean and Pacific nations

In a post-Brexit era, some British commonwealth nations (American/Carib-
bean, African, Asian, and Australian/Pacific) will take concrete measures, in-
volving new forms of association, depending on their own regional – politi-
cal, administrative, economic, and trade -- interests.

North America and Oceania have a total number of members of 23 nations
in the British Commonwealth. Predicting economic and trade trends for all
these English-speaking countries is important because with Brexit another
world power pole emerges, namely a redesigned (British) Commonwealth
of Nations. And Brexit is the first brick in the new architecture of this nati-
ons bloc.

The British Commonwealth has 12 member countries in North America:
Canada and 11 Caribbean nations (Antigua and Barbuda, Bahamas, Barba-
dos, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis,
Saint Lucia, Saint Vincent and the Grenadines).

The Caribbean nations (in North, Central, and South America), on their part,
possess a wide array of regional economic organizations, but we will empha-
size in particular two of them: the Association of Caribbean States (ASC),
with 25 full members, and the Caribbean Community (CARICOM), with 15
full members..A large part of them are English-speaking countries. The Engl-
ish-speaking countries are: parliamentary constitutional monarchies (domin-
ions or independent states, like Antigua and Barbuda, Belize, and Jamaica) –
with Queen Elizabeth II as their monarch and head of state – , republics (like
Dominica, Guyana, Trinidad and Tobago), and Dutch territories with English
as the official language, in addition to Dutch (like Sint Maarten).

These differences can make a difference in terms of trade with a post-Brexit
UK, on one hand, and the EU, on the other hand. The Caribbean English mon-
archies have a stronger connection with London, hence a narrower leverage of
negotiation with the EU, other states or trade blocs. In contrast, the Caribbean
republics, including the Dutch English-speaking territory of Sint Maarten, can
exercise more flexibly their negotiation leverage with other states, due to their
loose connection with London.

In the last years, the 15 CARICOM countries (Antigua and Barbuda, Bahamas,
Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat,
Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines,Suriname,
Trinidad and Tobago), and the Dominican Republic (with which they make up
together CARIFORUM) have been strengthening their ties with each other, in
order to play a more solid role in global trade. Also, they are in a process of ex-
tending their trade connections with 17 territories in the Caribbeans with direct
links to some EU countries (4 French "outermost regions" plus 13 "overseas te-
rritories" -- 6 British, 6 Dutch, and 1 French).

In a post-Brexit era, the Caribbean nations, on their part, will need to enhance
and improve the free trade agreements they currently have with the EU (like
CARIFORUM), North America (NAFTA), South Asia, and other regions.

The Pacific nations (in Oceania) have 11 member states in the British Common-
wealth. Five of them are monarchies – with Queen Elizabeth II as their monarch
and head of state (Australia, New Zealand, Papua New Guinea, Solomon Islands,
and Tuvalu), one is a monarchy with its own monarch (Tonga), and five republics
(Fiji, Kiribati, Nauru, Samoa, and Vanuatu).

Because of the small amount of land and limited resources (except Australia,
New Zealand, and Papua New Guinea), the trade relations of the Pacific nations
consist of economies in transition to a developed economy and infrastructure.
The smallest Pacific nations rely on trade with Australia, New Zealand, and the
United States for exports of goods and accession to other products (like cars, el-
ectrical equipment, machinery, and clothes).

The main trade blocs of the area are the Asia-Pacific Economic Cooperation
(APEC) and the East Asia Summit (EAS). Currently, APEC has 23 members
(among them, Australia, New Zealand, and Papua New Guinea), while EAS has
18 members (including Australia and New Zealand). A Pacific Island Countries
Trade Agreement (PICTA) is in the process of being implemented by 2020. The
aforementioned remarks, related to trade impact on the countries’ different status
(monarchy with British monarch, monarchy with own monarch, and republic),
remain valid for the Pacific nations, too.

Post-Brexit for the European Union

The EU has been developing its own bilateral trade agreements, or is in negotia-
tion for such agreements, with the English-speaking Caribbean nations, and also
with Spanish-speaking nations in the area, like Dominican Republic and Puerto
Rico. After the US, the EU is CARIFORUM's second largest trading partner.

Post-Brexit could mean different things for different territories. For instance,
there are some UK territories – like the Cayman Islands -- that receive signific-
ant support from the EU (e.g., a new radar system, which plays an important role
in the area’s hurricane data). Cayman will be a different issue, due to its challen-
ges in the financial services sector. Caymanians holders of UK passports will face
limitations of freedom to live, work or study in Europe, compared with the prev-
ious period.

As for the Pacific nations,  the EU has free trade agreements with Fiji, New
Caledonia, Papua New Guinea and Solomon Islands, and agreements in nego-
tiation with New Zealand.

The EU is also negotiating a comprehensive Economic Partnership Agreement
with all Pacific nations, building on its interim agreements with Fiji and Papua
New Guinea.

“The Times They Are A Changin’”

The choirs of lamenters were always right on short term. But in the long run,
new horizons will always be in front of us. Most probably, the UK will smoo-
thly slide, with a renewed – non-European -- leader role, into its (British) Co-
mmonwealth of Nations (established in 1931), and will be evolving from now
on as a new world political power pole.

Precedents like the Swiss confederation or the former British empire have pro-
ven durability in time to us, provided that a majority of people involved is ready
to sustain such political constructions. And Brexit has succeeded exactly becau-
se a majority of people involved has indicated such sustainment.

Nowadays we are witnessing world changes again. So far, the UK has been con-
sidered by some to be the EU’s fifth wheel of the cart, but in a post-Brexit era it
has all the chances of becoming the Commonwealth of Nations’ first wheel of
the bicycle.

If in the future Brexit were to serve as an example for similar movements --
like Byegium, Czechout, Deportugal, Donegary, Finish, Italeave, Latervia,
Nexit (or Nethermind), or Oustria --, this would be an issue that remains to
be confirmed.

Tiberiu Dianu is a legal scholar, book author, graduate of the American University Washington 
College of Law in Washington, DC, the University of Manchester Faculty of Law in Manchester, 
UK, and an exchange scholar of the Oxford University in Oxford, UK. He currently lives in Wa-
shington, DC and works for various government and private agencies. The opinions expressed
in the preceding article are those of the author alone and do not necessarily represent the views 
of The Puerto Rico Monitor, its editors or advertisers.

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