If Cuba in 2000 was a model for ‘Brexit’, what might it look like?

The introduction to this short series of blogs explained that, at a team meeting in early March, we discussed a range of scenarios should the UK choose Brexit in June. We took as our models the way different North American countries interact with their powerful neighbour, the USA. In this, our first in our short series, we considered Cuba as it was in 2000 and thought about what it would be like if this was the sort of model that emerged. In later posts we look at the scenarios that might occur if the model follows either Mexico or Canada.

Overall

The Brexit negotiations have been painful and difficult, leaving a legacy of ill-will on both sides. This mutual antipathy has an impact on the UK’s trading relationship with the EU, and the UK uses what influence it has to oppose and undermine “ever-closer union”, for example by tacitly encouraging Eurosceptic movements in member states.

This antipathetic relationship also affects Britain’s wider diplomatic relations – for example within NATO, where it is bound to co-operate with many of the same states it is at loggerheads with. The USA sees the UK as a less reliable ally, and is more interested in close ties with Germany as the “leader” of Europe.

The UK is attempting to strengthen trading links with non EU countries. In particular, it is attempting to refresh economic relationships with the Commonwealth countries – relationships which had been to an extent been neglected by the UK when it joined the “Common Market”.

Economy and Trade

Trade conditions with the EU are difficult. And the EU is actively seeking to undermine London’s status as the financial capital of Europe. This can play out in two ways.

• Either the UK is successful in developing stronger trade links with other countries – China, India, Turkey, Iran and the central Asian states (“the new silk road” economies), ASEAN, and Africa’s growing economies – it uses its financial and legal know-how to become a financial and judicial destination for these emerging economies; the UK uses its freedom from EU laws to reduce red tape and regulation and becomes something of a buccaneering global trading nation – although some accuse it of “a race to the bottom” in terms of workers’ rights and environmental protection.

• Or the UK struggles to make up the loss in trade with the EU; other countries do not place a high priority on bilateral trade deals with the UK, and foreign investors – eg car manufacturers begin to scale down their investment in UK capacity; there are the first signs of the City of London’s financial power being eroded, with serious consequences for GDP and tax revenues. These economic problems trigger political ones, with renewed calls for Scottish independence, and a resurgence of internecine unrest in Northern Ireland. The UK Government seeks to blame the EU for causing these problems by freezing the UK out of fair trading arrangements

Migration

The UK reduces the numbers of people coming from other EU states. But there is an increase in inward migration from the UK’s new trading partners – Asia and Africa. This causes its own political controversies. There is a “brain drain” effect as some people, such as bankers and financial analysts, move from London to the emerging EU financial hubs of Frankfurt and Amsterdam

A Vision for Britain

The repatriation of powers and the changed relationship with the UK’s near neighbours leaves a vacuum. The UK needs to redefine its role in the world, its alliances, and its economic strategy and goals.

Of course, the future is uncertain whether we Brexit or Remain. The nature of the relationship we have with the rest of the EU will underpin the whole range of economic and other issues. In this short series, we are simply exploring a small range of models for the Brexit option. Tell us what you think – and what models you think we might use to explore “Remain”.

Written by David Lye, SAMI Fellow

The views expressed are those of the author and not necessarily of SAMI Consulting.

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