Brexit: The Mexico way?

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 the first blog we looked at Cuba as it was in 2000 and in the final post we will look at Canada. Here we consider Mexico.

We had better start with a warning. These views are not the views of SAMI Consulting, nor of the author but reflect a conversation of a small group heavily supplemented by the author. The Group considered what would be the impact of a Brexit that resulted in a relationship similar to that between the USA and Mexico.

The relationship between the USA and Mexico is close, but probably only because of their proximity, and in practice close only because a close relationship is needed to manage circumstances, not through choice.

Some key issues of the USA/Mexico relationship appear to be:

• One party offers the opportunity for work, the other has unemployed workers, leading to one-way migration, which is not universally popular.
• One party is impoverished; the other is very rich.
• There is no parity of esteem at popular level nor at government level.

So are there parallels for Britain and the EU after Brexit? Absolutely, for all three USA/Mexican issues.

• There are people in Britain who take the view that inward migration from the EU is excessive and unsustainable. Although, in a Brexit world, Britain will have a significant advantage in the English Channel if it wants to limit immigration, whereas in the USA Donald Trump is proposing a mere wall.
• Many observers view a future for Britain and the EU, post Brexit, where there is one impoverished party and one very rich one. The only real question being which will be which, and much of the Brexit political hype focuses on this rather important unknown.
• Post Brexit, Britain will have clearly shown the level of esteem in which it holds the Continentals, and, no doubt, in face of such an insult the Continentals will treat Britain with carefully calculated equivalent contempt. So actually, diverging from the USA/Mexican model there will be parity here, with esteem on both sides hitting the bottom.

Nevertheless, given that we will have arrived at a relationship with the EU, similar treaty-wise to the USA/Mexico relationship, what will be the impact on some key British issues?

• The City: From a British perspective, the future of the City of London and its financial strength is very important, either side of Brexit. But what will happen post Brexit? Would the USA be happy to see Mexico control a substantial proportion of its financial affairs, in-house or foreign? Will Frankfurt or Paris be happy to see London cashing in on the recovery of the Euro and capital markets in the EU?
• Immigration: Will East European builders and Parisian bankers still want to come to the UK? Even if they do the barriers will be up. Will I still have a Lithuanian/Mexican cleaner?
• Expatriates: if you were a Frenchman in the Dordogne, would you want a quasi-Mexican living next door?
• Security and defence: Assuming that the rest of the world notices when Britain leaves the EU, why bomb a nation with little influence on European terrorism and immigration policy?
• Trade: The EU is likely to be selective in what trade it wishes to promote with Britain, even under a NAFTA form of agreement. Farming exports to the UK would be preserved so UK farming (unsubsidised?) exports to the EU would be permitted, and Spanish chicory, French apples will continue to flood our markets. More generally a NAFTA agreement would largely reflect what we have at present.
• House prices: Expats returning won’t be able to afford current UK prices. European immigrants leaving will drive down prices. With the City being increasingly isolated in banking circles will the Chinese and Russians prefer Paris and Berlin as safe havens? Or might they agree with the concept of Brexit and invest more?

So down to the polling station and vote Permanecer o Salir, as we say in Mexico

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 exploring a 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 Nick Jackson, SAMI Principal

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

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