Geo-Economics and Politics

Our national politics are pulling us apart. The UK, US and EU must stay aligned

U.S. President Barrack Obama takes part in a Town Hall meeting at Lindley Hall in London, Britain, April 23, 2016.  REUTERS/Stefan Wermuth  - RTX2C1GY

'The axis of alignment between the US, the UK and the EU has a heritage of understanding' Image: REUTERS/Stefan Wermuth

Iain Conn
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This article is part of: World Economic Forum Annual Meeting

Britain has just taken the momentous decision to leave the European Union. It is the biggest event in British politics in a generation and its consequences will not be clear for a long time. America has elected to put Donald Trump in the White House, the implications of which are feared by many. Meanwhile, many European countries are facing internal challenges. The European Union feels less confident and stable than at any point in my lifetime. Perhaps the UK’s Brexit vote was the canary in the coal mine – the latest indicator that not all was well in the major economies of the West.

There are some common trends that have led us to where we are now. Together, they add up to a world that is a more dangerous place, which makes it more important than ever for the developed democracies to come together. Yet, at the moment, the opposite is happening. Just when there needs to be an axis of alignment between the US, the UK and the EU, our national politics are pulling us apart.

Within Europe, there are three big current challenges. The first is Brexit: Britain has chosen to leave the EU. Some of us may be shocked by this and may think it was the wrong decision, but it is what more than half the people wanted and now we have to implement it. Putting the decision into effect is not, however, going to be easy. Putting this vote into action is like a bomb disposal exercise: we have to be careful which wires to protect and which to cut. In a detailed and complex negotiation we need to focus on the priorities that really matter.

Guarded optimism about a good deal is reasonable. Europe has a clear economic interest in keeping the UK close and it has reason to value the UK’s diplomatic, military and intelligence capabilities. The UK also retains a strong relationship with the US, which means the UK remains an important component in the maintenance of a strong axis of alignment between the US and Europe.

From the UK’s perspective, we have to recognize that so many EU laws and regulations have become our own. We will not wish to change them all. We are therefore going to remain highly aligned and compatible with the EU. We should also keep in mind the value of membership of the single market. On some measures Europe is the largest economic bloc in the world and much inward investment in the UK comes from Europe. We share common goals and joint programmes in so many areas.

This is why I think the demands to know whether there will be a “hard” or a “soft” Brexit miss the point. The sheer complexity of the negotiations means it is bound to be soft in many areas, which is not to say that some areas will not be harder. Negotiations might include questions about such vital issues as access to the single market and the price the UK is asked to pay, “passporting” for financial services, and terms regarding the free movement of people.

The second big challenge within Europe is low growth and poor competitiveness. In simple terms, Europe is falling behind in global competitiveness and our growth is weak. Europe has energy costs twice those of the US and labour costs twice those of Asia. Economic growth in Europe is lower than the US and lower than most Asian countries.

There is an urgent need for Europe to focus on the effectiveness of its markets and the efficiency with which we produce things. The UK has been a champion of free deregulated markets and competition and this is perhaps the biggest concern about Brexit. I worry about a Europe without the UK at the table.

The third challenge within Europe is social inequality. A quarter of young people are without work in Spain, Portugal and Greece. I think there is a link here with Brexit and the Trump vote: the rewards of prosperity around the world are not flowing equally. While globalization has been, on average, good for the world, it has left a significant number of people behind who are now making their voice heard. We need to listen and devise policies to act.

The challenges within Europe are severe, but there are also some difficult issues beyond its borders. The most important thing to remember, as we tackle them, is that we need to maintain the axis of alignment between the US, the UK and the EU.

Some of the trends I have described in Europe are evident in America, which has just been through the most extraordinary election in recent memory. Social inequality is even more advanced in America than in Europe. The working class of Rust Belt America has not had a pay rise for 30 years. In these circumstances there will be a temptation for the US to turn inward and focus on its own issues.

 US national wage stagnation in the middle and low wage brackets
US national wage stagnation in the middle and low wage brackets Image: Economic Policy Institute; US Bureau of Labor Statistics

But is important that it does not do so. A dangerous world needs an engaged America and the UK has an important part to play. We have a relationship with the US built on security, defence and intelligence. Our systems of governance flow from a common foundation established 800 years ago. Our alignment has been fundamental to peace and prosperity for the past 70 years and it would be foolish to lose that, because the world is full of dangers. Three threats in particular stand out:

  • First, there is relations with Russia, whose actions in Ukraine and specifically its invasion of Crimea are an affront to the rule of law in international relations. Yet constructive relations between Russia and both Europe and the US are crucial for the continuation of a peaceful world. The UK can help: UK-Russian relations have been difficult over sanctions, but there are important linkages with Russian investment in London and British investment in Russia.
  • Second, tragic developments in Iraq and Syria have left a vacuum in a crucial part of the world. The human toll is a calamity. The old alliances have as yet been unable to mount concerted action. Yet we must play a leading role in peace and stabilization of the region. The role of Russia is again complex and challenging, and there can be no progress without an aligned front.
  • Third, parts of North Africa have become largely lawless and a crucible for terrorism and immigration to Europe. As is the case in Iraq and Syria, radical Islam has a hold in some countries. Many countries do not have stable governments. Dealing with North Africa will require the same coherent and aligned axis between the US, Europe and the UK.

In all these places our nations have withdrawn from a direct role. In some cases we helped to create the instability, but are not prepared to police it. Domestic politics in the EU, the UK and the US are causing us all to turn inward. This would mean, at best, that issues are not dealt with; at worst, we would be allowing Russia and other countries to step in and gain power and prestige.

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We need the full strength of Europe in these regions and that requires a close relationship with the US, both bilaterally and through organizations such as NATO. Even outside of the EU, Britain can play an important role on the world stage and Europe is stronger when it does so.

There are many forces pulling the world apart and these must be resisted. The axis of alignment between the US, the UK and the EU has a heritage of understanding and it needs to be protected. The relationships of NATO and hundreds of years of the rule of law are precious inheritances. There is no reason why these things need to be placed in jeopardy even though Britain is leaving the EU; neither is there reason in America’s new phase to break the ties that bind. In these connections we place our optimism for the future.

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