A ‘clean’ Brexit would betray the British public – even if that’s what they voted for

Mike Rowse says the complex supply chains built up since the UK joined the EU mean a ‘clean Brexit’ that Leave voters want would be disastrous for the economy. In the larger market for services, however, even a ‘soft Brexit’ may present insurmountable problems

PUBLISHED : Monday, 16 July, 2018, 2:02am
UPDATED : Monday, 16 July, 2018, 2:02am

One corner of my heart will always have a soft spot for England. That’s not really surprising, given that it was the country where I was born and lived for the first 22 years of my life.

I have now spent more than twice that time in Hong Kong, and my links with the UK are now limited. So, was it really so surprising that I wanted to carry the passport of the place I have called home for almost half a century?

All this by way of explanation of why I no longer follow British politics as closely as I once did. But, last week, the sudden resignation of two cabinet ministers over the proposed terms of Brexit forced me to focus.

The UK formally entered the European Economic Community in 1973. The move, though supported by all three major political parties, proved unpopular with some sections of the public. To put the controversy to rest “once and for all”, the issue of entry was put to a referendum in 1975 and confirmed by a two-thirds majority.

The question of continuing membership was put to a second referendum in 2016 and a small majority – roughly 52:48 – was in favour of leaving. The UK government is now negotiating the terms of departure.

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As a matter of principle, I do not favour referendums; they boil down complicated issues into a simplistic question that omits the many nuances involved. So, put me down in the Edmund Burke school of democratic representation: “Your representative owes you, not his industry only, but his judgment, and he betrays, instead of serving you, if he sacrifices it to your opinion”, he once said.

I do not propose to debate whether entry was right; it’s now water under the bridge. Nor is it useful to discuss the merits of staying or going, because that has been the subject of other columns by people with greater knowledge and a more direct interest.

No doubt there are valid arguments on both sides. There were also many outright lies told in the recent “Leave” campaign, especially the notorious claim that £350 million (US$460 million) per week would be freed up that could be better spent on the National Health Service. But I would like to comment on practicality.

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It simply is not possible to make the “clean break” that the Leave campaign wanted. After more than 40 years of membership, complex supply chains have evolved that involve components moving back and forth between the UK and continental Europe, sometimes several times before the completed product is finished.

Companies have invested billions of dollars in manufacturing facilities in different locations on the basis that free trade would continue forever. If that is not to be the case, if instead there are to be customs checks and even the possibility of tariffs and other controls, then those supply chains would need to be completely re-engineered. That process would take many years, with much economic disruption and cost.

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Anyone in Hong Kong could have advised the British electorate on this point. After all, we are a trading hub par excellence and the total value of our imports and exports is a multiple of our gross domestic product. You do not need an economics degree to realise that a sharp break would be a disaster.

The British cabinet has reached basically the same conclusion and is now at the “soft Brexit” end of the range. Hence, the departures of Brexit secretary David Davis and foreign secretary Boris Johnson who claim Prime Minister Theresa May’s stand is a betrayal of the referendum. There is still a way to go in reaching agreement with Brussels, of course, and the dissidents are no doubt correct that even a “soft Brexit” offer may not pass muster.

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So where does all this leave Britain? Basically, in a mess. The conclusion that trade in physical goods must somehow stay within European Union auspices is surely correct, but it only applies to the 20 per cent of British GDP derived from manufacturing. The same issues are sure to arise, albeit in a different form, in the 80 per cent of the economy devoted to services.

So Brexit is not going to mean Brexit at all. There is an old joke where a couple of lost holidaymakers ask an Irish farmer how to get to their destination. After puffing on his pipe, he says, slowly, “Well I wouldn’t start from here.” But that is precisely the issue.

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Britain is in the place that it is and cannot will itself to be somewhere else as a starting position. Or, to put it another way, the eggs were used to make an omelette over 40 years ago, so it’s no good asking to take them back now.

A majority of the members of the House of Commons are known to oppose Brexit, preferring instead to make further efforts to reform the EU from the inside.

They should dust off their Edmund Burke books.

Mike Rowse is the CEO of Treloar Enterprises. [email protected]