(Photo by Calgacus)
By Joshua Tartakovsky
13 January 2016
Britain chose Brexit. Now Britain must find a way to leave while protecting its interests and finding an honorable compromise with its central trading partner. The problem is that forging a fair agreement with the EU, dominated by Germany, is impossible.
In an election year where both French President Hollande and German Chancellor Merkel are facing increasingly potent eurosceptical challengers, and as Merkel’s refugee-friendly policy is revealing itself as lunacy in the streets of Berlin, it takes a high level of naiveté to assume that EU elite in Brussels would want to give Britain a fair deal. Anything less than ‘punishing’ Britain for daring to break free would embolden Front National, Alternative for Germany, and Wilders’ Party for Freedom in the Netherlands where elections will be held in March. Hollande and Merkel can hardly have the tranquility and good judgment needed for even a meagre compromise as they feel the ground shaking beneath their feet.
Britain buys 7% of German exports. But Germany will not permit the EU to unravel for the sake of staying in good terms with Britain. If the EU breaks up, German industries would no longer dominate the EU, and Spanish, Italian or French products, now cheaper without the euro, could present a viable competition as they will be more attractive for buyers abroad. Similarly, Germany has already shown its inflexibility by the hardline it took towards Greece’s desperate pleas for a compromise on its debt. The Greek economy is on its death bed but Germany did not flinch. Germany’s financial interest is to suck out whatever it can from Greece’s crumbling economy. That this makes for a weak and somber EU member is of little relevance.
Even in the highly unlikely scenario where Germany and France would allow for a smooth Brexit during an election year, and even if a miraculous approval by a majority in the European Parliament were to unfold due to a rare display of fair-game, a single EU member state could veto the new arrangement. Could all 28 EU member states be seduced and convinced to allow for the UK to leave? Why would Cyprus whose imports to Britain lie at £152 million have the same considerations as Germany whose imports stand at £60 billion? It takes an irrational kind of blind faith, similar to the one constantly displayed by some EU apologists who see the supposed rationality behind every bizarre move taken by Brussels’ Eurocrats, to believe that all 28 members will vote in unison. The trade-deal with Canada was vetoed by farmers in Flanders. It is true that it eventually passed, but Britain is leaving the EU, not seeking closer terms with it. What would be the incentive for even small EU members, let alone Germany, to support a Brexit?
The EU cannot possibly allow for Brexit to be a success. It runs against everything Brussels believes in, it runs against all the evidence we have of EU’s past history of inflexible responses towards mere attempts at honorable compromises by weaker states, and it runs against Germany’s financial interests which are domination of weaker industries and their subjugation under a strong euro.
There is no point to pretend it is possible to turn back. Britain cannot choose the Norway option of membership in the European Economic Area since this would mean that it would have to accept Merkel’s mad migration policies. The same argument applies to the option of Britain following Switzerland’s free-trade association status. Switzerland is part of the Schengen zone and negotiates every single trade area as a separate issue in a lengthy and tiresome process. Talks would drag on for years and decades as Brussels would seek to make life difficult for Britain. Remaining part of a custom union as Turkey does would mean Britain could not forge its independent trade agreements with the rest of the world. Does Britain truly wish to be impotent with its international trade deals as Turkey?
The election of Donald Trump in the US, however, presents UK with a golden opportunity.
US President-elect Donald Trump has been setting his focus on China by claiming it is dumping cheap goods on the US and is not allowing its currency to float. But China is not the country that produces goods that compete with American goods. It is German manufacturing that poses a real competition to American products. What’s more, Germany has been doing so unfairly. Germany’s trade surplus is at 9% of its GDP, which is the highest trade surplus employed by any mature economy, MarketWatch claims. It also argues that “Germany’s surplus is seven times bigger than China’s.” Germany sells its products but it does not buy American products, nor does it transfer some of its wealth to poorer countries who are EU members. Germany refuses to give to the Italians, the Greeks, or the Portuguese a purchasing power. Germany just continues to accumulate its saving. China’s surplus is now just 3% of its GDP according to Newsweek.
Equally significant is the point that had Germany not been in the EU, the Deutschmark’s value would have been far higher than the Euro. China is frequently blamed for currency manipulation but China is a developing nation unlike Germany which is a mature economy by any standard. It is the EU which keeps German products cheap abroad due to the fact that the Euro is cheaper than the Deutschmark would have been. Meanwhile, the Euro is too high for weak industries in Italy or Croatia and they have been on the losing end since their products are more expensive abroad.
While US debt to Germany continues to grow (it owed $74 billion to Germany in 2015, but only $47 billion in 2006), and while many EU countries have been mired in austerity due to the Eurozone, Germany had, incredibly, continued to claim the higher moral ground. Germany is now presenting itself as a liberal alternative to US President-elect Trump and many leading liberal pundits have already called on Merkel to assume the mantle of leading the free world. Meanwhile, Germany refuses to budge an inch on Greece’s economic debt.
Germany presents a direct challenge to Donald Trump. It is not only the economic challenge as manifested in its unreasonable high trade-surplus, and the low value of its currency (precisely at a time when the US dollar is at high levels). It is also the political challenge. Merkel may seek to sabotage Trump’s new foreign policy initiatives and turn the failing EU into a liberal global power of sorts, giving the body a messianic mission while Muslim migrants carry terror attacks in German cities. For Trump, the grievance may be an historic one. Trump’s grandfather, Frederick Trump, was expelled from Germany for evading the draft. Now Merkel patronizingly warns Trump regarding his naughty behavior.
The people of Britain generally believe in fair-play but the EU under German dominance is not playing fair. The EU has no interest in reaching an honorable arrangement with Britain let alone with its own captive weaker members. What we may well see is the EU blocking British goods by claiming they lack EU-accredited certification of quality. This would make the British economy bleed. EU may even pressure nations with which it has free-trade agreement not to trade with Britain. European Trade Commissioner De Gucht expressed the European Commission decision that a country that left the EU would no longer enjoy the EU’s free-trade deal with other countries. His words contain a thinly veiled warning: “Third countries would be unlikely to offer as generous concessions to a Member State which has activated Article 50 that could only offer access to its own market.” It is somewhat amusing that De Gucht is certain in advance of what a third country would be willing or unwilling to do. Hollande may find it disappointing that it may be difficult to repeat Napoleon’s 1812 invasion of Russia carried out in a failed attempt to corner Britain by forcing Russia to break its trade with the British Isles. That does not mean Hollande and Merkel will not try to blackmail small nations and threaten to block their access to the entire EU market if they seek free-trade with Britain.
What’s next then? Leading German pundits are rightly worried that a trade-war with Trump may be looming due to Germany’s high surplus. Merkel’s people may be nervous for a good reason. They may realize that play time is over and that their bluff is being called out. It may also be the time for Britain to realize that it’s time to stop playing a defensive game and that the ball can go in the other direction too. Britain must seize the opportunity of Trump’s election and work with the US to put an end to Germany’s unfair economic practices and hypocritical pretenses. For Brexit to be a success story, the EU must be broken up. The EU will not allow Britain to survive post-Brexit.
The election of Donald Trump presents a rare opportunity for the US and UK to work actively to unravel the EU and provide a more promising future. Americans can boycott German cars, therefore strengthening local manufacturing as Trump works to provide better trade-deal agreements with states that leave the EU. In 2017, fresh eurosceptical parties will pose a real threat to the control-obsessed EU. The tide can be on the side of Brexit, but only if Britain seizes the initiative and takes a pro-active approach to bring down the EU. In this way it can liberate not only itself but also struggling nations who are under EU’s repressive economic dominion. It is a matter of survival.