Sunday, January 15, 2017

Behind Brexit: State Sovereignty, Not Markets

Lest it be thought that trade—indeed, economics—was the foremost consideration in the British decision to secede from the E.U., the state’s prime minister tasked with implementing the secession made it clear that the political union had been the prime antagonist from the British standpoint. In American terms, such a position has been labeled as anti-federalist and even “states’ rights.” Economic considerations are not primary; rather, federalism is front and center—in particular, where power should be lodged. This ought not to strike fear into British business practitioners.

In characterizing the secession, Prime Minister Teresa May said, “We are leaving. . . . We will be able to have control of our borders, control of our laws.”[1] As a state of the E.U., the United Kingdom had only qualified sovereignty; the rest residing with the E.U. itself. The secession of a state means a return of the sovereignty given up when Britain joined the Union. Similarly, were California to secede from the U.S., the state would be fully sovereign.

Lest it be thought that the sovereign in question in the British case was only economic in nature, May and her officials “made it clear that her two main priorities are ending the jurisdiction of the European Court of Justice over British law, and restoring British control over its borders and immigration.”[2] The economics fall out of these political priorities, as these decisions “mean that Britain could no longer be a part of the single market for goods, capital, people and services of the European Union, because the rules for that market are adjudicated by the European Court of Justice.”[3] In other words, getting back the Court’s sovereignty to which the UK had been subject was primary; giving up the common market and the customs union followed by implication.

By implication, the interests of particular British business sectors were not primary in May’s decision. This is not to say that particular British businesses had a basis to move “off shore” as a result, for a bilateral trade deal between the sovereign state and the E.U. would hardly be a minor thing. Put another way, given the amount of trade that would be possible, neither the state nor the Union would be apt to construct a trade agreement that thwarts trade. Therefore, even when economics is not in the driver’s seat, it does not follow that political changes will result in dire consequences for business.

[1] Steven Erlanger, “U.K. Set to Choose Sharp Break from European Union,” The New York Times, January 15, 2017, italics added.
[2] Ibid.
[3] Ibid.