Conventional wisdom failed; and the proverbial perfect storm brews in the financial market teacups. The globalscape of economic and trade is beginning to shift, gradually and forever.
And so the United Kingdom (UK) begins her lone, political and largely psychological, journey out of Europe through a Brexit referendum vote of 52%-48% on Thursday, 23 June 2016, in favour to leave the European Union (EU); which, truth be told, the UK has never been wholly integrated into.
Gone are the grandiose, delusional and oft-times, nightmarish, dreams of European unity originated in the 15th century and which gathered momentum at the end of the 2nd World War. In 1972, the UK eventually joined the European Economic Community (EEC) by becoming part of the 1957 Treaty of Rome which established the EEC with the goal of a free trade area with a common tariff. After a series of related and developmental Treaties, the European Union was formed out of most members of the EEC in 2009.
The initial gloom and doom predictions for UK in the wake of the Brexit vote are largely misconceived and the doom pundits ignore the fact that the UK has been very much a “reluctant” (EEC and) EU member who was courted with special terms and conditions to become “more European”.
The UK was allowed to keep her own currency, the British Pound, instead of merging it with the common European currency, the Euro. The British Pound therefore enjoys an independent exchange rate with the EU as well as other trading partners without being unduly impacted by the economic policy vagaries of many EC countries eg. France, Germany, Greece, Italy … etc. EU currency and financial regulations have no effect on the UK’s own independent policies and measures.
The ensuing financial markets volatility lacks compelling fundamental causes and makes very little logical sense since the Brexit votes did not change any factors affecting the volumes of trade, which is governed by contracts, and short-term investments, whose prospects and profitability are not suddenly impacted by the votes. Yet, the British Pound lost 8% against the US Dollar within just 40 hours, as financial players shed sterling pound (why?) for the US greenback (seriously?).
Never mind the simple economic truths: That 44% of UK exports goes to the EU, and which also accounts for 53% of UK imports. UK exports to the EU sustain about 10% of the UK workforce (about 3 million workers). In contrast, EU exports to the UK provide more than 8 millions EU jobs. Economists should also know that these would not change significantly in the coming years to justify the drastic shifts in the currency exchange rates that the market players have incited and instigated.
UK-EU trade is expected to continue and even improve since the UK is a major key export destination of many EU countries. Post-Brexit UK may face some new rules with some EU countries but these are likely to be mitigated by their legacy mutuality of benefits.
We see once again the stroking of fears by short-term profiteers and speculators. The explosion of fears and greed for speculative profits exaggerate and inject unfounded and imagined uncertainties to create profiteering opportunities for the smarter market players by fueling short-selling as they await the long-game victories that begin immediate in the next and following weeks.
The administration of UK laws is also not governed by EC legislation, legal systems and jurisdiction. For example, the European Court of Justice has no power over British Courts of Law.
The UK enjoys many exemptions from EU rules which must be complied by other EU members. For example, EU passports have to be produced when entering the UK; unlike the convenience of free travel without need to show EU passports when entering other EU countries.
EU annual membership fee costs the UK 12.9 Billion British Pounds (after the rebates agreed in 1984 from the full UK 17.8 Billion British Pounds). This includes UK contributions to other EU Institutions. British farmers, researchers and other beneficiaries received back about UK 6 Billion British Pounds.
What the pundits of Brexit gloom and doom did not want the rest of us to know is that the UK would save at least 350 Million British Pounds per Week in annual membership fee once the UK is out of the EU.
It is also estimated that compliance with the massive 170,000 pages of the Top 100 EU rules, directives and regulations cost UK businesses an annual 33.3 Billion British Pounds.
The UK is the top recipient of Fixed Direct Investments (FDI) among the EU countries. In turn, she is also a major FDI contributor to many EU countries. Its proximity to the EU remains a core competitive advantage, which is further enhanced by her relative political and security stability as compared with other EU countries. Most of her other major investment partners are however not from the EU.
The truth is the EU needs the UK much more in many ways beyond financial contributions. Post-Brexit EU is clearly much poorer financially and materially, as well as much weaker structurally with lesser strategic resources in terms of global leadership influence and prestige. The EU exit terms for a Post-Brexit UK are therefore expected to be quite favourable for the UK.
There is no rational basis for any gloom and doom predictions for the future of a Post-Brexit UK. Market volatility following the Brexit vote is man-made, and the more powerful men (and women) in the financial markets have a greater hand in provoking and fomenting it.
Post-Brexit UK is finally freed of EU ideological, economic and political shackles to pursue her own destiny and dreams. It is timely for the UK to reverse its 1968 “East of Suez” decision to retreat from its imperial power bases from the Gulf to the Far East, and replace it with an updated non-imperial engagement plan with equal partners in the British Commonwealth that focus on all the common issues of global concerns.
Like a Japanese “ronin” samurai without a “master”-brand to associate and anchor her affiliation, post-Brexit UK as a major political and economic player must now roam the world stage in search of a “uniquely significant and influential” global platform to re-define and re-calibrate her relationships with the global community in all the emergent issues of trade, economics, terrorism, security, immigration, climate change and sustainable development.
The challenges and prospects of a post-Brexit UK will portend well for ASEAN in a new dawn for old relations.