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.
