The Trouble with Brexit

I have never made a secret of my support for continuing membership of the European Union. You can reform a club if you are a member, but you lose that right if you choose to leave. In my view it is an act of extreme folly to leave a club that allows the UK access to its closest and largest market. There is plenty wrong with the EU, but that’s no different to any large organisation, governmental or otherwise. Organisations need to develop and adapt according to the demands of the time.

I was in Kosovo just five days after the vote to leave the EU, training local export consultants on (among other things) how to trade effectively with the EU! All 22 delegates thought the referendum decision insane and while I wasn’t going to disagree with them, their fascination with our moment of national stupidity ate into the first of three training days, then over lunch, and into the evening. The last time I was questioned with that level of intensity was during a drive from Vermont to Manhattan with two New Yorkers who wanted to know everything about our Royal family! I wasn’t able to help them much.

Eighteen years ago Kosovo was a war zone, and there are still murmurings of unrest in the area around its second largest city MItrovice. The current population of Kosovo is about 1.8 million, and you have to remember that at least 10,000 Kosovars dies during its liberation in 1999. Bullet holes still pock mark some of the buildings in Pristina, but the city feels (and is) safe and an improved highway out to the brand new airport is a physical manifestation of a return to normal life, freedom and safety for its citizens.

In 2009, Bill Clinton visited Pristina to open Bill Clinton (actually spelt Klinton) Boulevard and unveil a statue of himself, and the American presence and influence there remains strong. So too does the desire of Kosovo to become part of the European Union. A Stabilisation and Association Agreement was signed between Kosovo and the EU in October 2015 as the first stage in the process leading towards what they hope will be eventual EU membership. Kosovars feel safer under the EU umbrella, and it reminds you of one of the key reasons the EU was established in the first place, safety in Europe.

Make no mistake, the USA also wants a strong relationship with the EU for both political and economic reasons. They want access to its market of 508 million people and they want the EU’s cooperation in standing together against the rise of terrorism and the threats, real and perceived (and some of their own making) from Russia. The Transatlantic Trade & Investment Partnership (TTIP) may have stalled (and probably been halted completely) but some of its elements have been in place for some time. The EU is extremely important to the USA, and in spite of the blusterings of the current US administration that relationship will always take precedence over its ‘special relationship’ with the UK. They really would rather we remained.

The UK government and media seem obsessed with three things: the Royal family, Brexit, and our ‘special relationship’ with the USA. But if the current President intends to ‘make America great again’ then it will be more of a ‘take’ than a ‘give’ relationship. I have travelled widely throughout the USA and there are certainly huge opportunities for British companies to develop there providing they do so with a long term plan, they have an awareness of the logistics in selling to a nation of that size, that they take seriously the litigious nature of the market, and that they are prepared to sell. It is in the DNA of Americans both to sell and to be sold to.

We British consistently produce the best innovations in the world and we are very adept at marketing. However, most of us are far too reserved when it comes to selling, unrealistic about our ability to negotiate, and have been historically too ready to sell off our innovations without first realising their full potential. If you disagree then fine, but you will need to consider why I have entered multiple new markets with British products over thirty years either for employers or clients, to find that the Americans, the Germans, the French, the Scandinavians, the Italians and others already embedded in my target markets.

It is absolutely true that there are many more markets for our products and services outside the European Union if we are prepared to analyse opportunities, properly research target markets, plan our entry or improvement strategy, and implement a long term, sustainable sales programme, but we should not continue to underestimate the degree of difficulty in accessing those markets. For starters, all of them are aware that the UK is actually in a weaker negotiating position. Having started the process of leaving the EU, they know we need them more than we would have done as part of the EU club.

Our friends in Australia, New Zealand and Canada had to find other markets to trade with when our joining the EU left Churchill’s dream of a CANZUK Union in pieces. “The CANZUK Union of free trade and free movement should be the nucleus for the recreation of the dream of the English-speaking peoples that was shattered by Britain’s entry into the EU” (Daily Telegraph, September 2016). So they won’t make things easy!

Then there are two other myths to dispel. First new trade with Commonwealth countries can never replace what we currently have with the EU. Apart from upsetting its most stable members back in 1973, there are 52 Commonwealth states. Of those 12 are micro states about the size of my living room, 12 are Caribbean islands, and 18 are African countries in varying stages of development. Most importantly, only Singapore, New Zealand, Canada, and Australia make the top 20 in the World Corruption Perceptions Index https://www.transparency.org/news/feature/corruption_perceptions_index_2016

Trade deals really do take time. Years not months, and frequently between five and ten years. The very idea that we are at the front and not the back of the queue with the USA is laughable. Apart from unpicking ourselves from the EU and building a new trading relationship, we will need to re-establish deals with (eg) Australia, New Zealand, and Canada (who are all still miffed with us), as well as establishing new bilateral trade deals with countries outside the EU.

So I’m afraid it really doesn’t bode well for Brexit. If we are to make leaving the EU a success we need to be honest and realistic about our prospects on the outside, quickly overcome our national reticence to sell, and research, plan, strategise and implement our way out of this sorry situation. It is by no means impossible but it does require a fundamental change of mindset.

Article written by John Reed - Associate of Strong & Herd LLP

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