JULY 10–14, 2019

Brexit – The Ever-Evolving Exit

Tom Nuttall

Berlin Bureau Chief
The Economist

Tom Nuttall, Berlin Bureau Chief of The Economist, brought the Forum up to speed on current developments concerning the on-going Brexit process, as the UK negotiates its path out of the European Union. He discussed the significant implications of Brexit not only for the UK but also for the European Union and for the rest of the world, including the US. Finally, Mr. Nuttall explored the significance of Brexit as a marker for the ways democratic politics are changing, in Britain and elsewhere.

What is Happening?

Three years ago, Britain voted to leave the EU. But the decision to leave did not anticipate the difficulties of how to leave. The EU is more complicated and sophisticated than a simple free-trade area, it involves the harmonization of rules and regulations that have created tight economic integration between Britain and other countries. Unravelling this tight integration is proving complicated and costly, Mr. Nuttall observed.

The current 585-page treaty defines only the terms of Britain’s withdrawal from the EU but does not plot the path forward for future trade. It covers the financial settlement, £39bn, the rights of European citizens living in Britain and vice versa, and the terms governing the border between Northern Ireland and Ireland. A separate, brief “political declaration” sets out the future relationship between the UK and the EU – but that does not have the status of law and can be rewritten. The more challenging negotiations over a future trading relationship still lie ahead.

Brexit also created problems for Ireland and Northern Ireland. The peace deal struck 20 years ago guaranteed an open border, which is important for people and for trade. But if Britain leaves the EU’s customs and regulatory space, checks on or near that border will be necessary to preserve the integrity of the EU’s market. “And that is bad for the island, bad for people and citizens near the border, and potentially a threat to the peace settlement,” Mr. Nuttall forewarned.

Some Brexit proponents hope to solve the Irish border problem with snazzy administrative and technical schemes, but these do not yet seem practical.  An alternative strategy, the “Irish Backstop,” suggests that, if no arrangement has been found to keep the border open by the time Britain leaves the EU, then Britain will remain in a customs union with the EU, and will remain harmonized to the EU’s regulations in those areas needed to keep an open border. If Britain chooses to remain closely aligned with EU rules and regulations, and part of its common customs policy, “What’s the point of Brexit?” he asked, noting that Britain will only have sacrificed its opportunity to shape the rules it must follow.

On the other hand, proponents of Brexit reject the “Irish backstop” concept and want to diverge from EU rules, to conduct an independent trade policy, and to limit the number of EU immigrants, thereby “taking back control” or restoring sovereignty. It is the main reason that UK Prime Minister (PM) Theresa May’s proposed Brexit deals have been rejected three times in Parliament, precipitating her resignation, and why, more than three months after the original deadline, Britain is still in the EU.

What’s Next?

The new deadline for concluding a Brexit deal is October 31, and EU leadership suggests that renegotiations are not on the table. Prime Minister Boris Johnson has threatened to leave the EU even without a deal. “Leaving the EU without a deal is a catastrophic possibility that would prove a major disruption to Britain, and a big headache to parts of the EU,” Mr. Nuttall forewarned.

A new PM doesn’t change parliament– and parliament has indicated not only that it hates the Irish backstop but also that it rejects leaving the EU without a deal. So although both candidates say they don’t want to hold a general election, that might be the only way to break the logjam. A second Brexit referendum also is a possibility; however, Mr. Nuttall reported that the support for Remain vs Leave has remained pretty steady. There is a small shift towards Remain, but that is largely people who didn’t turn out to vote in 2016. Commenting on the polarization over Brexit, Mr. Nuttall said, “It seems that we have found our tribes, and we’re sticking to them.”

Why Does This Matter?

If and when Britain does leave, the EU will lose one of only two serious military powers, one of two permanent members of the UN Security Council, a huge slice of its economy, a major center for financial services, an important voice for free trade and liberalization. Brexit will leave the EU smaller, weaker and less able to project itself in a world increasingly dominated by the competition between America and China.

In terms of Britain’s relationship with the US, most Brexiteers insist on the importance of striking a quick trade deal with the US, based on a preference for “the Anglosphere.” However, the US Congress will ensure that the US Trade Representative takes an extremely tough stance on, for example, agriculture, public procurement and GMOs. Britain, negotiating as a 2.6 trillion-dollar economy, rather than as the EU’s 20 trillion dollar one, will not be able to define its own terms. And, the US will not negotiate with Britain until the terms of trade with the EU are settled, which may take years.

Democratic Politics are Changing

Britain has become a polarized place, and there are worrying lessons here. Politics is fragmenting everywhere. Tribal identities are becoming entrenched, a shared grounding in a mutual understanding of basic truths and principles is being eroded, and trust in some institutions is being eroded. That is not an especially happy omen, Mr. Nuttall said.

Brexit didn’t establish political divisions in Britain – it exacerbated divisions that were already there, and then put a label on them. Divisions between regions, between age groups, between city and countryside and, perhaps above all, between the educated and non-educated. “The Brexit referendum has entrenched our divisions and made it much harder to see how we find a way out of them, “ Mr. Nuttall noted.

This divisiveness is apparent in Britain’s politics. Like the US, Britain has traditionally been a two or 2.5 party system. Recent polls show that splitting into four or even five, as Brexit is shunting voters off to unequivocal Remain parties like the Liberal Democrats or on the other side, the so-called Brexit party. The Brexit vote made it clear that a large part of the country was unhappy with the way things were going and saw an opportunity to register their dissatisfaction. In the run up to the Brexit vote, every elite organization was against leaving the EU. If you don’t like elites, then finally you had an opportunity to tell them so, Mr. Nuttall concluded.

Sen. Charles Schneider (IA) and Sen. Rodrick Bray (IN) pose during the Forum. Friendly and candid conversations are a hallmark of the Forum, enabling an exchange of ideas between the States.

Discussion

Sen. Rodric Bray, IN: Why was a referendum held instead of having the elected representatives make the decision?

Mr. Nuttall: Brexit started out as a fringe concern, espoused by a small minority of very vocal proponents. Then-Prime Minister David Cameron promised a Brexit referendum if he was re-elected, assuming he would not have to execute on that promise. But he won such a large majority, he had to deliver on the promise.

Sen. John Cullerton, IL: Did Scotland and Northern Ireland vote to stay in the EU?

 Mr. Nuttall: Both voted to remain in the EU. For Scotland, Brexit may be a catalyst for Scottish independence. A re-unified Ireland could solve the problem and keep Ireland in the EU, but Northern Ireland does not want to re-unify.

John Burchett, Google: Isn’t military cooperation between the EU and US managed through NATO?

Mr. Nuttall: NATO is more important for military security in the region than the EU; however, the EU is increasing its military spending and paying more attention to the security challenges from Asia and the Middle East.

Sen. Ginny Burdick, OR: Could the growing pressure to stay in the EU lead to a new referendum, and what would be the likely outcome?

Mr. Nuttall: It is hard to predict what the referendum question would be: “Remain in the EU vs the current Theresa May deal” or “Remain vs no deal.” If the turnout for the vote was low and the outcome was “Remain,” this would poison our politics for a generation. A general election is more likely to occur.

Sen. Charles Schneider, IA: What is the impact of Brexit on the financial and banking sectors in Britain?

Mr. Nuttall: Studies suggest that jobs will be lost and fewer jobs created in London’s financial sector. Wealth and the banking industry are currently being shifted from London to EU cities. The financial services sector is worried; as members of the EU, they could operate all over the EU as local banks; with Brexit, they cannot.

Scott Gunn, IGT: Will the emergent Brexit Party be sustained over time? What will be its effect on the next election?

Mr. Nuttall: Nigel Farage, who founded the Brexit Party, has been a one-man show capitalizing on the frustration that Brexit has been delayed. In the next election, the new Prime Minister will be chosen by 200,000 people, who are disproportionately, older, male, white conservatives. If Boris Johnson becomes PM and can negotiate Brexit, this could drive Farage’s party to take a more populist stance.

Sen. Harry Brown, NC: How severe is the strain from Brexit on the relationship of Britain to Germany and France and the financially struggling EU members?

Mr. Nuttall: A key concern is whether German Chancellor Angela Merkel will remain strong enough to lead the EU through the Brexit negotiations. To date, the EU has remained unified throughout the Brexit process. However, after Brexit, Germany and France are left alone and this changes the center of gravity in the EU.

Sen. Robert Stivers, KY: The current Brexit deal is set to cost Britain 39 billion pounds. What will be the impact on Britain of this expense vs if they leave the EU without a deal?

Mr. Nuttall: The 39 billion pounds is not a sudden expense but is spread over payments scheduled well into the future, mostly covering pensions of retired EU officials. In contrast, a “no deal” exit will be disruptive to the British economy and will require immediate negotiations to establish trade rules and maintain supply chains.

Steven Cook, Council on Foreign Relations: What could change between now and the October 31 deadline for Brexit if no coalition government is formed to do the Brexit deal?

Mr. Nuttall: Britain will have a new PM by end of July and both front-running candidates say they will negotiate changes to the current deal; meanwhile, the EU refuses to make additional changes and the British cannot unilaterally extend the deadline. They can rewrite the political document on future relations, or add codicils to the current agreement. Or, the outcome could be a call for a general election. If Great Britain held a snap election, this could gain more time.

Michael Gregg, NEXTera Energy Resources: Will Brexit have a domino effect, causing other countries to leave the EU?

Mr. Nuttall: Brexit has been a good advertisement for NOT leaving, showing how hard the process is. In the short term, right wing parties, such as the AfD in Germany, who formerly championed leaving the EU are now rejecting that strategy. In the longer term, the impact is less certain. Brexit shows the reversibility of EU membership. If Brexit is successful, this suggests that leaving the EU is OK.

Speaker Biography

Tom Nuttall

Tom Nuttall has been The Economist’s Berlin bureau chief since November 2018. Before that he spent four years based in Brussels writing the Charlemagne column. He has also worked as US west coast correspondent in Los Angeles, and as an editor on the Europe desk in London. Before joining The Economist he worked as an editor at the European Council on Foreign Relations, a think-tank, and spent several years as a senior editor at Prospect Magazine.

The decision to leave did not anticipate the difficulties of how to leave.

“If Britain leaves the EU without a deal, this will be catastrophic outcome for Great Britain and Ireland.”

— Tom Nuttall

The US will not negotiate with Britain until the terms of trade with the EU are settled.

Politics is fragmenting everywhere. Tribal identities are becoming entrenched, a shared grounding in a mutual understanding of basic truths and principles is being eroded, and trust in some institutions is being eroded.

Sen. Rodric Bray (IN)

Sen. John Cullerton (IL)

Sen. Ginny Burdick (OR)

Sen. Harry Brown (NC)

Sen. Robert Stivers (KY)

Tom Nuttall

Sen. Charles Schneider (IA)

CONTACT

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2019 Senate Presidents' Forum. All rights reserved.

JULY 10–14, 2019

Brexit – The Ever-Evolving Exit

Tom Nuttall

Berlin Bureau Chief
The Economist

Tom Nuttall, Berlin Bureau Chief of The Economist, brought the Forum up to speed on current developments concerning the on-going Brexit process, as the UK negotiates its path out of the European Union. He discussed the significant implications of Brexit not only for the UK but also for the European Union and for the rest of the world, including the US. Finally, Mr. Nuttall explored the significance of Brexit as a marker for the ways democratic politics are changing, in Britain and elsewhere.

What is Happening?

Three years ago, Britain voted to leave the EU. But the decision to leave did not anticipate the difficulties of how to leave. The EU is more complicated and sophisticated than a simple free-trade area, it involves the harmonization of rules and regulations that have created tight economic integration between Britain and other countries. Unravelling this tight integration is proving complicated and costly, Mr. Nuttall observed.

The decision to leave did not anticipate the difficulties of how to leave.

The current 585-page treaty defines only the terms of Britain’s withdrawal from the EU but does not plot the path forward for future trade. It covers the financial settlement, £39bn, the rights of European citizens living in Britain and vice versa, and the terms governing the border between Northern Ireland and Ireland. A separate, brief “political declaration” sets out the future relationship between the UK and the EU – but that does not have the status of law and can be rewritten. The more challenging negotiations over a future trading relationship still lie ahead.

Brexit also created problems for Ireland and Northern Ireland. The peace deal struck 20 years ago guaranteed an open border, which is important for people and for trade. But if Britain leaves the EU’s customs and regulatory space, checks on or near that border will be necessary to preserve the integrity of the EU’s market. “And that is bad for the island, bad for people and citizens near the border, and potentially a threat to the peace settlement,” Mr. Nuttall forewarned.

Some Brexit proponents hope to solve the Irish border problem with snazzy administrative and technical schemes, but these do not yet seem practical.  An alternative strategy, the “Irish Backstop,” suggests that, if no arrangement has been found to keep the border open by the time Britain leaves the EU, then Britain will remain in a customs union with the EU, and will remain harmonized to the EU’s regulations in those areas needed to keep an open border. If Britain chooses to remain closely aligned with EU rules and regulations, and part of its common customs policy, “What’s the point of Brexit?” he asked, noting that Britain will only have sacrificed its opportunity to shape the rules it must follow.

On the other hand, proponents of Brexit reject the “Irish backstop” concept and want to diverge from EU rules, to conduct an independent trade policy, and to limit the number of EU immigrants, thereby “taking back control” or restoring sovereignty. It is the main reason that UK Prime Minister (PM) Theresa May’s proposed Brexit deals have been rejected three times in Parliament, precipitating her resignation, and why, more than three months after the original deadline, Britain is still in the EU.

What’s Next?

The new deadline for concluding a Brexit deal is October 31, and EU leadership suggests that renegotiations are not on the table. Prime Minister Boris Johnson has threatened to leave the EU even without a deal. “Leaving the EU without a deal is a catastrophic possibility that would prove a major disruption to Britain, and a big headache to parts of the EU,” Mr. Nuttall forewarned.

A new PM doesn’t change parliament– and parliament has indicated not only that it hates the Irish backstop but also that it rejects leaving the EU without a deal. So although both candidates say they don’t want to hold a general election, that might be the only way to break the logjam. A second Brexit referendum also is a possibility; however, Mr. Nuttall reported that the support for Remain vs Leave has remained pretty steady. There is a small shift towards Remain, but that is largely people who didn’t turn out to vote in 2016. Commenting on the polarization over Brexit, Mr. Nuttall said, “It seems that we have found our tribes, and we’re sticking to them.”

“If Britain leaves the EU without a deal, this will be catastrophic outcome for Great Britain and Ireland.”— Tom Nuttall

Why Does This Matter?

If and when Britain does leave, the EU will lose one of only two serious military powers, one of two permanent members of the UN Security Council, a huge slice of its economy, a major center for financial services, an important voice for free trade and liberalization. Brexit will leave the EU smaller, weaker and less able to project itself in a world increasingly dominated by the competition between America and China.

In terms of Britain’s relationship with the US, most Brexiteers insist on the importance of striking a quick trade deal with the US, based on a preference for “the Anglosphere.” However, the US Congress will ensure that the US Trade Representative takes an extremely tough stance on, for example, agriculture, public procurement and GMOs. Britain, negotiating as a 2.6 trillion-dollar economy, rather than as the EU’s 20 trillion dollar one, will not be able to define its own terms. And, the US will not negotiate with Britain until the terms of trade with the EU are settled, which may take years.

The US will not negotiate with Britain until the terms of trade with the EU are settled.

Democratic Politics are Changing

Britain has become a polarized place, and there are worrying lessons here. Politics is fragmenting everywhere. Tribal identities are becoming entrenched, a shared grounding in a mutual understanding of basic truths and principles is being eroded, and trust in some institutions is being eroded. That is not an especially happy omen, Mr. Nuttall said.

Politics is fragmenting everywhere. Tribal identities are becoming entrenched, a shared grounding in a mutual understanding of basic truths and principles is being eroded, and trust in some institutions is being eroded.

Brexit didn’t establish political divisions in Britain – it exacerbated divisions that were already there, and then put a label on them. Divisions between regions, between age groups, between city and countryside and, perhaps above all, between the educated and non-educated. “The Brexit referendum has entrenched our divisions and made it much harder to see how we find a way out of them, “ Mr. Nuttall noted.

This divisiveness is apparent in Britain’s politics. Like the US, Britain has traditionally been a two or 2.5 party system. Recent polls show that splitting into four or even five, as Brexit is shunting voters off to unequivocal Remain parties like the Liberal Democrats or on the other side, the so-called Brexit party. The Brexit vote made it clear that a large part of the country was unhappy with the way things were going and saw an opportunity to register their dissatisfaction. In the run up to the Brexit vote, every elite organization was against leaving the EU. If you don’t like elites, then finally you had an opportunity to tell them so, Mr. Nuttall concluded.

Sen. Charles Schneider (IA) and Sen. Rodrick Bray (IN) pose during the Forum. Friendly and candid conversations are a hallmark of the Forum, enabling an exchange of ideas between the States.

Discussion

Sen. Rodric Bray, IN: Why was a referendum held instead of having the elected representatives make the decision?

Mr. Nuttall: Brexit started out as a fringe concern, espoused by a small minority of very vocal proponents. Then-Prime Minister David Cameron promised a Brexit referendum if he was re-elected, assuming he would not have to execute on that promise. But he won such a large majority, he had to deliver on the promise.

Sen. John Cullerton, IL: Did Scotland and Northern Ireland vote to stay in the EU?

 Mr. Nuttall: Both voted to remain in the EU. For Scotland, Brexit may be a catalyst for Scottish independence. A re-unified Ireland could solve the problem and keep Ireland in the EU, but Northern Ireland does not want to re-unify.

John Burchett, Google: Isn’t military cooperation between the EU and US managed through NATO?

Mr. Nuttall: NATO is more important for military security in the region than the EU; however, the EU is increasing its military spending and paying more attention to the security challenges from Asia and the Middle East.

Sen. Ginny Burdick, OR: Could the growing pressure to stay in the EU lead to a new referendum, and what would be the likely outcome?

Mr. Nuttall: It is hard to predict what the referendum question would be: “Remain in the EU vs the current Theresa May deal” or “Remain vs no deal.” If the turnout for the vote was low and the outcome was “Remain,” this would poison our politics for a generation. A general election is more likely to occur.

Sen. Charles Schneider, IA: What is the impact of Brexit on the financial and banking sectors in Britain?

Mr. Nuttall: Studies suggest that jobs will be lost and fewer jobs created in London’s financial sector. Wealth and the banking industry are currently being shifted from London to EU cities. The financial services sector is worried; as members of the EU, they could operate all over the EU as local banks; with Brexit, they cannot.

Scott Gunn, IGT: Will the emergent Brexit Party be sustained over time? What will be its effect on the next election?

Mr. Nuttall: Nigel Farage, who founded the Brexit Party, has been a one-man show capitalizing on the frustration that Brexit has been delayed. In the next election, the new Prime Minister will be chosen by 200,000 people, who are disproportionately, older, male, white conservatives. If Boris Johnson becomes PM and can negotiate Brexit, this could drive Farage’s party to take a more populist stance.

Sen. Harry Brown, NC: How severe is the strain from Brexit on the relationship of Britain to Germany and France and the financially struggling EU members?

Mr. Nuttall: A key concern is whether German Chancellor Angela Merkel will remain strong enough to lead the EU through the Brexit negotiations. To date, the EU has remained unified throughout the Brexit process. However, after Brexit, Germany and France are left alone and this changes the center of gravity in the EU.

Sen. Robert Stivers, KY: The current Brexit deal is set to cost Britain 39 billion pounds. What will be the impact on Britain of this expense vs if they leave the EU without a deal?

Mr. Nuttall: The 39 billion pounds is not a sudden expense but is spread over payments scheduled well into the future, mostly covering pensions of retired EU officials. In contrast, a “no deal” exit will be disruptive to the British economy and will require immediate negotiations to establish trade rules and maintain supply chains.

Steven Cook, Council on Foreign Relations: What could change between now and the October 31 deadline for Brexit if no coalition government is formed to do the Brexit deal?

Mr. Nuttall: Britain will have a new PM by end of July and both front-running candidates say they will negotiate changes to the current deal; meanwhile, the EU refuses to make additional changes and the British cannot unilaterally extend the deadline. They can rewrite the political document on future relations, or add codicils to the current agreement. Or, the outcome could be a call for a general election. If Great Britain held a snap election, this could gain more time.

Michael Gregg, NEXTera Energy Resources: Will Brexit have a domino effect, causing other countries to leave the EU?

Mr. Nuttall: Brexit has been a good advertisement for NOT leaving, showing how hard the process is. In the short term, right wing parties, such as the AfD in Germany, who formerly championed leaving the EU are now rejecting that strategy. In the longer term, the impact is less certain. Brexit shows the reversibility of EU membership. If Brexit is successful, this suggests that leaving the EU is OK.

Speaker Biography

Tom Nuttall

Tom Nuttall has been The Economist’s Berlin bureau chief since November 2018. Before that he spent four years based in Brussels writing the Charlemagne column. He has also worked as US west coast correspondent in Los Angeles, and as an editor on the Europe desk in London. Before joining The Economist he worked as an editor at the European Council on Foreign Relations, a think-tank, and spent several years as a senior editor at Prospect Magazine.

CONTACT

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2019 Senate Presidents' Forum. All rights reserved.

JULY 10–14, 2019

Brexit – The Ever-Evolving Exit

Tom Nuttall

Berlin Bureau Chief
The Economist

Tom Nuttall, Berlin Bureau Chief of The Economist, brought the Forum up to speed on current developments concerning the on-going Brexit process, as the UK negotiates its path out of the European Union. He discussed the significant implications of Brexit not only for the UK but also for the European Union and for the rest of the world, including the US. Finally, Mr. Nuttall explored the significance of Brexit as a marker for the ways democratic politics are changing, in Britain and elsewhere.

What is Happening?

Three years ago, Britain voted to leave the EU. But the decision to leave did not anticipate the difficulties of how to leave. The EU is more complicated and sophisticated than a simple free-trade area, it involves the harmonization of rules and regulations that have created tight economic integration between Britain and other countries. Unravelling this tight integration is proving complicated and costly, Mr. Nuttall observed.

The decision to leave did not anticipate the difficulties of how to leave.

The current 585-page treaty defines only the terms of Britain’s withdrawal from the EU but does not plot the path forward for future trade. It covers the financial settlement, £39bn, the rights of European citizens living in Britain and vice versa, and the terms governing the border between Northern Ireland and Ireland. A separate, brief “political declaration” sets out the future relationship between the UK and the EU – but that does not have the status of law and can be rewritten. The more challenging negotiations over a future trading relationship still lie ahead.

Brexit also created problems for Ireland and Northern Ireland. The peace deal struck 20 years ago guaranteed an open border, which is important for people and for trade. But if Britain leaves the EU’s customs and regulatory space, checks on or near that border will be necessary to preserve the integrity of the EU’s market. “And that is bad for the island, bad for people and citizens near the border, and potentially a threat to the peace settlement,” Mr. Nuttall forewarned.

Some Brexit proponents hope to solve the Irish border problem with snazzy administrative and technical schemes, but these do not yet seem practical.  An alternative strategy, the “Irish Backstop,” suggests that, if no arrangement has been found to keep the border open by the time Britain leaves the EU, then Britain will remain in a customs union with the EU, and will remain harmonized to the EU’s regulations in those areas needed to keep an open border. If Britain chooses to remain closely aligned with EU rules and regulations, and part of its common customs policy, “What’s the point of Brexit?” he asked, noting that Britain will only have sacrificed its opportunity to shape the rules it must follow.

On the other hand, proponents of Brexit reject the “Irish backstop” concept and want to diverge from EU rules, to conduct an independent trade policy, and to limit the number of EU immigrants, thereby “taking back control” or restoring sovereignty. It is the main reason that UK Prime Minister (PM) Theresa May’s proposed Brexit deals have been rejected three times in Parliament, precipitating her resignation, and why, more than three months after the original deadline, Britain is still in the EU.

What’s Next?

The new deadline for concluding a Brexit deal is October 31, and EU leadership suggests that renegotiations are not on the table. Prime Minister Boris Johnson has threatened to leave the EU even without a deal. “Leaving the EU without a deal is a catastrophic possibility that would prove a major disruption to Britain, and a big headache to parts of the EU,” Mr. Nuttall forewarned.

A new PM doesn’t change parliament– and parliament has indicated not only that it hates the Irish backstop but also that it rejects leaving the EU without a deal. So although both candidates say they don’t want to hold a general election, that might be the only way to break the logjam. A second Brexit referendum also is a possibility; however, Mr. Nuttall reported that the support for Remain vs Leave has remained pretty steady. There is a small shift towards Remain, but that is largely people who didn’t turn out to vote in 2016. Commenting on the polarization over Brexit, Mr. Nuttall said, “It seems that we have found our tribes, and we’re sticking to them.”

“If Britain leaves the EU without a deal, this will be catastrophic outcome for Great Britain and Ireland.”— Tom Nuttall

Why Does This Matter?

If and when Britain does leave, the EU will lose one of only two serious military powers, one of two permanent members of the UN Security Council, a huge slice of its economy, a major center for financial services, an important voice for free trade and liberalization. Brexit will leave the EU smaller, weaker and less able to project itself in a world increasingly dominated by the competition between America and China.

In terms of Britain’s relationship with the US, most Brexiteers insist on the importance of striking a quick trade deal with the US, based on a preference for “the Anglosphere.” However, the US Congress will ensure that the US Trade Representative takes an extremely tough stance on, for example, agriculture, public procurement and GMOs. Britain, negotiating as a 2.6 trillion-dollar economy, rather than as the EU’s 20 trillion dollar one, will not be able to define its own terms. And, the US will not negotiate with Britain until the terms of trade with the EU are settled, which may take years.

The US will not negotiate with Britain until the terms of trade with the EU are settled.

Democratic Politics are Changing

Britain has become a polarized place, and there are worrying lessons here. Politics is fragmenting everywhere. Tribal identities are becoming entrenched, a shared grounding in a mutual understanding of basic truths and principles is being eroded, and trust in some institutions is being eroded. That is not an especially happy omen, Mr. Nuttall said.

Politics is fragmenting everywhere. Tribal identities are becoming entrenched, a shared grounding in a mutual understanding of basic truths and principles is being eroded, and trust in some institutions is being eroded.

Brexit didn’t establish political divisions in Britain – it exacerbated divisions that were already there, and then put a label on them. Divisions between regions, between age groups, between city and countryside and, perhaps above all, between the educated and non-educated. “The Brexit referendum has entrenched our divisions and made it much harder to see how we find a way out of them, “ Mr. Nuttall noted.

This divisiveness is apparent in Britain’s politics. Like the US, Britain has traditionally been a two or 2.5 party system. Recent polls show that splitting into four or even five, as Brexit is shunting voters off to unequivocal Remain parties like the Liberal Democrats or on the other side, the so-called Brexit party. The Brexit vote made it clear that a large part of the country was unhappy with the way things were going and saw an opportunity to register their dissatisfaction. In the run up to the Brexit vote, every elite organization was against leaving the EU. If you don’t like elites, then finally you had an opportunity to tell them so, Mr. Nuttall concluded.

Sen. Charles Schneider (IA) and Sen. Rodrick Bray (IN) pose during the Forum. Friendly and candid conversations are a hallmark of the Forum, enabling an exchange of ideas between the States.

Discussion

Sen. Rodric Bray, IN: Why was a referendum held instead of having the elected representatives make the decision?

Mr. Nuttall: Brexit started out as a fringe concern, espoused by a small minority of very vocal proponents. Then-Prime Minister David Cameron promised a Brexit referendum if he was re-elected, assuming he would not have to execute on that promise. But he won such a large majority, he had to deliver on the promise.

Sen. John Cullerton, IL: Did Scotland and Northern Ireland vote to stay in the EU?

 Mr. Nuttall: Both voted to remain in the EU. For Scotland, Brexit may be a catalyst for Scottish independence. A re-unified Ireland could solve the problem and keep Ireland in the EU, but Northern Ireland does not want to re-unify.

John Burchett, Google: Isn’t military cooperation between the EU and US managed through NATO?

Mr. Nuttall: NATO is more important for military security in the region than the EU; however, the EU is increasing its military spending and paying more attention to the security challenges from Asia and the Middle East.

Sen. Ginny Burdick, OR: Could the growing pressure to stay in the EU lead to a new referendum, and what would be the likely outcome?

Mr. Nuttall: It is hard to predict what the referendum question would be: “Remain in the EU vs the current Theresa May deal” or “Remain vs no deal.” If the turnout for the vote was low and the outcome was “Remain,” this would poison our politics for a generation. A general election is more likely to occur.

Sen. Charles Schneider, IA: What is the impact of Brexit on the financial and banking sectors in Britain?

Mr. Nuttall: Studies suggest that jobs will be lost and fewer jobs created in London’s financial sector. Wealth and the banking industry are currently being shifted from London to EU cities. The financial services sector is worried; as members of the EU, they could operate all over the EU as local banks; with Brexit, they cannot.

Scott Gunn, IGT: Will the emergent Brexit Party be sustained over time? What will be its effect on the next election?

Mr. Nuttall: Nigel Farage, who founded the Brexit Party, has been a one-man show capitalizing on the frustration that Brexit has been delayed. In the next election, the new Prime Minister will be chosen by 200,000 people, who are disproportionately, older, male, white conservatives. If Boris Johnson becomes PM and can negotiate Brexit, this could drive Farage’s party to take a more populist stance.

Sen. Harry Brown, NC: How severe is the strain from Brexit on the relationship of Britain to Germany and France and the financially struggling EU members?

Mr. Nuttall: A key concern is whether German Chancellor Angela Merkel will remain strong enough to lead the EU through the Brexit negotiations. To date, the EU has remained unified throughout the Brexit process. However, after Brexit, Germany and France are left alone and this changes the center of gravity in the EU.

Sen. Robert Stivers, KY: The current Brexit deal is set to cost Britain 39 billion pounds. What will be the impact on Britain of this expense vs if they leave the EU without a deal?

Mr. Nuttall: The 39 billion pounds is not a sudden expense but is spread over payments scheduled well into the future, mostly covering pensions of retired EU officials. In contrast, a “no deal” exit will be disruptive to the British economy and will require immediate negotiations to establish trade rules and maintain supply chains.

Steven Cook, Council on Foreign Relations: What could change between now and the October 31 deadline for Brexit if no coalition government is formed to do the Brexit deal?

Mr. Nuttall: Britain will have a new PM by end of July and both front-running candidates say they will negotiate changes to the current deal; meanwhile, the EU refuses to make additional changes and the British cannot unilaterally extend the deadline. They can rewrite the political document on future relations, or add codicils to the current agreement. Or, the outcome could be a call for a general election. If Great Britain held a snap election, this could gain more time.

Michael Gregg, NEXTera Energy Resources: Will Brexit have a domino effect, causing other countries to leave the EU?

Mr. Nuttall: Brexit has been a good advertisement for NOT leaving, showing how hard the process is. In the short term, right wing parties, such as the AfD in Germany, who formerly championed leaving the EU are now rejecting that strategy. In the longer term, the impact is less certain. Brexit shows the reversibility of EU membership. If Brexit is successful, this suggests that leaving the EU is OK.

Speaker Biography

Tom Nuttall

Tom Nuttall has been The Economist’s Berlin bureau chief since November 2018. Before that he spent four years based in Brussels writing the Charlemagne column. He has also worked as US west coast correspondent in Los Angeles, and as an editor on the Europe desk in London. Before joining The Economist he worked as an editor at the European Council on Foreign Relations, a think-tank, and spent several years as a senior editor at Prospect Magazine.

CONTACT

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2019 Senate Presidents' Forum. All rights reserved.