Britain could be the next Bolivia, according to comments made about the consequences of Brexit. “It is obvious to us that if Britain was outside the EU, we would be as reliant on the third-country rules as Bolivia,” said TheCityUK’s chief executive Chris Cummings. What does that mean?
If you’re not in the EU, the EU treats you differently based on your domestic regulatory regime. If the regime is roughly the same, you can get access to the EU’s single market for services. But if you’re regime is not up to snuff (by EU standards) you’re given “third country” status.
I’ve no idea what “second country” status is. But Bolivia has “third country” status. And the implication is that Britain would be relegated to the third tier of trading status with the EU if Brexit happens.
Hyperbole or a valid warning?
The warning is surprising, given that Britain is in the EU at the moment. That means the current regulatory regime is harmonious with EU directives. You’d think it would take a lot of changes for the EU to suddenly decide Britain’s revamped, less restrictive regime required a new, lower status.
“Third country” status would make it a lot harder for the City to do business with the Continent. But how likely is “third country” status? Well if the EU chose to be vindictive, or the negotiation for a new a separate deal took years and not months, perhaps it’s possible.
But think how absurd that sounds. The penalty for leaving an inefficient, over-regulated, over-bearing regulatory regime is to be excluded from it entirely. You can see why the City fears that change. Things are easy now. Capital and labour flow.
It’s a good deal for the City
But that raises another more provocative question: should Britain stay in the EU because that’s less risky and better for the City? The City is unquestionably the centre of the British services economy at the moment. But perhaps that’s part of the economic problem itself.
The economy has been “financialised”. That national interest is being determined by what’s good for the people that lend, manage and move money. If that’s the strongest argument for staying, how strong is it?
Category: Brexit