David Fuller's view -
It is likely the EU "hard talk" versus UK "hard Brexit" gamesmanship will hurt the EU more than the UK or at least be neutral. First, EU exporters outnumber UK exporters and will lose out if the UK retaliates via tariffs (German car exporters must already be angry about the competitive devaluation of the GBP, a gift to Philip Hammond and the UK). Second, it makes the UK's negotiating position much easier. When you have little to lose, tougher counterparty positions having been taken, you can focus on areas where you are strong or your adversary weak and be more aggressive in your demands for areas you are likely to lose, knowing they will be watered down or dismissed. Third, a PR disaster, other counties with EU reservations or facing referendums -Holland, Hungary, E Europeans etc- will see the ganging up on the UK as a potential thorn in their own side when they are looking for reassurance from the EU, fortifying the centrifugal political forces already operating in the EU. Fourth, it will accelerate the post Article 50 end game, since the UK may react to EU intransigence by curtailing or terminating negotiations if it knows that the EU is not going to give way (the EU has now declared its hand; this is seldom a good idea in negotiations). The default position is WTO tariffs for the UK anyway. If your adversary does not care about losses when you engage him, he is a much more dangerous adversary; this is the position that the EU is creating for itself with reference to the UK.
It will be very interesting to see how international non-EU businesses that have invested in the UK as the best country to manufacture inside the EU will now react to Brexit. I think it will be a long and slow process because they have fixed investments that cannot be shifted easily or quickly.
Unfortunately, politics has dominated over economics and finance in the building of the EU and I fear that this will continue to be the case.
That is why I think that the EU will continue to stagnate.
Regarding the first email above, very well said. I agree and appreciate this informed contribution.
Regarding the second email, it will indeed be interesting to see how overseas companies operating in the UK for the purposes of exporting to the EU respond to a hard Brexit, if that is the only sensible option for the UK. Manufacturers will be reluctant to move because the UK is a favoured location for a number of reasons, including language, labour relations and plant infrastructure to which these companies have already made significant contributions. Non UK financial firms may be more tempted to move, although this may not be necessary as most banks and insurance companies already have representative offices in some EU countries. Meanwhile, the UK’s devaluation, tax structure, regulatory terms and international professionalism will be increased by hard Brexit. Lastly, overseas corporations and governments with UK divisions will not thank the EU for adding to their costs, if it makes the political decision to block single market access for UK-based firms.
Game, set and match?
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