Moving on after Brexit: interview with Dr Andrew Lilico

Brexit as a leap in the dark, a disaster waiting to happen, a petty revenge of Little Englanders who basically didn’t understand how exhilarating it is to feel a citizen of the world. We’ve heard all this far too often, but are Italians -and other Europeans- getting it right?

I asked Dr. Andrew Lilico a few questions that hopefully will help clarify the risks and opportunities of such a seismic change.

I noticed that Italians cannot see a way out of the EU for themselves, therefore they tend to believe the same applies to the UK. How would you respond to this assumption?

First of all, Italy was one of the EU’s founding countries. Also, in many ways the European Union has been central to the development of Italy politically and economically for some decades, whereas for the UK its relationship with the European project has always been a little bit more at arm’s length.

The UK didn’t join at the beginning and only joined when it started feeling it was an economic project rather than other kinds of things, it didn’t like it very much when the European Union went back to what it was always really about - a political union - from the 1990s. Maastricht is an example, so we didn’t join the Euro, we didn’t join the Schengen area, and we’re not going to be joining in the future other projects like the development of an elected EU presidency, we won’t be into any of the EU border guards, we don’t want to be in the European Army, so that things the European Union has been doing, we just haven’t been wanting to do, and this is not something new, that has been the case for decades. And the reality is, it seems to me, that having chosen not to be a co-part of these European programs, the clock was always going to be ticking on the UK’s membership of the EU.

We did fantastic things as part of the European Union: we faced down the Warsaw Pact, we showed that you could feed and offer an economic model to the people of Europe which wasn’t based on communism or fascism, we absorbed the post fascist countries of the Iberian peninsula and post dictatorship Greece, the post Warsaw pact in Eastern Europe. These were all fantastic projects, and along the way, we like to feel that we gave to the Europeans, we persuaded them to an economic philosophy of low tariffs internationally, market liberalisation, competition policy, those kinds of areas through the European Commission, and those things were all fantastic, but it’s something that only ever had a limited life, it was always eventually going to come to an end.

So, I would say that we think the European Union has been a thing that’s been good to be part of, but it’s now time to move on and do something else, just as it’s time for the European Union to move on, and we shouldn’t hold you back and complain anymore.

So what now for Britain? After a landslide victory of the Conservative party, it seems now Brexit can actually move on, it can finally happen.

Now we are going to be hopefully putting behind the rather bitter debate of the past four years and that means firstly, of course, that we leave the European Union. It also means that we put behind us the possibility of the government been taken over by basically quasi-communists, which is also equally as important, and we can move to a new phase for the United Kingdom.

We don’t know exactly what it will involve, the European Union has been there as a comfort blanket for us for many decades, not only economically but also it has protected us constitutionally, you know people complaining about being overruled by the various European Courts on this and that matter but, that’s an important protection to people as well, it’s been a geopolitical partnership, a part of defining our role globally, and increasingly so in fact, since the end of the Cold War. There was  a period when NATO was a bigger relationship, say in the 1980s, but probably that hasn’t been true since the end of the Cold War, and the European Union has probably been a bigger one, so now we have to work out something different to do. And exactly what that different thing to do will be is yet to be defined.

So, I don’t think we’ll just want to be ourselves, some latter-day Switzerland, or Norway, or Singapore, we’ll want to have some new partners in the world that we’ll work together with the same way we worked with the European Union, but it’s unclear who those will be as yet. Apart from anything else, we’ve spent so long prevaricating over we’re going really leave the European Union, that natural partners might have become a bit frustrated.

There are obvious candidates, like Canada, Australia, countries that are similar to the UK, but it might be that it will actually turn out to be somebody else that we work most naturally with. I don’t think that it’s going to be a that close a collaboration with the United States, because one of the things about us and the European Union was that the Eurozone was too big relative to us, whereas when we were operating together with Germany and France and Italy , these were reasonably similar scale countries to us and so sometimes you can win arguments and sometimes you could lose.  With the Eurozone becoming more politically integrated, it would inevitably have meant that we were bound to it, that we were dominated by it, it outvoted us, settled the rules, we just had to choose to obey them, whereas in the case of the United States there would be kind of the same asymmetric relationship. The United States is far too big related to the United Kingdom for us to have that much influence, we would have to be in some common regulatory area, we’d just end up following the United states, and I don’t think we want that. We’re not going to leave one asymmetric relationship to jump into another, we want to do some other kind of thing.

Now as I say exactly what that is, I have some ideas and some suggestions, but it’s by no means clear to me that the suggestions that I make would be the ones to win. I think it’s enormously up in the air. One of the things to say, which might be particularly interesting from a European perspective, is that one of the other big advantages for us at this moment in history of leaving the European Union arises from the following process. One of the big things the European Union creates is what we in the UK refer to as a “ratchet process” [a ratchet is when you have a tool and you turn it and it fixes in a position]. A ratchet process in the European Union is: once you’ve agreed to introduce regulations and laws in certain areas it’s very hard to undo it and to go backwards. And when the best thing to do is obvious, that’s what you want, because it’s good that once you’ve decided to cut some tariffs or to remove some stupid non-tariff barrier, you then have to get 28 sets of ducks in a row to undo it. The last thing you want, once you’ve introduced some measure, is the forces of reaction turn and undo it straight away, because they’re all going to get mobilized and try to change things as soon as they start to see they have some impact.

One of the things which the UK political system is quite good at is allowing for u-turns, so it allows for experimentation: we try something, people say oh it’s a terrible idea, we reverse it, and do something else, and that’s good when the best thing to do isn’t obvious. So, if you’re regulating in some new areas like artificial intelligence, driverless cars or the commercial exploitation of space, green technologies, or even new narcotics, or vaping, or something like this, what is the best way to regulate these things? When it’s not obvious, there are advantages in experimenting, getting it wrong and trying again. And I think much of the low hanging fruit - the things that are obvious ways to improve - these we’ve already done in the European Union.

Once tariffs have gone down from 10 to below 1%, once you’ve got rid of most of non-tariff barriers, there’s not much further to go. The EU have already got to the point at which it’s awkward to make progress in the digital single market. In the future the UK - the big regulatory challenges coming for us - don’t lie in those sorts of areas. They lie in those new technologies, in what you do about and how you manage the process of lab- grown meat, genetic manipulation of species, and all kinds of other things like this.

I think that we will experiment in those areas, help to develop new international best practices, and then the European Union will learn from us, because it will see us as a better model how to do these things than the US or others, and it will copy our model, and that will then become the European Union best practice in due course.

So, I think that that’s another set, apart from us freeing the European Union from this anchor of us complaining about everything. It will also create the possibility of a model where we experiment which the European Union can learn from.

I read some of your articles and you seem to be very keen on the CANZUK project. You said you don’t know if it’s going to work, but if it does, what would be the positive outcomes?

The CANZUK idea is that of creating a new geopolitical partnership between Canada, Australia, New Zealand, and the key advantages of this from a UK point of view would be something like the following. We find them to be amenable, we like to be together with countries that have a very similar scale, very similar values to us, where we could collaborate and achieve more together than we would individually. We liked that in the European Union for many decades; the fact is that eventually there was just a bit too much difference between our habits and ways of doing things and our traditions and constitutional arrangement for us to go the final steps into the deep political integration as the European Union. Also, within the European Union countries tend to differ a bit more from each other than we do within the CANZUK set, which meant that in order to achieve integration you have to force things a bit, with level playing field rules and stuff like that and make everything the same just wouldn’t naturally become the same. In the CANZUK area we wouldn’t need to force things all to be the same, because we start similar, and secondly if we did, the cost to us doing that would be less, because we are more constitutionally similar.

The CANZUK countries also, I think, have certain sorts of global interest rather than regional interests, which are relevant, a particular interest in certain areas like media, space travel. So there are many ways they might want to operate globally and they might want to present a common face to the world, they might find that those things might be as important as the way they deal with each other but that’s probably different from the European Union, where most of the focus is internal.

But another thing is that those three countries, each in their region risk being dominated by a larger regional player, so Canada would be dominated by the United States, the United Kingdom by the Eurozone, Australia by China, whereas by collaborating they would achieve a status where they can face up to their regional challenges, not perhaps as equal, but at least as peers, so that it seems you would have a significance that you wouldn’t have as a massively dominated smaller player but that kind of collaboration would also allow them to function. Another thing is, I think the tendency in the world is to move towards regional power blocks, in trade and other geopolitical arrangements.

One thing about that. You know, we used to have those toys when I was a little boy when you had felt and you cut out the shape of an animal out of felt. You had a rectangular piece of felt and once you’ve cut out your animals you would have one piece of felt, what was left over. I think that there’s space for one player in the world which is the leftover bits, that aren’t these regional power blocks themselves but the rest of the world would link them all in some way.

It seems to me that CANZUK nations are natural candidates. Maybe who knows, later other countries might join, perhaps Singapore, and other countries might be added at some stage in the future, some of the wealthier Caribbean countries would be natural additions, but at least let’s start with the ones that are easy, the CANZUK set, and then I think that that kind of collaboration you can achieve a geopolitical partnership, that means working together across a whole stream of different policy areas, start with a free trade agreement, probably a mobility agreement, probably a security partnership.

You wouldn’t have the same focus that there was in the European Union, there wouldn’t be an equivalent of the Euratom Treaty, the coal and steel things. That kind of stuff is not the place where we start. No common agricultural policy for example, we wouldn’t be interested in that. So there’s differences from the developments in the European Union, but that same kind of principle that you begin with a few projects in common and you build from there to do lots of other things. I think in due course CANZUK countries will find it amenable to work across a vast range of different policy areas.

One last thing to say about CANZUK is that I think that the way to think at it is not you leave the European Union in order to do CANZUK; it is that given that you’re leaving the European Union, the question arises what shall we try to do next, and so the CANZUK is the natural thing for us to do. 

So it’s definitely something new, it’s a new idea, it’s not the dream of the Empire, as many seem to suggest in Italy

Well look empires are intrinsically dominating and asymmetric, one powerful player and satellites. I think in the CANZUK arrangement Canada and Australia have higher GDP per capita than the United Kingdom in fact Australia’s quite a lot higher than the United Kingdom.

So, these are richer countries, they’re much bigger geographically than the United Kingdom and Australia is the fourth largest country in the world. The collective population of Canada, Australia and New Zealand is about the same as that of the United Kingdom, so higher GDP collectively and about the same population. There’s not much risk of the UK dominating this arrangement and it’s not the intention at all, and of course you begin with combining people who are similar, who have similar traditions and similar history.

Now, in each of those different places you also have a lot of people who blended into that over many centuries of course, but also people who blended in more recently. So for example New Zealand has about 30% of the population of non-European extraction, and that’ s much larger than any part of the European Union. The UK and Canada are fairly similar in terms of different populations mixes, some parts of Canada have large non-Europeans in ways that are not quite the same as the UK. For example Vancouver has about 30% of the population being Chinese-they refer to it as Hongcouver- and Australia a little bit less, but still a fairly high East Asian and South Asian population there as well. It is the case that you have more recently blended in populations, but it’s also the case that you have family linkages that create a natural affinity, traditions and ways of doing things that are quite similar. Australia alone for example has about as many British people living in it as the entire European Union. These are countries which Britons like to go to, and they also countries that Britons regard in a different way from other countries in the world.

People have done surveys about which countries are regarded especially favourably. The most favourable countries in Europe are Sweden and the Netherlands in the UK, so just a little bit north of 20, 22-23% of the British regard them especially favourably, the United States just a little north of 30%, whereas Canada, Australia and New Zealand, those three countries completely by themselves, are just under 50% of the British regarding those countries especially favourably, and I think that the reality is that people in the UK don’t see these countries as completely foreign.

It would be more the way Britons would see the Falkland Islands or Gibraltar. There’s a bit of gradation of foreign, so there are places like the Isle of Man or Guernsey which are only just foreign at all, and then the Falkland Islands and Gibraltar that are a little bit more, but not really, and then Australia, New Zealand and Canada just a little bit further again. And that sense of being part of “us” gives you a sense of affinity with people, which makes it natural to collaborate with them. It also means that when you meet people from these countries you get along with them very automatically. When one meets Australians it’s a different experience for a British person from meeting an American or somebody from France, let alone things that are much more different like meeting somebody from China. So you have that sense you’re with somebody who’s like you, and that makes business relationships and all kinds of things easier.

All countries have other countries that they get along with better and less well, sometimes they don’t get along very well with those that are most like them, sometimes the people that are most like you, you get along with, and that’s the case of Canada , New Zealand and Australia.

I see. Is there anything you want to say to Italians living in Britain – to reassure them?

There have been Italians living in the UK for many decades and certain clichés like spaghetti bolognese and macaroni cheese date back to long before the European Union.

There is a set of countries in Western Europe- France, the Netherlands, Spain, Italy, Belgium –where there’s always been for centuries upon centuries very high levels of interrelationship and dealing with each other, and I would expect that to continue.

Italians have a certain sort of reputation in the UK and the British have a certain sort of reputation in Italy, we all have stereotypes and clichés of each other, sometimes charming, sometimes less so, and these sorts of things don’t necessarily depend on the European Union.

It’s definitely the case that the period of being in the European Union did create a working together in a different way. And so there is a certain poignancy, there will be some loss of depth of the relationship with European Union partners, I don’t think we should pretend anything else. I would expect that, relative to the past, Italians will look a bit more to the French and the Germans and a little bit less to the British.

These things are matters of degree, and the three of you and the other partners will form your own new way of doing things, and the European Union, Europa, whatever the Single European State wants to call itself, will find its own new way of dealing with the UK and I think it’s all part of the way the world moves on.

Dr Andrew Lilico is Executive Director and Principal of Europe Economics, a consultancy specialising in economic regulation, competition policy, and the application of economics to public and business policy issues based in London. He is a Fellow of the Institute of Economic Affairs and Chairman of the IEA/Sunday Times Monetary Policy Committee. He is a frequent contributor in the UK and international media on economic and financial matters.