Brexit: New opportunities with China and Europe?

By Tomas Casas<EM></EM> | chinadaily.com.cn | Updated: 2016-07-18 15:48

Brexit is a harbinger of new uncertainty in Britain, Europe and beyond. A chain of events has been set in motion and it is anybody's guess where the chips will fall. Much less do we know when the dust will settle, nor what the positives of Brexit could be when all is done.

Brexit seems part of an unsettling larger global pattern where institutions are failing to deliver and people respond by defying those institutions. Populism is as varied as the Arab Spring, the European Far Right and the Far Left movements or some of the American election narratives, yet a common denominator is deep discontent. There is increasing inequality, economic stagnation, overpopulation, lack of social mobility, fear of migrants and terrorism. Moreover, it is not unlikely that in the coming years matters will worsen. With such an outlook are there any bright spots to Brexit?

European reform

The British electorate has spoken, sending signals that Brussels better not ignore. The message begs for deep reflection, even when the temptation is to pick up the spoils. French Prime Minister Manuel Valls promises incentives for banks moving from London, even if Paris is no match to the City's sophistication in matters of finance. Naiveté is not the issue here. This type of jostling dents the European ethos with its sterile loose-loose scenarios. What London and Britain might lose by Brexit, other Europeans will not gain.

The temptation for the EU to erase the smirk on Boris Johnson's face will be understandable, but it's no time to make life more difficult for the UK than it ought to be, if only because of self-interest. Legitimacy of its narrative is the EU's main force. After all, at its inception the ECC was a peace project. Punishing Britain as a deterrent to the exit campaigns of Marine LePen in France or Geert Wilders in Holland might easily backfire. A vengeful EU will breed resentment; instead it is time for a charm offensive via a deep reform push to make the Union both more effective and more legitimate. The modern nation-state peace project of the 1950's is now a given and needs to be transformed into a working prosperity project. To that end European elites must mobilize their creative energies to design a leapfrogging strategy for a new mode of political organization. The added pressure for institutional innovation is at the core of the Brexit opportunity.

How should the EU re-organize? It starts with the practical question of Brexit about what the relationship with Britain will be: EFTA, EFTA-light, bilateral, bilateral-light? It is high time to design a new European architecture, one that is flexible and one that benefits from competition. One size does not fit all in Europe; the EU has to leverage its diversity by providing choice. For instance, there could be two or three integration levels where nations can opt in and out - without the recent drama - and pick the corresponding institutional arrangements that suit them best. The core level, the Union, would see tighter integration with a democratically elected European President accountable to the people, not to a club of states perceived as specializing in backdoor deals. The nations by choice out of the core, such Britain, Norway or Switzerland, would still relate to the EU via economic and other arrangements. The end point of a Polexit or a Frexit scenario would be clear. Uncertainty would be reduced, the popular will respected and this measure of flexibility and institutional innovation would make the EU adaptable, able to absorb stress and all in all more likely to survive.

A special China relationship

China has been conceived in some quarters as one of the winners of Brexit. Far from rejoicing, China is as interested as the other large powers in global order and stability. And yet, Britain will need new friendships and deploy all its ingenuity to carve out a global niche like Switzerland has done. The FT reports that Britain already plans high-level diplomatic missions to China, India and the US. Will this work? The value of bridge-builders in networks is firmly established; de-coupled from Europe, the UK is all the less valuable to America. On the Indian front, it is also hard to see how the existing relationship could be meaningfully upgraded. At the same time a strategic Sino-British partnership has great potential and could even help integrate China further with Europe. Right after Brexit, George Osborne's five-point plan to re-activate the British economy includes a push for Chinese investment.

Fortunately for the British there is a ready-made template for engaging Beijing; the Sino-Swiss Free Trade Agreement, which is a cornerstone of a deepening innovative strategic partnership. As a Swiss diplomat to China noted during last month's World Economic Forum in Tianjin, a goal for the Swiss FTA was to be a model for the EU. Yet Brussels has been unconscionably lukewarm to Beijing's overtures. It would be ironic if a Britain outside the EU hitchhikes on the Sino-Swiss best practice FTA template originally meant for the EU. For Switzerland the "a little bit less European, much more global" position seems to pay off.

On a different level, in China it escapes nobody that Brexit reinforces the domestic Chinese political narrative. In WeChat and other social networks, netizens poked fun at the post-vote decision-regret. They find the talk of a second referendum, the bumpy change of government and the volatility in financial markets to be in the best tradition of British humor, of the sardonic kind. The serious conclusion is that in a democracy voters are all too easily swayed by populism, demagogy and half-truths. Can a polity lead by enlightened leaders with a benevolent Confucian ethos be preferable after all? On the other hand, should the calls for a second referendum be heeded, or should Brexit boggle down to a non-exit of sorts, then democracy will be reduced to a device of devious statecraft. Or as a Chinese friend cynically observed: "Keep on voting until you get the result you want."

Brexit could lead to new gainful arrangements with Europe and China. The question is whether Theresa May's new government has the vision and skills for a sophisticated globalization push that compensates Britain's exclusion from the European framework.

Tomas Casas is a faculty member of the University of St. Gallen and its Institute for International Management (FIM-HSG).

The opinions expressed here are those of the writer and don't represent views of China Daily website.