Brexit: No Way out for the British Bourgeoisie

The draft withdrawal agreement between Theresa May’s Conservative government and the European Union, which at the time of writing seems unlikely to get the necessary backing of the British parliament on 11 December, offers no solution to the bundle of contradictions that is Brexit.

Both the ruling Conservative Party and the opposition Labour Party are split on the issue. But we will not waste time on the complex parliamentary arithmetic that makes virtually any solution impossible. Nor with the debates about a possible further referendum, or the legal and constitutional wrangling. Of more interest are the economic factors that have created this impasse.

A substantial part of the British ruling class believed that Brexit was a simple matter of walking through a door and leaving behind regulations which, in its opinion, were holding back the competitiveness of the British economy. This viewpoint, though false, reflected the growing competition and rivalry between the United Kingdom and most of continental Europe, led by Germany, and the misalignment of the economies, as Britain has stayed outside the Eurozone.

The reality is that the UK has not passed through an open door but entered a vast maze of uncertainty that offers no obvious or easy way out.

Since Britain dismantled much of its unprofitable and state‑subsidized heavy industry in the 1980s, its focus has been largely on the services sector, which is largely dependent on selling abroad. This shift was only made possible by inflicting serious defeats on the working class, most notably the steelworkers (1980) and miners (1984‑5).

These developments have helped British capitalism to attract inward investment from many overseas firms wanting to sell into the European Union. This makes the job of extracting Britain from the EU extremely complicated, so there has been stiff resistance from many sectors of big business to any Brexit that would diminish free access to the European single market or to other markets via EU‑negotiated free trade agreements. (Ironically it was Margaret Thatcher who pushed hardest for the single market, though today her nationalist rhetoric is echoed by the Brexiters, who want to withdraw from it, arguing that it benefits Germany more than the UK).

Much of the British economy is intricately interwoven with that of the European Union. To take just one example, as frequently reported in the British press: the crankshaft used to manufacture the Mini (an iconic “British” brand now owned by the German firm BMW) crosses the Channel three times in a 2,000‑mile journey before the finished car rolls off the production line. The same story applies to many other components in the Mini, as well as to components used in other car plants in Britain.

The UK is ranked second for Japanese foreign direct investment and is a major economic partner for Japan. In the automotive sector, Japanese manufacturers such as Nissan and Toyota represent more than 40% of British car output and 142,000 jobs. All of this depends on just‑in‑time delivery and therefore the friction‑less trade of the single market and customs union. Other sectors such as aerospace, scientific research and pharmaceuticals also have a strong pan‑European dimension.

Should Britain leave the EU without a deal, going onto World Trade Organization (WTO rules), as favored by the Brexiters, companies in these sectors are likely to choose to divert future investments to other EU countries.

Meanwhile French and German capital, in order to “protect the integrity of the single market” (i.e. the interests of the national bourgeoisies) have threatened retaliatory action should the UK try to leave and undercut EU capitalism. For example, France has repeatedly threatened border checks to disrupt cross‑channel trade that would potentially turn motorways in Kent, southeast England, into a lorry park. President Macron has also said that France would ignore any British imposition of coastal waters (the fisheries sector, though insignificant in terms of British GDP, has taken on huge emotional significance for embattled Brexiters).

Meanwhile Ireland and France have been working to create new sea crossings to avoid the UK as a land bridge.

And that is just the situation for manufacturing industry and physical trade. Questions also arise over the future of the services sector, and in particular financial services. Although it accounts for just 6.5% of total economic output and 1.1 million jobs, 44% of financial services exports go to the EU and 39% of financial services imports come from the EU. This business also depends on compliance with a whole raft of EU regulations.

Falling EU immigration: a Pyrrhic victory for the populists

These are the considerations behind the May proposal, which effectively ties the UK to EU single market and customs union rules for the foreseeable future, while making some concessions to the pro‑Brexit demands, notably on the free movement of labor.

Immigration was a key factor behind the leave campaign, which was led by populists such as Nigel Farage and backed by capitalists who have little or no stake in the European Union.

In fact, there seems to have been a “Brexit effect” on migration patterns. Figures released by the Office for National Statistics at the end of November showed that net immigration from the EU to the UK slumped to a six‑year low, while non‑EU migration is the highest in more than a decade. There were 74,000 more EU citizens who came to the UK than people leaving for other EU countries. This was the lowest level of EU net immigration since 2012. On the other hand, non‑EU net migration was at its highest since 2004, with 248,000 more non‑EU citizens arriving than departing, the ONS data shows.

The underlying reality of course, that immigration is largely driven by the labor market. The scapegoating of immigrants, along with all other populist arguments, are merely expressions of the inability of capitalism to offer any solutions to economic decomposition (see our article on sovereigntism in Communist Left No 42/3).

Ireland

The current draft withdrawal agreement is therefore a messy compromise to buy the UK time, during a transition period, to negotiate a free trade agreement (FTA) with the EU, while giving it a free hand to negotiate FTAs with other countries and economic blocs, notably the USA (though President Trump has already signaled his unwillingness to do the UK any special favors if the UK agrees to the draft withdrawal agreement. The fact is that the best the UK can hope for at the moment is to piggy‑back off existing EU FTAs).

However, the so‑called Irish backstop could keep the UK tied by single market and customs union rules for the foreseeable future. This is anathema to Ulster Unionists and to Brexiters.

Under the agreement the EU and UK agree to “use their best endeavors” to have a future trade agreement concluded six months before the end of the transition period in December 2020, but that if this is not the case the EU and the UK could “jointly extend the transition period” for an unspecified time.

Otherwise the backstop solution for Ireland and Northern Ireland, aimed at preventing a hard border, would come into force. The backstop, consisting of “a single customs territory between the Union and the United Kingdom”, will apply from the end of the transition period “unless and until… a subsequent agreement becomes applicable”.

The single customs territory would cover all goods except fishery products, the agreement says, and will “include the corresponding level playing field commitments and appropriate enforcement mechanisms to ensure fair competition between the EU27 and the UK”.

There would necessarily be extra non‑customs checks on some types of goods passing between Northern Ireland and the rest of the UK, which will not please the Democratic Unionist party.

On exiting the backstop, the agreement says that if “either side considers the backstop is no longer necessary, it can notify the other” setting out its reasons.

Brexiters have consistently argued that Britain must be able to exit any all‑UK customs union as and when it wants to be able to pursue free‑trade deals around the world.

The Need for a Working Class Response

Thus, at the moment none of the options can possibly satisfy the British bourgeoisie. May’s deal has received lukewarm support from the City of London and the bosses’ organization, the CBI, but only on the basis that it is the “least bad” option. Few want to crash out of the EU without a deal. Another referendum would cause more political upheaval, while a complete reversal of the Brexit decision would hand power back to Britain’s economic rivals; the terms for returning to the EU might be worse than they are now.

All of these “choices” must be seen in the context of the global crisis of capitalism and increasing national rivalries. None of the bourgeois parties (whether established parties or populists) can offer a solution that will benefit the working class in any way whatsoever. Any notion that the economic integration or unification of Europe through EU state institutions could serve as the basis for socialism, or alternatively, that there could be a “socialist Brexit” is nothing but rank opportunism. Now more than ever the British working class needs to develop its own class perspective in solidarity with the working class across Europe and beyond. Only then can we benefit from the confusion and discord among our enemies.

The only way out of the Brexit maze is to burn it down, along with the rest of capitalism!