How Will the Relationship Between the UK and the EU Change in the Future?

2020/05/22

I have lived in London since 1999 and work at the European regional headquarters of a Japanese company. These 20 years have been a period of experiencing great swells of change in British society and the economy. Initially, seeing the orderly streets that felt traditional, the many beautiful parks in the city, and stylish elderly couples driving classic cars with flair, I felt a level of social wealth incomparable to Japan, while at the same time seeing many homeless people. Entering the 2000s, the atmosphere grew that the free movement of global people, goods, and money would enrich people's lives and the economy. While the number of foreigners and delicious restaurants increased, housing prices skyrocketed and many luxury cars appeared on the roads. However, this bubble-like atmosphere changed completely with the 2016 referendum. As you know, the world was stunned to learn the next day that the Leave camp had won by a narrow margin of 4%.

Brexit shows that the British people, often described as conservative and moderate, chose change in search of a new way for the country after much deliberation. The EU accelerated the globalization of the UK through the free movement of people and goods within the European region, pushing London, which is particularly strong in finance, into a world-class wealthy international city. On the other hand, many people in regional cities who felt left behind by economic growth blamed the EU for problems such as unemployment and immigration. While the media proclaimed that conservative people in the regions supported leaving the EU while urban people and youth wanted to remain, I believe there is a reaction to the rapid globalization of British society and the economy at the undercurrent of this social division.

The reason it took several years for the British Parliament to reach a conclusion amidst this social division is that, in addition to the fact that views on the pros and cons of globalization split the nation in two, the EU is not merely an economic framework. The EU started from a vision of permanent peace and prosperity through regional integration, and I believe a major factor that prolonged the debate was that whether or not to support its idealistic philosophy depends on personal beliefs. Among the various opinions I heard from European friends and colleagues regarding the pros and cons of leaving the EU, the one that left the strongest impression was the opinion of a friend who is a native Briton, an Oxford graduate, and a lawyer, just before the referendum.

"In my head, I think remaining in the EU is desirable, but in my heart, I have conflicting feelings that leaving and regaining national sovereignty will be in the UK's long-term interest, and as a Briton, I cannot ignore my own feelings." During the subsequent three and a half years of political turmoil, while many people felt "I'm fed up. I'm ashamed as a British citizen. I want to decide on a direction quickly," the Conservative Party, which advocated for new nation-building through an early exit from the EU under the strong leadership of Prime Minister Johnson, won a landslide victory in the general election at the end of last year over the Labour Party and other opposition parties that failed to unite the Remain votes under a single vision. Meanwhile, many companies have already been working on reviewing their bases and supply chains for the past few years on the premise of leaving the EU, and the current mood is "Let’s get on!"

Brexit can be described as an "unfortunate divorce drama between the UK and the EU." The British people joined (married) the EU primarily for the economic benefits of the single market. When you ask British people, almost no one supports currency or political integration. As the political aspect of European regional integration deepened with the creation of posts like a President and Foreign Minister representing the EU in the 2009 Lisbon Treaty, perhaps the British people, who had enjoyed globalization within the EU framework, gradually experienced increasing conflict between business (Head) and maintaining national sovereignty (Heart). If trade negotiations after the withdrawal stall and the flow of goods with the EU, with which the UK has a strong trade dependency, is disrupted, a negative impact on the economy is inevitable. On the other hand, as an economic power with the world's fifth-largest GDP, the UK is a major customer for the EU, especially for the export powerhouse Germany, and chaos caused by the withdrawal is not wise for either side. However, from a political perspective, if the UK leaves and succeeds economically, there is a risk that other countries will also start talking about divorce (leaving the EU). To successfully maintain an ambivalent relationship where one needs the divorced partner economically (Head) but cannot share the philosophy (Heart), a "mature way of interacting" is necessary, and I believe the people of Europe, who share a long history, possess that wisdom and experience.

Based on this background, I believe that Brexit brings new business opportunities to Japanese companies at the same time as the risk of changes in the business environment. In recent years, major paradigm shifts in the world order, including the intensification of the US-China conflict, have become apparent. Within this new trend, it is entirely possible that the UK will switch its trade partners, which previously relied heavily on the EU, to countries such as the US, Japan, and former Commonwealth nations including India. While the new coronavirus, which is currently causing great turmoil in European society and the economy, may delay the conclusion of trade negotiations with the EU, I believe that the UK, having made the decision to determine its own course amidst the rapidly changing world situation, will shrewdly overcome the rough seas of globalization while rebuilding new interdependent relationships with countries around the world, including the EU.