Brexit and You

brexit-1477302_960_720“Alea iacta este” (the die is cast), is the Latin phrase attributed to Julius Ceasar as he led his army across the Rubicon river into Northern Italy in 49 BC.   England has now crossed its own Rubicon, in voting to leave the EU.

While no one really knows what the effects of this decision will be, many will recall that when the UK decided to enter the EU in 1970’s, it triggered 20 years of uncertainty for New Zealand.  Losing our largest single market meant having to find our own separate way in the world, and that took time, effort, and a toll on a generation of people growing up through that period.

Now that England has decided to do a similar thing to itself, one would expect a similar outcome for the English economy.  The knee jerk reactions of the financial markets are not a reliable guide to what the future might hold for the English economy. However, the effects in New Zealand will be modest.  Having spent those 20 years dealing with the effects of severing close ties with the UK, the NZ economy is not particularly exposed to the turmoil that will be occurring half a world away.

It is fascinating to watch the unravelling of the relationship between England and the EU, between England, Scotland and Northern Ireland, between England and Gibraltar (which voted above 90% in favour of “Remain”) and the various proposals for the future.

Scotland wants a new referendum, with a now very stark choice between England and the EU.  Gibraltar is considering becoming part of Scotland (if it becomes independent and stays in the EU).  Northern Ireland may follow Scotland, seeking independence from England (but is unlikely to join the Republic of Ireland).  Wales voted to Leave, but may feel left out, in the longer term…  It does look like the end of the Act of Union (1707), joining Scotland and England, and thus the end of the United Kingdom as a political and economic entity.

The demographics of the vote have told an interesting story, and raise an interesting question.  Those under 25 years old who voted, were about 75% in favour of “Remain”. As the voters aged, they turned in favour of “Leave”.  One wonders whether those over a certain age had any right to vote – as this was a vote about the long term future, not the present or the past.  It will be irrevocable, once the government formally advises the EU and invokes article 50 of the Lisbon Treaty. brexit-1477611_960_720

Should those who will not be significantly affected by that outcome be able to determine that outcome?  Is it fundamentally unfair to allow those with no interest in an outcome to determine that outcome?   Would it be undemocratic to require that sort of qualification, to entitle someone to vote?

These are all political questions, which can be framed as legal constitutional issues.  He who makes the rules does tend to control the game – as anyone who follows the Admirals Cup will understand.

IMG_5535As an observer to the chaos, it does seem incredible that England would choose to part from what is still the largest or second largest (depending on whose figures you use) single operating economy in the world – right next door.  In New Zealand, we are a long way for anywhere, and the tyranny of distance is a major issue for us. Imagine what our economy would be like if we were 33 kms from China (the width of the English Channel at it’s narrowest point).  That is the sort of calculation most observers made.  An exit was ridiculous.  Having made that choice, it will now have to live with the consequences.

What does this all mean for New Zealand?  We are already negotiating a free trade deal with the EU.  Now we will have to negotiate a separate one with the UK – but as that entity may not last long, why would we bother?   We would later have to negotiate yet another with a further diminished England.  So, full speed with EU, backburner for UK.

The EU has itself said that it will not conduct formal or informal discussions with the UK, until formal notice of Brexit is given.  That does seem sensible as an approach for New Zealand to take, as well.  However, what is good for nations is not necessarily good for commerce.  So our exporters to the UK should be taking immediate and urgent steps to strengthen their links with the EU (as many will have been using the UK as a convenient entry point).  Investment decisions should favour the larger EU market, and that will adversely affect the UK.  When you only have limited resources, you should be concentrating on the big prize.

There will always, of course, be money to be made in niche markets.  The UK for now will certainly be one of them, and as it devolves into it’s constituent parts, each will have to be separately considered.  But that again favours concentration on the EU in the meantime, as the entry requirements of that market is harmonised.

While the outlook will be uncertain and the opportunities more fragmented, the need for good strategic choices becomes important.  As lawyers, we do have expertise in negotiating contracts, advising on opportunities and the available options, and the trained ability to weigh and consider the best next step to achieve a desired outcome.

Even a political event on the other side of the world can provide opportunities.  Legal advice can be extremely important, in making the most of them.

You can read more about Ross Dillon here.

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