BREXIT, What's Next?

By Kristel Van der Elst

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This article was published on the Huffington Post website. Click here to view it.

On June 24th, we all woke up to the Brexit future. While we knew it was plausible, for many it didn’t seem probable and for some it was not discussable. In recent weeks, however, I had the opportunity to informally discuss post-Brexit scenarios with a number of high-level decision-makers and advisors, in the public and private sectors. Here some thoughts I thought might be useful to share more broadly.

While staying in the EU would not have guaranteed an easy or predictable road for the UK, Brexit has killed the business-as-usual future. In the new bigger picture, the key uncertainties turn around the dynamics of the exit negotiation table and the evolution of the broader international context.

Without stability on both sides of the table - UK and EU - the exit may be rough, turbulent and prolonged. According to the Lisbon Treaty, once the UK officially informs the EU that it wants to leave - triggering Article 50 of that treaty - then formal negotiations must be concluded within two years. What is less certain, because there is no precedent, is how much informal negotiating might happen before Article 50 is formally invoked.

Outgoing UK Prime Minister David Cameron has said he will leave invoking Article 50 to his successor, who is not expected to be in place before October. European Commission President Jean-Claude Juncker, meanwhile, has stated that he wants the formal process to begin quickly. But some insiders I spoke with wonder if the informal negotiations could drag on for months or even years.

On the EU side, the urgency to start the negotiations is understandable. If the preparatory dance is allowed to spill into 2017, when we will have presidential elections in France and federal elections in Germany, the dance partners and their mindsets could change.. There is also the simmering possibility of more referendum demands, with candidates including the Netherlands (Nexit) and Sweden (Swexit).

On the UK side, the incoming prime minister will need to create a negotiating position that commands broad support, given the closeness of the vote and the starkness of regional polarization - Scotland and London voting heavily to remain in the EU, with Wales and other parts of England tipping the balance. Some expectations of citizens who voted leave may prove challenging to satisfy. And whatever deal is eventually agreed could take as much as a decade to implement.

None of this will occur in a vacuum. The negotiations table stands on shifting global sands - economic and governance landscapes are in flux. . A fresh financial crisis cannot be ruled out. Some posit Brexit might trigger far reaching de-globalisation and exacerbate geopolitical disputes in other world regions. Even without such extreme scenarios, instability in the Middle East, rising pressures on migration from Africa and Russian relations will continue to shape the immediate European neighborhood, which Brexit cannot escape.

The new global context of the exit negotiations is characterized by shifting powers and technological transformation. Technological revolutions - digital, robotic, artificial intelligence and bio - will continue to profoundly reshape the global economy, international trade and the competitive dynamics within generations and between societies. These global shifts are beyond the control of any one government and redefine the challenges for every government in delivering prosperity, jobs, equality and security.

Although opinions diverge on the prospects of job creation, a plausible scenario is a future of ‘jobless growth’, where wealth and consumption increase but citizens have fewer opportunities to earn a stable income through paid and permanent jobs as automation moves up the skills ladder. Surgery by robots is already reality. On the other hand, as entrepreneurship and value creation shift to the digital economy, self-generated livelihoods will become increasingly common. But can the rising freelancer economy enable societies as a whole to flourish? The nature of work and global economic activity will be fundamentally transformed over the next 20 years. Without better and more collaborative policies, demographic- and digital- divides and dividends could result in greater social and intergenerational inequalities.

In response, revenue and redistribution mechanisms will need to be rethought - the concept of a guaranteed minimum income is already being considered by some countries. New policy challenges will include how to tax knowledge and generate revenue from the freelancer economy; enable access to private data in the public interest; ensure fair trade in intermediaries (e.g. digital templates); and, rethink intellectual property in the context of the global digital commons?

Technological evolution is stripping away the advantages of being big, resource-rich, and medium skilled or low-cost labour, leaving the capacity to innovate as the only source of competitive advantage.

As ideas on new economic, social and governance models emerge to respond to these global shifts there is a risk for increased polarisation, resulting for example in economic protectionism, deteriorating social cohesion and trade wars amongst nations.

The EU and UK will not only have to work their divorce arrangements, all sides will also need to continue to cooperate on supporting societies to cope with and flourish from these wider technological, economic and geopolitical shifts.

The UK’s leave campaign won on the slogan “take control”. But in reality, no nation can really fully control its own future in a more connected and interdependent world. And no island or region can flourish alone. In deciding to leave the European Union, the UK may have created tough questions for both sides of the negotiating table: who are “we”, what do we want to “become” and are we prepared to keep collaborating to navigate the turbulence ahead?


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