Abstract
Following the impressive economic dynamism of the United Kingdom and particularly of the City of London in the last decades, as well as the imposing economic and political ascent of the European Communities and lately of the European Union , the “Brexit ” referendum on 23 June 2016 endorsed a growing popular Euroscepticism and disaffection, particularly with the recent trajectory of the European integration process, and caused a huge shock, namely to the United Kingdom and the City, as well as to the EU. Furthermore, it disrupted the long-lasting expansion trend of international political and economic cooperation and integration experienced worldwide, including in Europe.
Nothing will ever be the same after the “Brexit” vote, and one of the most interesting and decisive issues on the theme consists in inquiring if none, only one or all of them—the United Kingdom and the City, and the EU—will recover promptly and vigorously enough in an appropriate way to ensure general prosperity and political success in the context of the actual and future process of “globalization”, or "(quasi-) globalization".
The text focus on the impact of awkward “Brexit” on the European Union in the context of international economic and political cooperation and integration process, that is, “globalization”.
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Notes
- 1.
The text refers chiefly to the international economic integration process that occurred on the European continent following World War II, with the creation of three European Communities (ECSC, EEC and EAEC), which later led to the current European Union (succeeding the EEC and remaining to this day, such as the EAEC; the ECSC lasted for 50 years, from 1952 to 2002, under the terms of the respective founding Treaty). In Europe, in addition to the mentioned integration process, by far the most important and the object of numerous replicas throughout several continents, it is worth recalling the immediate predecessors, based fundamentally on international cooperation, with and around the Organization for European Economic Co-Operation (OEEC) , including the European Payments Union (EPU) and the European Monetary Agreement (EMA), inspired and funded by the United States, through its Marshall Plan , as well as other later experiences in cooperation and integration, whether in the Western part with the European Free Trade Association (EFTA), founded in 1960 by initiative and influence of the United Kingdom, whether in the Eastern part, with the COMECON (Council for Mutual Economic Assistance) , founded in 1949 and which lasted until 1991, under the initiative and guidance of the Soviet Union, encompassing the countries in its sphere or bloc of influence (mostly as a reaction to the Marshall Plan and subsequent creation of the OEEC).
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As today, the 1947 GATT’s purpose was the international trade of goods, with exceptions that were increased as it was applied and where “self-limitations” on exchanges were accepted and several exceptions claimed, many with doubtful conformity as to the multilateralism in force, up to the change of the Uruguay Round, with the approval of the agreements that set up the World Trade Organization (WTO) on 1 January 1995. Cf. Herdegen (2013), Qureshi and Ziegler (2011), Carreau and Juillard (2010), Tamames and Huerta (2010), Lowenfeld (2008), Mota (2005), Hoekman and Kostecki (2001), Jackson (1997).
- 5.
In the Soviet Union, Eastern Europe and China, whose economies were planned by the state at central level, state-owned companies followed the government decisions on the production and distribution of goods. In these countries, international trade was of lesser relevance than in countries with a market economy, but they also resorted to international economic cooperation , namely, within the framework of the CMEA, or COMECON—Council for Mutual Economic Assistance, created in 1949 upon initiative of the Soviet Union, and which remained in place until 1991, involving the Eastern European countries and communist countries from other parts of the world that were under the Soviet Union’s political and economic influence. Initially this was a replica of the US Marshall Plan for European reconstruction, which gave rise to the Organization for European Economic Co-operation (OEEC), which preceded the European integration process that developed from then to date, whose cornerstones were the three European Communities created in the 1950s (in 1951, by the Treaty of Paris, and in 1957, by the Treaties of Rome) in Western Europe, which led to the current European Union, as well as the Organization for Economic Co-operation and Development (OECD) , in 1961.
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The European Union (EU, at the time the European Communities) promoted from the onset active cooperation for development. The 1957 Treaty of Rome envisaged the creation of a European Development Fund to support Member States’ overseas territories and colonies, which meanwhile became independent. This policy expanded later and included a greater number of African, Latin American and Asian countries, in addition to neighbouring European regions. In 2000, the Cotonu Agreement was signed between the European Union and the African, Caribbean and Pacific countries (ACP), to last for 20 years, with the goal of combining efforts to eradicate poverty and help recipient countries integrate in the world economy. The European Union is also present in other areas of the world through complementary financial instruments, such as the Development Cooperation Instrument and the European Neighbourhood and Partnership Instrument, in the context of the United Nations (UN) Millennium Development Goals , with the aim of reducing poverty by 2015. Seventeen (17) new Sustainable Development Goals to be reached by 2030 replaced the eight (8) Millennium Development Goals, where among other goals we have the eradication of poverty and hunger, as well as quality health and education for all human beings.
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David Ricardo (1817, 135) argued the theory of “comparative advantages ”, using as reference the explanation offered by Adam Smith (1776) on “absolute advantages”, putting in crisis the prior vision of Mercantilism, which had dominated from 1500 until up to around 1750. The developments of Ricardo’s theory are still at the core of the International Economics discussion. Cf. Krugman et al. (2012, 24–47).
- 8.
Economic integration tends to occur at a restrictive and “local” scale at first, and only then does it become larger geographically and materially, until it gains a “national” dimension, by a decisive boost by the State. Without prejudice to the various specificities. Effective integration, that is, not just economic and social but also political and cultural, depends on multiple circumstances, and, namely, the geographical extension and continuity of the territory and the nature and effective exercise of political power. Depending on the fields of integration and the specificities of the State, some attained it long before others. Some countries continue to apply restrictive commercial measures within their territory that are identical to those required at external borders.
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The EFTA (European Free Trade Association) was set up under the Stockholm Treaty in 1960. Its signatories, in addition to the United Kingdom, were Austria, Denmark, Norway, Portugal, Sweden and Switzerland. Iceland joined in 1961, Finland in 1986 and Liechtenstein in 1991, while Denmark and the United Kingdom exited EFTA in 1972, Portugal in 1985, and Austria, Finland and Sweden in 1994, in all cases to join the European Communities, nowadays the European Union. The Treaty of Porto (Oporto) of 1992 preview the establishment on 1 January 1994 of the European Economic Area (EEA), between the European Communities/European Union and the EFTA member States, with exceptions. According to the agreement, the European Union Law dispositions on the Single or Internal Market, mainly the four European economic freedoms (free movement of goods, capital, persons and services, including the fredom of establishment), as well as the European competion law, are mandatory. Consequently, as of 2016, the European Union internal market law is applied to 31 States: the 28 EU member States and three EFTA members: Iceland, Liechtenstein and Norway; it is also partially applied to Switzerland in fulfilment of the bilateral agreements celebrated with the EU.
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The North American Free Trade Area (NAFTA), set up by Canada, Mexico and the United States of America on 1 January 1994 followed immediately from the Canada-USA Free Trade Agreement, which entered in force on 1 January 1989.
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Article 9(1) of the 1957 Treaty of Rome, which set up the EEC (TCEE), established that [the Community] “shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries ”. This wording of the original Treaty of Rome matches the one we still find today in article 28(1) of the Treaty on the Functioning of the European Union (TFEU), the new name of the 1957 Treaty that set up the European Economic Community (EEC), renamed in 1992 (in the Treaty of the European Union or Treaty of Maastricht) as Treaty of the European Community (EC) and, lastly, in 2007 (in the Treaty of Lisbon), as Treaty on the Functioning of the European Union (TFEU).
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International or “regional” economic integration , in the sense of being developed at interstate level among sovereign States but not at a universal scale is different to (i) internal or national economic integration, which operates within the territory of each sovereign State, that is, with a more restrictive geographical scope than that set up between more than one State, depending on the size of the national territory; it is also different to (ii) “global” or “universal” economic integration, which is global in scale and theoretically involves (at least nowadays or in the days we can forecast), all the countries and territorial points of the Earth, which, in that imaginary framework, would form a single world economic bloc, without any discrimination or internal barriers on trade based on the origin of the goods or the nationality of the producers of those goods or service providers, when national borders had to be crossed... The current international economic order, run by the WTO, can be seen as an attempt towards gradual global economic integration. Cf. Viner (1950), Tinbergen (1956), Balassa (1961), Mansfield and Milner (1997), Yamamoto (1999), Knox et al. (2003), Pitta e Cunha (2004), Stiglitz (2006), Renato Gonçalves (2010, 2016), Porto (2016), Paz Ferreira (2016).
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Article XXIV-4 of the GATT establishes that “the purpose of a customs union or of a free trade area should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other contracting parties [retius of other Member (States)] with such territories”.
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Article V-A of the GATS establishes that the Agreement “shall not prevent any of its Members from being a party to an agreement establishing full integration (...) of the labour markets between or among the parties to such agreement, provided that such agreement: (a) exempts citizens of parties to the agreement from requirements concerning residency and work permits; (b) is notified to the Council for Trade in Services”, and a note is then added to say that “Typically, such [full labour market] integration provides citizens of the parties concerned with a right of free entry to the employment markets of the parties and includes measures concerning conditions of pay, other conditions of employment and social benefits”.
- 15.
There are many studies on the critiques, both general and specific, to the prevailing international economic order following World War II and particularly in the last few decades. In addition to the ones already mentioned, cf. E. Paz Ferreira (2004), Held and Kaya (eds.) (2007), Tamames and Huerta (2010) and, specifically on the international monetary and financial system, Eichengreen (2007).
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Cf . WTO (2008, Part II).
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We continue to refer here mainly to the international economic integration process that occurred on the European continent following World War II, with the creation of the European Communities which later led to the present European Union.
- 21.
From the security and defence perspective, the situation has changed deeply in the last few years, more recently with the occupation of Crimea and other Eastern Ukrainian lands, and ensuing Russian annexation of that peninsula in 2014. At a first instance, Russia officially denied this occupation and later, with the unilateral declaration of the “reunification” of Crimea with Russia, following a referendum that was deemed illegal by a United Nations General Assembly Resolution. Only nine countries in the world recognized this annexation: Zimbabwe, Venezuela, Syria, Nicaragua, Sudan, Belarus, Armenia, North Korea and Bolivia.
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- 23.
Ghemawat (2011) offers several examples of “resistance” to the phenomenon of globalization: the letters sent by post cross-border represent about 1% of all letters, the length of international phone calls represents around 2%, internet traffic between countries is lower than 2%, the patents held by OECD countries that involved international cooperation in research correspond to about 7.5%, university students that study abroad are about 2% of the total, the intensity of international trade measured by products and services exported from one country to another, in terms of GDP percentage in 2009 was about 23% and foreign direct investment that crosses borders in the proportion of gross fixed capital formation corresponds to 10% of the total, on average over the last few years. There are obviously major differences between countries and beyond this, the data put forward correspond to global averages. In any case, it seems certain that the phenomenon of globalization does not reach the scale that is often currently mentioned.
- 24.
Cf. The Economist (February 26th 2015).
- 25.
After seven years of negotiations, the Trans-Pacific Partnership (TPP), which combined Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States of America (up to 23 January 2017) and Vietnam was signed in 2016, but its effectiveness was completely compromised when the United States drew out of the agreement by decision of the new President, Donald Trump . As for the Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union, negotiations should continue until at least 2019–2020. The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union was signed on 30 October 2016 and later approved by the competent parliaments, starting with the European Parliament on 15 February 2017.
- 26.
The United Nations Conference on Trade and Development (UNCTAD) is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
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Gonçalves, J.R. (2017). Brexit and the European Union in the Context of Globalization. In: da Costa Cabral, N., Renato Gonçalves, J., Cunha Rodrigues, N. (eds) After Brexit. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-66670-9_3
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