Speech for Reagan Republicans
Date: June 30, 2016
Location: Fedora Restaurant, Coeur d’Alene, Idaho
Author Bio: Arthur B. Macomber is the managing attorney for Macomber Law, PLLC. His undergraduate degree in business was procured at George Fox University. Prior to attending the University of California Hastings College of the Law, he enjoyed 25 years in business, real estate, and construction. Macomber Law focuses on real property, land use, water, and construction law.
Topic: The U.K. Vote to Leave the European Union, a.k.a. BREXIT
Good afternoon, my name is Art Macomber, a local attorney. I want to thank the Reagan Republicans for allowing me to speak today on this challenging topic.
The topic is last week’s vote in the United Kingdom to leave the European Union, commonly known in the Twitter-amenable shorthand, BREXIT or British exit. As you may know, the United Kingdom includes four countries: England, Scotland, Wales, and Northern Ireland, and its full name is the “United Kingdom of Great Britain and Northern Ireland.”
The topic is very challenging, because it has significant economic and political consequences, even for some in Kootenai County. Beyond the direct economic and political consequences of the U.K. vote, there are also being conjectured many parallels for United States global and domestic policies. In order to sort this out, and since I was requested to speak on the topic late last week, I have attempted to educate myself on these matters, so that you may not only enjoy a fine lunch here at Fedora’s, but also so that you may become as erudite as I and hold forth intelligently at your next cocktail party or Fourth of July celebration.
In order to give us some structure, I will start with history, and then move on to economics, and finally, because this is the Reagan Republicans, I will end up with politics, including some of those conjectured parallels I mentioned earlier.
As with many governing structures worldwide, we begin with World War II. World War II was devastating to Europe, and many from Belgium and the Netherlands through France and Italy were quite nervous about the German power rising from the ashes of Hitler’s Reich. In September 1946, while speaking in Zürich Switzerland, Winston Churchill advised, “what we need is a kind of United States of Europe.”
The puzzle was thus: how could Germany be kept from rising from the ashes of defeat, after it did subsequent to the punitive Versailles Treaty of World War I? How could Germany be stopped from building the Fourth Reich, or the Fifth Reich? Further, there were questions about how to rebuild the markets in Europe, in particular how to funnel the Marshall Plan funds from the United States for that rebuilding. France in particular was nervous about German industrial might, and so after the establishment of the Federal Republic of Germany in 1950, there was a call during May of that year for the creation of a special supra-national coal and steel community to administer the rebuilding of the industrial assets of numerous countries of Europe with the primary political goal of avoiding the rise of a threatening German state for the third time in the 20th century.
Also in 1950 was suggested a European defense community, which failed because in particular France did not want to give up its own national Army, and so in 1952 the defense of Europe was undertaken with the NATO treaty being signed, which allowed member states to keep their own armed forces, but agreed to contribute to the common defense. In 1952, the European coal and steel community took effect to help rebuild Europe’s industrial might. Between 1950 and 1960 there were various discussions all over Europe about how to accomplish various jointly-run industrial policies, including the common agricultural policy and the European atomic energy community. As early as 1956 there was a call for the establishment of a European economic community establishing a supra-national basis for numerous commercial sectors.
I think it is important to start with this history, because there are many who today and with the benefit of hindsight are overly critical of those post—World War II governing structures. We hear talk of the horrible globalists, those who are pushing for one world order, in particular with a design to undermine not only United States sovereignty, but the ultimate sovereignty of its individual citizens. Given the experience of the first two world wars, we can now see the motivation if not the benefits to creating supranational structures in the 1950s to prevent a resurgence of German power. If any in this room personally knew of or had their siblings or parents share with them the horrors of World War II, these supranational structures can be seen as quite logical and even moral political responses.
In 1960, there was established the European free trade area, and in 1962 the first rejection of the United Kingdom’s application to become a part of the European governing structures as they were evolving. In 1967, Britain applied again, but suffered a summary rejection by France, and only after French President Charles de Gaulle resigned did Britain reapply in 1969, eventually becoming a member of the European Economic Community in 1973.
There was never written and there does not exist today a written constitution for the European Union. There are many difficulties presented by this lack of a written document, one of which is to have the member nations constantly negotiating, some would say bickering over such things as the allowable tread on new car tires, the wattage in lightbulbs and hairdryers, as well as internal member state fiscal tax policies.
Overall though, we see three stages to the formation of the European Union. It is important to review these steps, because the proper response to too much government is not to burn down the house, but to deconstruct it.
The first step was the creation of a common market, which primarily concentrated on getting rid of export controls between the member countries, and setting up systems so that countries outside the community could trade with those inside. In such a market, states could set up free trade areas, where each country agreed to allow goods from the others to enter free of duties and tariffs, while goods from countries outside of the community were still subject to each country’s own system. At the next level was created a unified system of external tariffs so that once, for example, United States goods entered the common market zone, those goods could circulate freely among all the members once they’d cleared the customs of any one country. The common market has one more component, and it leads us to the cry from some in the European Union the other day that Britain was free to leave, but it would lose the benefit of the four liberties of the union, freedom of movement of goods, services, labor, and capital.
Once the borders were addressed, the planners of the European Union realized there were direct and indirect obstacles to the free flows of goods, services, labor, and capital. Direct obstacles included for example individual member state internal tax systems, where sales taxes directly penalized goods imported from a member nation, and these were finally dispensed with by the adoption of the value added tax. Also, and in particular troubling to those who still respect private property, there remained numerous private restrictions directly discriminating against foreign goods, which had to be abolished to assure the free movement of goods among the member states. The nature of the indirect obstacles had to do with things like replacing national rules with supra-national rules, a.k.a. community rules, the harmonizing of national laws, and the mutual recognition of each other’s different rules.
The second step was the creation of the internal market, the “community market,” to unify the some 300 million people then in Europe in the 1980s. This second step had three parts, the removal of physical barriers, like customs stations at national borders, the removal of technical barriers, such as agreeing on standardized weights and measures, and removal of fiscal barriers, which involved the coordination among member states of fiscal legislation that would apply to each state internally. The removal of these internal barriers is sometimes called “harmonization.” It is in fact this very harmonization process over the last three decades that started to chafe on United Kingdom citizens, because anytime power is centralized and rules are made from a centralized political power, regional differences are by necessity either irrevocably altered or destroyed.
In Britain, the EU-required “free movement of labor” mandated a cap of 100,000 new immigrants into the United Kingdom each year. Putting aside the issue of how so-called “free movement” involves a government-imposed limit, last year over 330,000 immigrants crossed into Britain because it had a stronger economy than was available for jobseekers on the continent. To make matters worse, these immigrants were not looking for a British way of life, but were looking to establish enclaves of their own culture in Britain while taking advantage of the vast array of social benefits built up in the United Kingdom since the 1970s.
In the European Union, they call it harmonization when the member states public policies are bent to those of the multi-state governing bodies in Brussels. We see a similar harmonizing drive in the United States, where Democrats and those on the left are much more comfortable with the imposition of federal law to wipe out regional differences, as opposed to allowing each region build and live within the value structure and financial capabilities of its own culture. Here in Idaho we are not only expected to govern ourselves with a “blue state” level of complexity, but also must be able to pay for it, even if it means slipping the noose of federal funds onto the necks of our children. In United States history, the impetus for the exercise of a concentrated federal power was of course originally the eradication of the slave power, and then the deconstruction of the Democrat Party’s Jim Crow laws in the South. From that springboard came the constant call from the left for the federalization of everything in this country, because as we all know those darn States can’t be trusted.
The third step to the creation of the European Union had to be then a coordination of economic and monetary union amongst the member states, so that the market community would not be subject to economic distortions arising from currency fluctuations between for example the Franc and the Pound, and differing economic goals of the individual member states. The move to a single currency, what we now call the Euro began in mid-1990 with the abolition of exchange controls in most member states and the entry of the United Kingdom in the exchange rate mechanism of the European monetary system. After 1994, no member state was allowed to impose restrictions on the free movement of capital, except by permission of the European Council. In Europe, as in Kootenai County and Coeur d’Alene today, freedom means you get permission before you invest your capital, build your business, or try to create wealth.
So, as you can see the construction of the European Union was an approximately 50-year project, and it appeared to be continuing apace until the spectacular economic downturn starting in approximately 2007. The European Community today has 28 member states and some 440 million consumers.
Now that we have the history, let’s move on to some of the economic aspects of the European Union today. Some of the best numbers we have are from 2013 from the Office of the U.S. trade Representative in the executive branch, although I must admit some of these numbers came from the last four days of the Wall Street Journal.
Today, approximately one-half of total gross domestic product for the planet Earth comes from the combined economies of the United States and the European Union, with a slight edge going to the European Union. Total imports and exports of goods between the United States and the European Union totals about $650 billion a year. In terms of services, the United States and the European Union import and export to each other approximately $360 billion worth of services annually.
Part of the United States’ problem with the BREXIT issue is that U.S. exports to the United Kingdom are 47 billion annually, while to Germany we export 47 billion, 43 billion to the Netherlands, 32 billion to France, and 31 billion to Belgium. This means the United Kingdom is a heavy hitter for the United States, and the United Kingdom is the fifth largest economy in the world. This is why it is very insulting, especially considering our common cultural heritage, for Pres. Obama to say that Britain was going to have to “go to the back of the queue” in trade talks if the Leave vote won. If anything, we should recognize that the United Kingdom is going to have a rocky road ahead, and we should step forward to immediately initiate unilateral trade negotiations to give special attention to the country which gave us the Magna Carta, and our common law heritage. The United States is not hindered by having to wait for Mr. Cameron to step down, for a new prime minister to invoke Article 50 of the Lisbon Treaty and the triggering of the two-year time frame for Britain to leave the European Union. The United States has the power and should, to the extent our current treaties allow, act today to lay the groundwork for continuation of strong trade with the United Kingdom.
In 2013, the United States imported more goods from the European Union than any other country except China. Imports to the United States from the European Union are as follows on an annual basis: Germany 114 billion, United Kingdom 52 billion, France 45 billion, Italy 39 billion, and Ireland 32 billion. And the reason why Germany’s Angela Merkel is being less critical of the U.K. vote than other European Union member states is because approximately 60% of Germany’s exports stay in Europe, with 100 billion in exports going to the United Kingdom. Unfortunately, in my perspective, Germany’s reluctance to look in its own mirror after World War II has also prevented it from seeing its own political errors in opening its borders to uncountable millions of undocumented immigrants.
From the 2015 Trade Statistical Guide from the European Council we can compare the gross domestic product (or “GDP”) of the United States with that of the 28 member European Union. Presently, the U.S. dollar and the euro currencies are within 10% in value with 1 EUR = 1.10994 USD, or, from our perspective 1 USD = 0.900948 EUR.
In 2014, the United States had a €13 trillion euro gross domestic product, and the European Union had a €13.9 trillion euro gross domestic product: we are neck and neck! The United Kingdom, Germany, and France had between two and €3 trillion euro GDP’s. The United Kingdom in 2014 generated approximately 16% of the European Union’s gross domestic product: AND IT JUST VOTED ITSELF OUT.
No wonder the daily news gives us another economic shockwave.
From an economic standpoint, these are not small numbers. One should admit the Marshall Plan succeeded in rebuilding Europe, prevented a third round of German aggression, and created and invigorated a trading partner for the United States that is second to none: the European Union.
There is now a transpacific partnership agreement in the works with major Asian nations and the United States. There is also a transatlantic partnership agreement in the works between the United States and the European Union. There is NAFTA. There is the WTO to smooth out difficulties that arise between nations, so that we don’t have to undergo trade wars. The Republican Party with solid roots in Adam Smith and Edmund Burke has historically encouraged free trade among nations, and some of these structures are healthy.
However, we should not properly term the numerous and intricate inter—governmental treaties as free-trade, because free trade in a classical sense was either done between guilds or private corporations created by or given the blessing of governments, such as the East India Tea Company, or was carried on completely by private individuals, subject only to import and export duties and tariffs. In short, over the past 200 years world trade has evolved from primarily private relationships to publicly-controlled relationships dominated by politics involving much more than simple charges for bringing goods across borders. We should not be calling it “free-trade,” because there is not much free about it at least from the perspective of private property owners of goods, services, capital, or labor. It is important to keep this in mind.
Then, in 2016 we get Donald Trump, who lambastes free trade, in particular trade agreements with not only the European Union but with the Pacific Rim nations, Canada, and Mexico. In my view, it is very odd to have Mr. Trump representing Republicans but taking a traditional Democratic line, which is to be against free-trade and for protectionism generally. Mr. Trump is taking a nationalist view of America the Republicans have not supported for many decades, if not generations. I am pretty sure that “making America great again” does not have to do with closing our borders and damaging long-term trading partnerships. But, before we tackle these political subjects, let me say one or two more words about the economic picture.
As the European Union evolved, it took on many of the more unfortunate characteristics of large governmental organizations, but it had no written constitution to rein in the type of ambition we see when politicians are allowed to exercise too much control the operation of free societies.
One of those is the increasing complexity of rules, which I have spoken about from this platform related to Idaho’s own 722 different sets of executive branch rules. Today, every jurisdiction, from the city to the county to the state to the federal power — has intricate sets of rules for nearly everything we do. When we layer on unilateral and multi-lateral treaties among nations, which at least under the United States Constitution take precedence over every other law except the Constitution itself, the complexities of opening a single business, much less one aspiring to do business over national borders can lead to a form of uncertainty that causes a freezing of capital and labor that are the primary symptoms of a bureaucratic sclerosis that many people discuss but few know how to address. The United States addressed some of these types of problems in the 1970s and ‘80s with the deregulation of the airlines, trucking industry, natural gas industry, and the telecommunications industry. However, today the United States under Mr. Obama is on a renewed binge of regulation, and the BREXIT vote should give us pause.
In the United Kingdom today, there are similarities between the economies of those countries and the United States in the destruction of the middle class, the increasing divide between the rich and the poor with a loss of social mobility between classes, and the difficulty of starting and maintaining a business in the current regulatory environment. The United Kingdom has seen the loss of manufacturing jobs, and the flows of its countrymen and capital moving to the city from the rural areas.
In my view, the tipping point for the BREXIT vote to Leave was immigration. Even though the United Kingdom is not part of the Schengen Zone, the flood of immediate or just arriving immigrant jobseekers became overwhelming to not only the public and private organizational systems of the U.K., but also presented threats to the culture because those immigrants did not conduct themselves as assimilating immigrants, but clung to characteristics of those who wanted to keep with their own tribe.
For those of you that are not familiar with it, the Schengen Zone is an area from the southwestern tips of Portugal and Spain all the way up to the northern fjords of Norway that allows for free movement of people by anyone with a Schengen Visa without being hindered by individual member state border controls. The Schengen Zone covers every state in the European Union, except for the United Kingdom, Ireland, Romania, Bulgaria, and Cyprus.
Just last year we heard of the spontaneous formation of vast refugee camps near Calais France, which is near the opening to the tunnel under the English Channel. Hundreds if not thousands of primarily Middle-Eastern refugees and immigrants were trying to reach English schools, the English national medical system, and the renowned welfare system that has sprung up in the English socialist state since the 1970s. Because the British economy was succeeding better at recovering from the 10-year recession gripping the European Union, everybody and their brother wanted to get to London. So, they came, they saw, but they did not conquer.
In my view, several factors were behind the BREXIT vote, but the tipping point was immigration. Therefore, let’s talk about politics.
First, let me tell you that I have not visited the United Kingdom, although I have some friends there, but I cannot speak from personal knowledge. I have read history, and am aware of the stalwart characteristics of the people of the United Kingdom. There is not only our own heritage in this country of the moral toughness and hard-working characteristics of the Scotch-Irish, but there are stories from the London blitz, the London subway bombings, and numerous other instances of what we call the British “stiff upper lip.” The Brits are tough and independent, and as cosmopolitan as any people on earth.
Therefore, and given this history, we have to look beyond these accusations of fear of aliens and other such nonsense. Let me tell you that the people of the United Kingdom fear little, much less a few immigrants with a different culture. It was the British Empire upon which it was once said that the sun never set, so let’s not buy the baloney that the British are not courageous and outwardly facing people. The BREXIT vote was not due to xenophobia.
As in the United States, the Western cultural values and the rule of law that are inherent in common law countries allowed Britain to absorb immigrants as well or better than any other nation. However, the rate of absorption needed to be limited, especially when those immigrants were not interested in assimilation. When immigrants want to destroy your culture and supplant it with their culture there will always be resistance. You could say that importing English culture by the British Empire, or American culture by the United States should suffer the same criticism, however we are talking apples and oranges aren’t we, because the wealth-creating markets and stability of the rule of law that the British and the Americans have exported have been beneficial at raising the standards of living and bringing due process and good governance to countries throughout the globe. There is a reason why India is doing so well, and it is because of the foundations laid for 100 years by the British Empire. Let’s stop pretending Western culture is not superior, because the historical evidence shows otherwise. There is no need to be cocky, but let’s not ignore good evidence.
So politically I see two primary drivers of the BREXIT vote.
The first has its roots 20 or 30 years ago, which is the slow accumulation of more intricate inter-governmental rules governing private property, private contracts, and as they say in the European Union the “free movement of goods, services, capital, and labor.” Unfortunately, like the use of the term “free trade,” there is really no free movement whatsoever, unless Brussels allows it.
There is a parallel here, because in 1776 the English colonies fought a revolution because they were being taxed without representation from the English Parliament, and today the people of the United Kingdom voted to exit the European Union, because their lives were being over-regulated from Brussels, a sort of regulation without representation. Now in the 1776 example, there truly was no representation in Parliament, whereas today the United Kingdom did have representation in the European Union. However, being one of 28 countries did not really give the United Kingdom, or more properly England where the Leave vote was concentrated — much say so about how things worked. This is similar to the way being one of 50 States as Idaho is today does not give us much of a say over how things are done in the United States. The British, being an independent-minded people, got tired of being told by people on the continent how to run their country, and so they voted to get out. I am not saying that Idaho needs to consider IDA-GO out of the United States, but what we need to do is reinvigorate our federalist structure using the 10th amendment.
The second driver of the BREXIT vote was the rapidity with which the so-called “free movement of labor” overwhelmed primarily the English systems in the United Kingdom. It is important to remember that Scotland in particular puts a heavy drain on English finances for social welfare systems, and so in addition to England’s own welfare systems, including the national medical service in England that has Britons standing in line for 10 weeks to get a standard medical operation, the United Kingdom still had to make its payments to the European Union, and those payments were becoming more difficult to make after a 10 year recession.
With that economic backdrop, the tripling of annual immigration into England, graphically illustrated by the crowds of immigrants gathering in northwestern France to get there were bringing numbers to the British island that could not be absorbed. The so-called “free movement of labor” was choking England. Further, there have been numerous instances of the outright defiance of some immigrants at the thought of assimilating into the culture of the United Kingdom. When you have immigrant enclaves, purposefully separating themselves into tribal neighborhoods, coupled with calls for respect for immoral, patriarchal, dysfunctional, and overly-punitive Middle Eastern Sharia law, you can see how even the British had had enough.
Conclusion: So what’s the path forward? In the view of many, including this commentator the uncertainty generated by Mr. Cameron’s decision to put off triggering Article 50 until his successor takes office is bad policy. At the end of a 10-year recession, just when people are starting to climb out of it, the commercial uncertainty created by delaying getting a new regime in place could be devastating. So Article 50 should be triggered immediately, and the United States should immediately undertake unilateral negotiations with Britain to help them through the rocky period ahead. Therefore, what the Republican standard bearer should do is state unequivocally that Pres. Obama’s call to put the British “at the back of the queue” is wrong economically, politically, and morally. “Putting America first” needs to be done right now by putting the United Kingdom first. America always prospers to the extent we lead in the world, so I think we ought to get to it.
Thank you for hearing these thoughts today. Does anyone have any questions or comments?
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