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Lilico: Yes we Canzuk - A post-Brexit possibility

Full text of a speech given at an event hosted by Political City in London, on September 26th, 2016.


I believe that, for many years, Britain did quite well out of being in the EU. If you are the global hegemon – the US in the 1950s, the UK in the 1850s – the trade deals you make are a projection and reflection of your power. You tell other smaller countries that and how you are going to trade with them, and they like it. If you are a small country willing not to become embroiled in the struggles of Great Powers, then you can make your trade deals on a no-questions-asked, if you’ll deal with me I’ll deal with you basis.

But if you are medium-sized country, eager to influence the course of the world, what you do is to find other medium-sized countries, with similar values and objectives to yourself, and you team up, achieving more in combination than you ever could alone. You relationship is rooted in a geopolitical partnership. You then make trade and other kinds of cultural or social exchange deals so as to strengthen and foster that basic partnership.

It is a mistake to believe a country’s most important geopolitical partnerships must reflect their most important trade partnerships. For example, when the UK joined the EEC, only around 20% of its trade was with those six founding members. But that partnership was nonetheless deep, fundamental and influential. In the EEC, the UK participated in demonstrating that Western Europe could provide an economic partnership, independent of the US, to face off against the Warsaw Pact. It was able to absorb post-dictatorship Spain, Portugal and Greece. Later, after the fall of the Iron Curtain, it was able to entrench liberal democracy in post-Warsaw Pact Eastern Europe.

These were great achievements. Along the way, Britain was able to influence its EU partners, embedding via the EC and EU a regulatory and economic philosophy much more in tune with traditional British norms, built around free trade, market liberalisation, privatisation, opposition to state aid, openness to international capital and deregulation.

In the end, however, we didn’t have quite enough in common with our EU partners to keep on with them in the project of ever-closer union. Our constitution, legal system and political culture were just a little too different. We couldn’t join Schengen. We couldn’t join the euro. We didn’t want a constitution or an elected President of Europe. We’d gone as far as we could. And it didn’t help that, late in the game, we found ourselves joined with countries with much lower GDP per capita than ours.

If, as I do, you believe that is why we are leaving the EU, and if you also agree that medium-sized countries, seeking influence, as the UK does, need geopolitical partnerships with other medium-sized countries with similar values, the natural question becomes: What medium-sized countries might there be, beyond the EU, with whom we could form an EU-style partnership that we might have more in common with, constitutionally, legally, in terms of political culture, and in terms of GDP per capital?

Put that way, the question almost answers itself. Canada and Australia are medium-sized countries, with values, constitutions, legal systems and political cultures as close to the UK’s as any country in the world. If we add in New Zealand, we get a nice acronym: CANZUK. As well as very similar constitutions and cultures, their income levels are fairly similar: in 2014, the U.K. had a GDP per capita of about US$46,000, versus US$44,000 for New Zealand, US$50,000 for Canada and Australia a little higher at US$62,000.

They are also the countries Britons like most, by a large margin. A 2011 YouGov survey found that Australia, New Zealand and Canada are regarded as “especially favourable” by 48, 47 and 44 per cent of Britons. The next most-favoured country, the U.S., was way behind at 31 per cent, and the most-favoured EU member, the Netherlands, had only half the favourability of those three countries, at 24 per cent. The feeling is fairly mutual. A 2014 BBC survey found 80 per cent of Canadians and 73 per cent of Australians regard the U.K.’s influence as “mainly positive.” (By way of reference, that same survey found only 43 per cent of Canadians regard American influence as “mainly positive,” versus 52 per cent who regard it as “mainly negative.”)

One way to think about the compatibility of political culture is to ponder the following scenario. Suppose you were a standard 2015 Labour voter (let’s abstract from Corbyn-related issues for this purpose, and assume Ed Miliband were the Labour leader). How would you rank the following options: Being governed by Theresa May’s party, Francois Hollande’s party or the Australian Labor party? Or if you are a Conservative, how would you rank being governed by Ed Miliband’s party, Angela Merkel’s party or the Canadian Conservative Party? I’ve not seen surveys, but I’d bet heavily that few British voters would prefer being governed by their EU counterpart parties over their domestic rivals, but many would prefer their CANZ sister parties over the UK rivals.

Perhaps I don’t really need to prove compatibility. Maybe you think size is what counts? I’ve already illustrated that geopolitical partnerships don’t have to begin with overwhelming trade. The EEC didn’t, for the UK. But if the partnership is really to achieve what’s wanted in terms of projection of values, it had better have some scale.

CANZUK would certain have that. Between them these four countries would control a surface area of more than 18 million square kilometres, the largest in the world, exceeding even Russia’s 17 million. Their combined population, at 128 million, would be the world’s 10th largest, just ahead of Japan. Their combined military spending of around US$110 billion would be the world’s third largest, behind the U.S. and China but well ahead of Russia.

At US$6.5 trillion in combined GDP, the CANZUK countries would constitute the fourth-largest group in the world, behind the U.S., EU and China. At nearly two-thirds the combined GDP of China, no one could deny that a CANZUK economic grouping would be economically significant. Total global trade of these four countries would be over US$3 trillion, versus around US$4.8 trillion for the U.S., US$4.2 trillion for China, or US$1.7 trillion for Japan. These are big numbers by global standards. There is no question that, working together, the CANZUK countries would be one of the world four top powers, with their own unique values and objectives to project.

How might it work in practice? The easy places to start would be with trade deals, a deal on free movement of persons and a new military alliance. The Canadian-EU trade deal may well go the way of TTIP now but would constitute an easy start-point for a UK-Canada deal. There are already voices in New Zealand and Australia agitating to incorporate the UK in their Closer Economic Relations Trade Agreement. Free movement has heavy support in polls in CANZ (70%+) and a modest majority in the UK. There are obvious military interests. Canada could do with someone with ships with big guns on to help enforce its claims on the North-West passage and to protect it if the Arctic melts more frequently. Australia could do with a nuclear shield more credible than that offered by the US.

But then what? I’d favour beginning with these three and having an “ever closer union” concept, that would encourage the participants to keep deepening the relationship as they felt it was helpful so to do. That might take very limited forms, such as caucusing in votes on international regulatory fora or in bodies such as the UN. Or it might mean forming common institutions to agree future regulations or legal convergence. We might not need nearly so much of that as the EU has done. After all, the EU was trying to force convergence between countries that differed in many important ways, and so needed quite a high degree of harmonisation. But with CANZUK affinities would be much more natural, so we might find we evolved along very similar paths, once we started paying special attention to each other, without the need for much mandating of convergence.

Nonetheless, perhaps there would be some common regulatory institutions. Perhaps one day even some version of the European Commission and European Parliament. Who knows? Perhaps many decades hence we’d even fancy a currency union? I don’t know.

But I do think it would be important to be clear, from the start, that any governing institutions would not be based in the UK. CANZUK is not any kind of reinvention of the British Empire. It is an arrangement for tomorrow, when the internet, low-orbit travel, contracting-out and services-based trade make geography less relevant and ease of getting along dominant. I would suggest therefore, that much as the EU’s institutions were consciously placed outside the Big 3 EEC6 members, in Belgium, any CANZUK institutions should be placed outside the big 3 CANZUK members, in NZ.

A CANZUK Union would allow each of its big 3 members to escape regional political domination — by the EU; by the US; by China. It would allow them, by working together, to defend themselves without relying upon others and to stand up for themselves in the world, projecting their own, different values internationally in global regulation, global trade negotiations and international conflicts. When CANZUK spoke, not everyone would agree, but everyone would have to listen. Shall we try?

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