European Economy MakeUp Lecture A Short History of

European Economy Make-Up Lecture: A Short History of Brexit © Baldwin & Wyplosz/Pech 2004

Tariff Reform • 1903: Joseph Chamberlain’s idea of a preferential tariff regime for the Empire at a time when Britain had zero tariffs with everybody. . . – – “imperial preference” so tariff reform actually meant introducing tariffs on the non-Empire countries • PM Balfour tried to find compromise to keep Tory party together • But only in 1931 “tariff reform” was finally © Baldwin & Wyplosz/Pech 2004

And today’s (2019’s) Tory Party? • Similar dilemma: Britain doing its own thing (it’s own regulation) or having frictionless trade • PM Teresa May tries to find compromise formula (free trade deal but from outside of customs union and single market) to keep Tory party together © Baldwin & Wyplosz/Pech 2004

Customs Union or Free Trade Agreement • EC went for customs union rather than free trade agreement • This forces Britain to choose between joining EEC (with common external tariffs) or continuing preferential trade with the Empire © Baldwin & Wyplosz/Pech 2004

Empire: Reason for Nostalgia or Economic Interests? • Fintan O’Toole’s “Heroic Failure” emphasizes nostalgia • Kevin O’Rourke (our speaker) emphasises – naturally - economics © Baldwin & Wyplosz/Pech 2004

1950 -1973 © Baldwin & Wyplosz/Pech 2004

Eamon De Valera Prime minister (taoiseach [“tea-shock”]) of Ireland after independence 1937 -1948 and 1957 -1959 © Baldwin & Wyplosz/Pech 2004

1973 -2001 © Baldwin & Wyplosz/Pech 2004

Empire: Reason for Nostalgia or Economic Interests? • Fintan O’Toole’s “Heroic Failure” emphasizes nostaligia • Kevin O’Rourke (our speaker) emphasises – naturally - economics © Baldwin & Wyplosz/Pech 2004

Thatcher and the Single Market Programme • Jacques Delors launches completion of the internal market with Single European Act • Important institutional changes follow, e. g. majority voting on Single Market issues. – Margaret Thatcher was the initiator in 1985 – although in 1990 she rejects moves towards greater federalism also under pressure from Eurosceptics to defend sovereignty © Baldwin & Wyplosz/Pech 2004

The UK and the European Monetary System • In October 1990 Britain joins the EMS but Margaret Thatcher is still hostile to monetary union. • In November 1990 the Europhile wing of her party mounts a leadership challenge and wins • Her successor, John Major (still from the Conservative Party), is forced to leave the EMS in 1992. • Remains a dividing issue for the Conservative Party © Baldwin & Wyplosz/Pech 2004

Economic Deprivation and Brexit • Deindustrialization affects Northern England • The Daily Telegraph is a conservative newspaper for which the current PM worked as a columnist • Austerity policies, instigated by PM David Cameron, following the 2008 -9 crisis result in a shrinking of the welfare state © Baldwin & Wyplosz/Pech 2004

More personalities and events • Dominique Cummings, main organizer of the Vote Leave Campaign • Michael Farage, leader of the UK Independence Party and the Leave. EU campaign. • Eurozone crisis: 2012 • Refugee crisis: 2015 © Baldwin & Wyplosz/Pech 2004

Set-up of the EU • Criterion for optimal currency area: common fiscal policy • Deposit insurance: bank deposits are guaranteed in case the bank goes bankrupt – considered necessary to avoid capital flight from the Southern European countries at times such as the Eurozone crisis in 2012 © Baldwin & Wyplosz/Pech 2004

The UK in spring 2019 • Remember that this interview was conducted in February 2019 • Parliament was promised a meaningful vote on the legal instruction to government which kind of withdrawal agreement (“deal”) with the EU it should seek • Parliament rejected every “deal” put before it and it resolved that “no deal” had to be avoided. • At the same time, a campaign for a second referendum had started © Baldwin & Wyplosz/Pech 2004

The UK in spring 2019 • ERG: Eurosceptic Tory parliamentary group • “Irish Backstop”: – is a clause in the (now defunct) draft withdrawal agreement agreed by the Teresa May government which guarantees that Northern Ireland remains in the single market if there is no other agreement – negotiated by the Irish prime minister (taoiseach [“tea-shock”]) Leo Varadka © Baldwin & Wyplosz/Pech 2004