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Economics & Finance - BLOG

The Best-Case Scenario for Avoiding Brexit

Jonathan Story, INSEAD Emeritus Professor of International Political Economy |

The Brexit referendum could be a knockout victory for Cameron and Whitehall, if they adopted this simple solution.

U.S. President Barack Obama will come to London in April and say that it is in the US and Western interest for the UK to stay in the EU.

The trouble is that the EU is not in good odour with many of its most ardent supporters: Martin Schulz, President of the European Parliament, has just described the EU as a “Frankenstein” sucking democracy out of the member states.

What Schulz wants is a fully fledged United States of Europe, with a division of powers between executive, legislature and judiciary, one sovereign federation, with a large internal market, a single currency, a charter of fundamental rights, and a single defense policy.

To be fair to Obama, that is not the reason he will cite in favour of Remain. If he did, he would be taking sides in a debate that is hotting up across all EU member states, and not just in the UK. Voters remain overwhelmingly loyal to their own constitutional states, and do not want “more Europe”.

They may get it, nonetheless. Brussels has a habit of asking countries to vote until they give the right answer, sacking governments who disagree with it, or lecturing member states about democracy and human rights. The latest example is the Dutch vote against the EU-Ukrainian association agreement, which will go ahead regardless.

The “special relationship”

Obama is much too canny to get involved. He knows very well that the EU is far from popular in Europe, is a ramshackle affair with not one but five Presidents, and has ambitions far beyond its reach.

What he will point out is that, after two US military interventions in Europe’s wars, the US has a vital interest in the European project, just as it does in Japan’s future, and the prosperity of Southeast Asia. A rising China and an unpredictable Russia are challenges enough, he will argue, without the UK contributing to further disunion in Europe.

To be truthful, the official UK position on the EU is in full agreement with Schulz. In the 1972 Act of Accession, the conservative government of the time signed up to a supranational vision of Europe’s future. A European union would be the second pillar of a strengthened Atlantic alliance. This is still Whitehall’s position.

One small problem: The public

There is a problem, though. Whitehall has never managed to sell its European vision to a skeptical public. The centuries-old UK tradition is to vote the rascals in who make the laws, and kick them out if they do not match expectations. They frequently do not.

Hence, the regular pattern of alternating political parties running the country for a while, before the electorate sends them packing. The problem is that Brussels is the source of growing volumes of laws, which the UK electorate cannot sanction. The EU is an unelected dictatorship.

Not surprisingly, the British Social Attitudes Survey of 2014 records that only 15 percent of the UK public backs the Whitehall/Schulz view. In the survey, 25 percent of respondents want to leave; 15 percent want EU powers to stay the same; 38 percent want the EU’s powers to be reduced. At best, the UK public is ready to accept a minimalist EU.  And definitely, it wants to be able to sanction those who legislate on its behalf.

Obama’s dilemma

President Obama will recognize the problem. It is the same as the American colonists had in 1776: they did not want decisions to be made in Whitehall, where they were not adequately represented.

Where does this leave the President? Obama will certainly give voice to the US interest in what has been a central plank of US foreign policy since the days of President Truman. For all the talk of the US “pivot” to Asia, Europe is vital to the US world position.

But if the President endorses the Schulz/Whitehall vision of a supranational Europe, he in effect tells the UK electorate to lump it, and live with a neutered parliament.

This is an impossible demand to make of a country. No friendly ally could ever possibly propose that a country abandon its sovereignty for the benefit of the alliance. Were it to do so, the country would not be an ally, but a client.

I doubt very much that the President would advocate such a thing. What he can say is that the EU has to be founded on the constitutional states of Europe in order to be sustainable in the long term. And that is perfectly compatible with the UK staying in a reformed EU.

The best-case scenario

There are two conditions to this happy outcome. One is that Schulz’ dreams of a European great power, centred on Berlin and Brussels, is buried. The other is that Prime Minister Cameron has the wording of the 1972 Accession Act rewritten. References to the EU as a supranational body would be substituted for a reassertion of UK sovereignty.

The UK would stay in the EU, but with clear discretionary powers to analyse, amend, reject any proposal emanating from the EU institutions. This would not mean automatic rejection: but it would clearly state that the UK reserves the right to make its own laws, while listening of course to good ideas wherever they may come from.

Schulz won’t bury his dream, and Cameron won’t have the 1972 Act revised. Apparently, the Prime Minister does not want to win a massive majority in the referendum.

Were he to change his mind, Cameron would spike the guns of Leave; win a landslide victory; place the UK centre field as champion of a Europe of cooperating states, with less ideologically driven policies; and keep the UK’s position as a key player in  the US global alliance system. The referendum of June 23 is Cameron’s to lose, President Obama please note.

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD.

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Good point about the 1972 Act of Accession. But we did have a referendum in 1975 and decided to stay in.

jonathan story,

Indeed. The momentum at the time of writing in now behind Leave for June 23, though. As Donald Tusk, President of the Council, has pointed out, the peoples of Europe do not want a supranational, let alone a federal Europe. Another way of making the same point is "whom the gods would destroy, they first make mad." Europe is diverse, and needs a correspondingly flexible regime. The Rome Treaty may be definitely interpreted in that direction. Unfortunately, Eurodreamers have taken too much control. Their works are all around us.

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