RD Interview: Charles Grant, founder and head of the Centre for European Reform, discusses the fundamental change in national mindset that’s taking place in Britain, Europe and Russia

Russian President Vladimir Putin, right, listens to British Prime Minister Theresa May during a bilateral meeting in Hangzhou, China, Sunday, Sept. 4. Pool Photo via AP

For many in Britain who once advocated for greater integration with Europe, the understanding that the UK is now facing a profoundly different future after Brexit has led to active discussion about the consequences of globalization and the meaning of sovereignty in an interconnected world.

Russia Direct recently sat down with Charles Grant, a former journalist with The Economist and the founder of the Centre for European Reform, Britain’s leading pro-European think tank, to discuss the changes taking place within Britain. Grant, who also has a long standing interest in Russia, comments on the steps that Britain needs to make in the upcoming years leading up to its divorce from the EU and how Brexit may affect the UK-Russia relationship.

But even more importantly, Grant weighs in on what the UK and Russia may have in common at a time when considerations of sovereignty are beginning to play a more important role in policy than purely economic interests.

Russia Direct: For a long time you had been one of the leading voices arguing for greater British involvement in the EU and ways for the EU to change in order to facilitate British involvement. Now, it’s Brexit. Why do you think that’s happened?

Charles Grant: Brexit happened because there is, throughout the Western world, greater hostility towards globalization and its consequences, namely migration of people and free trade. There is the perception, which in some ways isn’t reality - globalization is great for successful, educated, rich people, for elites, but it’s really bad for less educated, poor people who don’t travel. That they are left behind and suffering from the inequality that stems from globalization. This is the phenomenon which explains [U.S. Republican presidential candidate] Donald Trump in America, [the National Front's President] Marine Le Pen in France, [the Party for Freedom's leader] Geert Wilders in the Netherlands and [the UK Independence Party's head] Nigel Farage in Britain.

It just so happens that Britain has left the EU because there has been a referendum on these issues. There are, of course, Britain-specific factors why the referendum, which was very close, was lost. It was lost because [former UK Prime Minister David] Cameron and [British Conservative Party politician George] Osborne ran a very bad campaign based on economic scare mongering rather than creating a positive message for the EU.

It was lost because [former Mayor of London] Boris Johnson and Farage were charismatic and more convincing leaders. And it was lost because the “out” campaign told a lot of complete lies, saying that Turkey would join the EU next year and 70 million Turks would come steal [UK] jobs. But the underlying causes were not Britain-specific. They are common to the Western world, at least to North America, Western Europe and in some ways Central Europe – a revolt against globalization and its consequences.

RD: How long is Brexit going to take?

C.G.: It’s going to take much longer than people realize. There are many different negotiations that need to take place. The first negotiation concerns Article 50 of the EU Treaties – the actual divorce settlement. Dividing up the property, assets, what rights the British people have in the EU and vice versa. That’s going to take just two years – that’s laid down by the treaty.

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But then you have to have a separate negotiation on the future economic relations. There will almost certainly be a free trade agreement, similar to the one between Canada and the EU. This will take five to seven years to negotiate. So, there’s going to be a big gap between when Britain leaves and gets the future deal on its economic relationship. What happens between these two events? So we will need the third negotiation about the interim agreement.

Fourthly, Britain needs to join the World Trade Organization (WTO) as a full member. At the moment it’s a member, but not a normal member. Normal members have their own quotas, tariffs and subsidies deposited with the WTO. And Britain doesn’t do that, because it goes into the WTO via the EU. It has to become a full member and negotiate with the roughly 160 members of the WTO. Maybe Russia would object because the relations are not very good right now, maybe Argentina will object because of the Falkland Islands. But until the UK becomes a full member of the WTO, no other country will negotiate a free trade agreement with us.

The fifth negotiation is that EU currently has 53 other free trade agreements with countries like Colombia, Mexico, South Korea, Singapore – they will cease to apply to Britain the day we leave the EU. So, during the two years of Brexit we need to hurry to do bilateral deals with these 53 countries.

The sixth deal that we need to reach concerns foreign policy, defense, security policy and cooperation on police and justice. Here we are in a stronger position, because Britain has real assets to offer. Britain has quite good intelligence services, armed forces, diplomats and real expertise on counter-terrorism. So, I think, if we want to plug into EU decision-making on these issues, our partners may well be benign to us and give us, if not a seat at the table then a seat in the back of the room, so that we can feed them our thoughts and have influence on decision-making if we are lucky.


Charles Grant, the founder of the Centre for European Reform (CER). Photo: CER

It is going to be tough for the British - we will not be getting anything better than a free trade agreement. We will not get single market entry, because we will say we will not accept free labor movement within the EU – that’s why we voted to leave, hostility to migration. The Polish plumbers were too unpopular in Britain. So, we’ll get the free trade agreement, which will cover our manufacturing, but will not do much for services.

RD: There is now a lot of talk whether Brexit will mean more integration or less integration for the remaining 27 states of the EU. What do you think is going to happen there?

C.G.: The EU has a lot of problems on its plate quite apart from Brexit. It has the refugee crisis, which I’d say it is coping with, although with difficulties ahead. It has the Eurozone crisis, which it’s just about coping with. It can recur and will recur. It has problems in Poland and Hungary, where governments seem to be embarking on policies that are not entirely in keeping with the EU vision of what democracy should involve.

And then, of course, there is a longer-term issue of difficult relations with Russia, which is not, frankly, the most urgent crisis in the EU, but it may come back in the future – what we do about Ukraine and so on.

The short answer to your question is that the EU is not going to become more integrated in the foreseeable future. There is a school of thought that it should. There are some federalists who say they would like to use Brexit to leap forward with integration. It won’t happen, because France and Germany cannot agree on the way forward. The real future of the EU is about the future of the Eurozone, and it’s difficult. And when I talk to French and German politicians, they don’t trust each other on what to do about the future of the Eurozone.

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The French view is you need to have a budget, you need to have transfer payments, whereby the rich countries subsidize the poorer countries; you need to have Eurobonds whereby you mutualize the debt of the Eurozone. The Germans hate those ideas because they think that poorer countries are grabbing their money. And the Germans say a more integrated Eurozone means more budgetary discipline, stricter rules on how much you can borrow and forcing countries like France and Italy to engage in difficult economic reforms. And the French and Italians say no to that. So, basically, they are stuck.

So what are they going to do? They are going to have a little bit of integration in the areas that are not too controversial and not too complicated. There will be some statements on defense integration – not creating a European Army, but cooperating better on defense industries, research and development and maybe having a headquarters for EU military missions in Brussels. Frankly, it won’t change much in the real world but it may make people feel happy and feel they are moving forward.

Secondly, it’s borders. They do understand that they need to have stronger external borders. They are creating a new European Border Guard and Coast Guard to strengthen the Schengen borders. It is happening  - slowly and imperfectly, but there is some progress there.

Thirdly, on the economy, they’ll talk about youth unemployment and job-creation and they will do something to beef up the so-called “Juncker Plan” on investment, and they will move ahead with plans for the capital markets union and the single digital market.

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But these are small steps. The fundamental nature of the EU will not change in the foreseeable future because there is not really a political consensus on creating a more integrated Europe. Voters in France and Germany in particular do not want to transfer powers to EU institutions. In my view, the EU will muddle through with incremental changes rather than go for a dramatic leap forward.

RD: For a long period we had a nearly Marxist view that economic interests are something that drives global politics. But we had a sequence of events, where people at various levels dashed economic interests in favor of some greater visions of political or even ideological nature. Russia decided to pretty much sacrifice its ties with the EU and the West in general, perceiving a greater interest to be pursued by reintegrating Crimea. Britain voted for Brexit, whereas all the arguments to stay in the EU were economic. But the decision was: OK, there could be economic losses, but here is a greater goal to be independent. Are we moving into an ideological world again?

C.G.: I think your analysis is correct. It is not so much that economics are irrelevant. It’s rather that voters in many countries don’t believe what the experts tell them. It is true that in the British referendum campaign most economic experts said: If you vote to leave, we will be poorer, GDP will be say 6 percent less in the long run. But voters said: Who cares? I don’t see any benefits from this globalization and EU membership. We have Polish plumbers and Romanian farm workers stealing our jobs. My wages have not gone up for seven years. So this globalization is not helping me. Well, if the Davos elite is going to suffer a bit if we leave the EU, let them suffer.

That is the view in Britain, and there are a lot of similar views in America for the people backing Donald Trump. He says let’s protect the economy, let’s have no free trade agreements. Which would be of course bad for the economy, but the people voting for Trump don’t care, because they don’t think they are going to benefit from an open economy.

So, I think what you see in many parts of the world is the growth of identity politics. People worry about nation and identity. There is national feeling – we see it in Russia too. As an outside observer, I’d say Russia has become more nationalistic. Frankly, the actions in Ukraine have damaged the Russian economy – via the sanctions, via capital outflow, etc. But maybe people in Russia don’t care? Maybe they are feeling that they are happy to be in a strong country that is respected in the world?

So, there is something in common between Russia, America and many parts of Europe, which is: People don’t really care so much about the economy. They care more about national feeling and national identity. And this is a profound shift in the developed world’s policy.

It could change again, of course. And maybe, if the British outside of the EU see the lack of foreign direct investment, which will certainly be a consequence of Brexit, and then the economy starts to grow more slowly, and then there are public spending cuts, because the government has less tax revenues, maybe some people would say the EU wasn’t so bad. But that is not the way it looks at the moment. Most British people are quite happy to be leaving the EU.

RD: And what does Brexit mean for Russia’s relations with Britain? Is it an opportunity for an improvement after a long freeze? Or is it going to turn worse? Because seen from Moscow, Britain in the EU was more often an ally of Poland and the Baltic States, which advocated for more of a Russia containment policy than engagement for a long time.

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C.G.: I don’t think anything much will change in UK–Russia relations. It is true that in the referendum campaign quite a few asking for Brexit were soft on Russia. Boris Johnson said the EU had caused the Ukraine crisis. And Nigel Farage, the leader of the far right party, has always said he admired Putin and that the EU caused most of the problems in Eastern Europe. So, as with other countries in Europe, the far right is very sympathetic to Putin and Russia.

However, Mrs. [Theresa] May is the prime minister now, and she is not from the far right or even a Brexiter. She was narrowly for “remain.” And although her foreign secretary is Boris Johnson, he is not, frankly, a powerful figure in the government. He is, in my view, fairly decorative. He was given the important post to show that she respects the Brexit vote. He is not running the country. And I would predict that, although we are leaving the EU, when it comes to relations between the West and Russia, we’d still take a fairly hard line on Russia. Because that is where the British establishment is. Even when it is against the interests of British companies like Shell and BP, which invested heavily in Russia and would like a much softer relationship.

It is an open question, to what extent Britain will be plugged into the EU foreign policy-making machinery and decision-making. I would guess we would be in the long run associated with EU foreign policy-making, but certainly not a full member of it. And, from the distance, we will be the advocates of a fairly tough line on Russia, because we will still be close to America, we will still be close to Poland. And would not want to upset our partners by taking a different line.

When the G20 met in China recently, I gather from press reports that Mr. Putin told Mrs. May: Let’s have a reset of the relationship. You need some friends. You need investment. You need economic ties.  And I gather he was rebuffed by Mrs. May on this occasion. So, I am sure she would want a benign, polite and serious relationship with Russia, but I don’t see Britain shifting its line dramatically towards the soft end of the EU spectrum to say, “Let’s get rid of the sanctions.” That’s unlikely.