Canadians know what it is like living next door to a huge, powerful and sometimes bullying neighbour. In a speech which he intends to deliver on Friday, David Cameron, the British prime minister, will try to explain to his party why Britain should not seek to become the EU's Canada.
Mr. Cameron probably won't say anything about Canada, but he might mention Switzerland and Norway — two European nations who kowtow to every Brussels edict (and pay for their expensive implementation) but who are not members of the Union, and therefore have no say in making the rules. Mr. Cameron has made it clear he doesn't want Britain to quit the EU, but he has boxed himself into a political corner, with the fringe nationalist party UKIP stealing Tory votes from every discontented shire. In a bid to quell the right wing and avoid a disastrous electoral defeat in two year's time, Mr. Cameron has promised both to renegotiate Britain's EU membership to the former's advantage, and to seek the electorate's blessing for a new deal.
This is a pipe dream; Angela Merkel, the German Chancellor and the EU's de facto leader, has already warned the U.K., via her emissaries, that there will be no renegotiation. The difficult question therefore is whether the U.K. economy would truly suffer from a British exit, or whether the halcyon vision offered by UKIP and some Tories of Britain as a kind of Singapore: offshore of Europe; rich; and madly trading everything from automobiles to aluminium.
Half of Britain's exports end up in the EU. However, even if Britain managed to keep access to the customs union, like Norway and Switzerland, there must be serious questions about the City of London's continued domination of Europe's financial markets. Do the fans of a Brexit truly believe that France and Germany would allow this business to continue with Britain politically as well as geographically offshore, thumbing its nose at EU financial regulation? During the height of the euro crisis, accusing fingers in Paris and Brussels pointed to the "speculators" in the Anglo-Saxon banks. It would be a short step to the exclusion of London banks from EU sovereign mandates and then regulations that give preference to Frankfurt, Paris and Amsterdam.
American and Canadian banks would react swiftly to any shift of the market onshore to the heart of the euro zone. Banks are mobile, and allegiances are fragile. Of course, Britain still has language, culture and a friendly legal system to its advantage. But markets don't like fragmentation; instead they tend to cluster, and London's success has been self-perpetuating.
A better analogy than Singapore for the City of London may be Hong Kong. The Communist Party mandarins allow the Hong Kong-based banks to wheel and deal because it is useful. Meanwhile, the onshore rival in Shanghai continues to grow and spread its wings. There is, as yet, no conflict between the two, but any sign of embarassing rebellion or bid for independence would be disastrous for the former colony's financial playground. It could be disastrous for London, too.
Carl Mortished