LONDON – To understand where the United Kingdom’s relations with the European Union may be heading, it helps to understand how they got to where they are today, according to a report from Dow Jones.
Of course, entire books can and will be written about why the British never learned to love the EU and ultimately voted to leave in the referendum of 2016.
But the manner and timing of the UK’s departure hinged on political decisions taken by David Cameron after he became prime minister in 2010.
And last week, Sir Ivan Rogers – who was then at Cameron’s side, first as his EU adviser and later as British ambassador to the EU – shed important light on how Brexit unfolded.
Rogers’s central insight is that the origins of Cameron’s ill-fated EU policy lay in the eurozone debt crisis and, in particular, the events surrounding a fateful EU summit in December 2011.
That was when Cameron famously vetoed an attempt by eurozone countries to incorporate new fiscal rules into the EU treaties, Dow Jones added.
He did so because they had refused to bow to British demands for changes Cameron said were needed to protect the UK financial-services industry from possible future attempts by the eurozone to use its combined voting weight to rig EU rules in its favor.
But the prime minister soon found that the eurozone had simply bypassed him, securing their reforms behind his back via an intergovernmental treaty that didn’t require UK ratification.
The focus on the December 2011 veto is clearly right.
As Rogers notes, Cameron drew important lessons from this experience: that the eurozone wasn’t willing to engage with British concerns; that it would indeed privilege its own interests above those of the UK; that it had found a way to circumvent British objections; and that he would need to find a new way to deliver the changes he wanted.
The result was the decision, just over a year later, to pledge to renegotiate the terms of Britain’s EU membership and then hold a referendum.
From the start, Cameron’s priority was to use this renegotiation to safeguard the City’s position within the single market but outside the currency union.
Only later was this strategy overwhelmed by the need to respond to public anxiety over migration.
But Rogers – perhaps in deference to the sensitivities of former colleagues – lets Cameron off too lightly, Dow Jones added.
The truth is that the December 2011 summit was one of the worst diplomatic debacles in recent British history.
The draft protocol Cameron presented to his fellow EU leaders on the eve of the summit was, as Rogers politely puts it, “a remarkable document.”
Along with three highly-technical second-order amendments to EU regulations, it contained three extraordinary demands to effectively rewrite the rules of the single market to give the UK a veto over financial-services legislation.
Far from a coherent strategy, this crude attempt at what the eurozone considered blackmail on a matter of vital interest appeared to have been cobbled together on the back of a cigarette packet and never stood the slightest chance of success.
Even though the strategy backfired, Rogers says Cameron had identified a legitimate area of national concern.
Yet British officials have never been able to point to any occasion when the eurozone has ganged up to put British interests, let alone financial stability, at risk – or might do so in the future.
Out of more than 40 pieces of financial-services legislation agreed by the EU in the wake of the financial crisis, including the creation of a eurozone banking union, the UK objected to only two: a hedge-fund directive that British officials considered too intrusive and a cap on banker’s bonuses.
And neither of those were the result of eurozone caucusing.
In fact, the UK welcomed most of this legislation because it simply transposed global rules the UK had helped draft.
Even so, some will argue that Cameron had little choice but to act as he did: He couldn’t have persuaded his party to back any EU treaty amendment in 2011 without securing some major concession from the EU.
Others will argue that prime ministers always have a choice, Dow Jones added.
The option was open to him to explain the benefits of persisting with an arrangement that continued to serve British interests well.
But what all can surely agree on is that Cameron’s policy failed spectacularly on its own terms.
Not only did he fail to carve out a special status for British financial sector, but also his approach ended up taking the UK out of the EU altogether.
He turned what was a largely theoretical problem into a very real practical problem as the City now contemplates its post-Brexit future.
Now it falls upon Theresa May to try to deliver the protections from outside the EU that Cameron failed to deliver from within.
Brexiters are urging the prime minister to threaten to withhold 40 billion euros ($47.5 billion) in divorce payments and crash out of the EU without a deal unless the EU offers the UK a free-trade agreement that will give British-based firms full access to its markets, while allowing the UK to set its own rules.
As Rogers says, this is unlikely to work.
And as many have said before, those who fail to learn the lessons of the past are doomed to repeat them.