In Other News – A View from Abroad – 4-11-2023

A View from Abroad

Once a month, In Other News features a short op-ed heavily informed by the European perspective. We hope that these special monthly pieces will offer our readers an enriched understanding of global events and allow for a more robust international risk calculus.

President Biden’s upcoming visit to Northern Ireland on the 25th anniversary of the Good Friday Agreement indicates a potential shift in UK politics. In the aftermath of the Brexit referendum, economic decisions have been tightly interwoven with political ideology in the United Kingdom. But since UK Prime Minister Rishi Sunak took the helm last October, his economic policies appear to be primarily driven by pragmatism. Still, it’s uncertain if Sunak is truly adapting his ideology or instead believes that without immediate measures to promote a stronger UK economy, ideology won’t matter because his party will lose the next election.

Under Brexit, UK trade with Europe, and subsequently the UK economy, has faced myriad challenges. The UK’s reluctance to negotiate more constructively with the EU about issues resulting from the Ireland- Northern Ireland Protocol also created political and economic problems in Belfast. But Liz Truss’ departure from office last fall was a turning point, and Sunak and Finance Minister Jeremy Hunt have been quick to make some practical changes.

Hunt immediately reversed several aspects of Truss’ ineffective mini budget, thus stabilizing the financial markets and the pound exchange rate. The Foreign Affairs and Defense Ministers also updated the national security strategy to again incorporate the European Union as an ally. The latest security Integrated Review seeks to balance UK ambitions and financial means, toning down the rhetoric of ‘Global Britain’ and repositioning the nation in line with its capacities, stressing the need for cooperation with like-minded friends.

Sunak has also been trying to ameliorate the political struggle in and about Northern Ireland. Over the past several months, his team has quietly negotiated a solution, establishing the Windsor Framework agreement to replace the doomed Ireland – Northern Ireland protocol. In principle, Sunak’s government’s agreement with the EU on Northern Ireland has been approved by the House of Commons in London, but it has yet to re-start Parliamentary work in Belfast. Nonetheless, the agreement opened the possibility of President Biden’s upcoming Good Friday Agreement anniversary visit. Notably, Sunak is also expected to discuss a free trade agreement with Biden at the upcoming meeting.

Sunak’s government has also encouraged collaboration with the EU on issues like scientific cooperation in the Horizon program, information exchange in the financial sector, agreement on data sharing and especially cooperation in the foreign and security field. He recently held a French-British summit in Paris reconnecting the two countries in friendship and concluded a deal on countering illegal migration. Finalizing the AUKUS agreement on delivering nuclear submarines to Australia together with the United States was another international success.

These efforts have led many to question if Sunak is ultimately placing country before party, but it’s too early to say how his strategy will play out. Given the financial situation that he inherited, however, facing the next round of elections in 2025 without economic improvements would be tantamount to political suicide for the Conservative party. Sunak is making strides, but he isn’t there yet, and every month in the United Kingdom approximately 250,000 people face a tripling of their mortgage payments, as interest rates have soared.

Meanwhile, the Labour Party is also working to strengthen its position. The group is isolating its far-left wing and reaching out to society and business, with the slogan ‘Labour is back in business’ – promising a dialogue when developing its policies once in power. That bodes well for continuity in the return of practicality in the coming period. Indeed, regardless of the outcome of the next election, if both the Conservative and Labour Parties are actively sidelining their more extreme elements, more pragmatic political and economic policy making could return to the United Kingdom.