U.K.'s Vision of Sovereignty Draws Pushback in Davos

At the World Economic Forum's annual meeting in Davos this week, competing versions of national sovereignty are playing out.

For Britain, sovereignty is about "taking back control" -- bringing back to London the power to make those laws that are now made by the European Union in Brussels.

But French President Emmanuel Macron this week laid out a contrasting version. French sovereignty, he said in Davos, is enhanced by its membership in the EU and would be further strengthened by deepening policy coordination among its nations.

"On migration, digital, energy, defense, development, finance, investment -- the core of what makes you sovereign in this current environment -- we have to build common [European] policies," he said.

Reinforcing their view, the French see the world dividing into three zones of interest. With U.S. President Donald Trump proclaiming "America First" and China ruthlessly pursuing its own global ambitions, the smaller countries of Europe can only defend their own interests by operating as a bloc. Because of this, French officials believe Britain couldn't have chosen a worse time to leave the EU.

Being sovereign is partly about being able to set the rules of the game, said Arancha González, chief executive of the International Trade Center, a joint agency of the United Nations and the World Trade Organization.

In international trade, this means being able to set your own rules and standards for products and services that you trade with others. "You need to have a critical economic mass to be a standard setter," she said on the sidelines of the Davos meeting.

While the U.K. is an important economy, it doesn't have the size on its own to set global product and industry standards. Only the U.S., the EU and increasingly China will have the clout to lay down the global rules of the game.

Within the EU, however, the U.K. is big enough to influence standards. Former Prime Minister Tony Blair said in Davos this week that the architecture of the EU's single market, which the U.K. is now set to leave, was shaped in large part by British governments under him and his two predecessors, Margaret Thatcher and John Major.

Ángel Gurría, the head of the Organization for Economic Co-operation and Development, described this week another vision of sovereignty. "Sovereignty is about providing well-being for your people; it's not about taking decisions by yourself. If you cannot provide well-being then you're betraying the notion of sovereignty," he said.

The U.S. is the only country currently large enough on its own to write its own regulations and have them accepted in the rest of the world, he said in Davos.

These views about the nature of sovereignty are unsurprising perhaps among the arch-globalists at the World Economic Forum. But if accurate, they should inform Britain's future strategy for economic success outside the EU.

The British "have to accept that things will happen in the world which they won't be able to influence -- or only at the margins -- and they will have to be able to adapt," said Michael O'Sullivan, chief investment manager for international wealth management at Credit Suisse.

That means the U.K. should follow "a small-country model," he said. That doesn't require the U.K. to act like a minor country, but suggests it should adapt its economy to be flexible and dynamic enough to deal with whatever the global economy throws at it.

The U.K. could follow this model outside the EU's single market, he said, or inside as Ireland, Denmark and Sweden have been forced to do by their size.

Much of the U.K. government's rhetoric around Brexit play up Britain's role as a world power. In Davos, Prime Minister Theresa May emphasized she wanted the U.K. to play a leadership role in global trade. Some influential Brexit supporters still see the country as a great power.

They may be missing the point, Mr. O'Sullivan said. "They talk in terms of being a world power, of having a big army and a seat at the United Nations. But in terms of where the future lies, that is not a model."

(END) Dow Jones Newswires

January 25, 2018 15:43 ET (20:43 GMT)