People: James P. Moore
Josephine Rossi
As the former U.S. Assistant Secretary of Commerce, James P. Moore oversaw programming for U.S. privatization assistance to the Soviet Union during the Perestroika period and negotiated trade and economic agreements for the United States. He currently is the head of the Business Society and Public Policy Initiative at Georgetown University’s McDonough School of Business. Here, he discusses “Brexit” and its possible consequences.
The following has been edited for length and clarity.
How has consumer spending been affected and how could Brexit affect cross-border transactions in the future?
For British citizens, the upcoming period of uncertainty is leading them to cut back on both their spending and cross-border transactions. The British pound took an immediate beating with the passage of Brexit and became a signal of potentially tough days ahead. Uncertainty and a sense of potential risk always create a sense of caution and delay.
What effects on standardization and regulation of payment services?
This is not known for now. The U.K. must begin an arduous process of figuring out these kinds of details in the coming months. In many instances, there will be a desire to hold on to existing standardization and regulations that are not seen as onerous or beholding to the Brussels bureaucrats who were seen to have imposed them. But make no mistake, the U.K. is not in the driver’s seat when it comes to overturning the framework of standardization and regulation that evolved over time within the E.U. Although diminished after the Brexit vote, the E.U. remains a powerful economic force, and the U.K. just cannot choose a contrarian posture in its post-E.U. world.
Could Brexit affect fintech activity across the E.U.?
London has become an especially busy hub for start-up companies recently. Investment and regulatory “friendliness” made it so, as well as the receptive environment dramatically bolstered, in part, due to the perception of the U.K. as the front door to the European Union and beyond. That political and economic dynamic is now over, and a new one is about to take its place. Unless pressed for time, companies and potential start-ups will be carefully waiting to see how Brexit affects economic and business dynamics. In the end, it will not be as severe as critics predicted, nor as minimal as supporters advanced.
Should we then expect to see companies moving to other countries like Germany?
Absolutely. The question is not “if” but “how.” Business models put in place by global corporations that assumed that the U.K. would continue to serve as a gateway to the E.U. now must do some business soul-searching. If the same rules adopted for the same marketplace apply to a 27-nation economy, transactions will thrive in that setting. The U.K. is now the proverbial odd man out—the perceived outlier at this moment. Companies will be tempted to hold on to a remnant of their U.K. presence but will need to determine how a presence in Germany or France or even a small country like Luxembourg will provide better entry to a large consumer base.
Mainstream media outlets are talking of a “domino effect.” Is this likely?
It is a mistake to see Brexit as a U.K. phenomenon. It is not. The frustration that “faceless bureaucrats” in Brussels have overtaken national identities and self-determination has been growing across the continent. The concern was only raised dramatically after hundreds of thousands of refugees from the Middle East landed on the doorsteps of E.U. nations.
Political movements in countries such as the Netherlands are now calling for a “Nexit” vote to offer the same kind of referendum that British voters faced. Having said that, I think that all E.U. countries will be waiting for a grace period to see how Great Britain copes with its secession from the E.U. before treading too far on their own. It also should be understood that a critical psychological barrier has been broken via Brexit. Not only will E.U. nations consider taking the same path down the road, but individual national provinces will consider “detaching” themselves from their own countries and declaring state independence in their own right. We are going through a monumental, untested period in the evolution of globalization.
On a scale of 1 to 10, how important is Brexit to the electronic transaction processing ecosystem?
Electronic transaction processing is itself a serious enhancer of globalization. It behooves governments and businesses alike to work with one another to find ways to reduce barriers where the results produce “win-win” situations. Rather than come up with a rating number, let me just say that the question is not so much what the impact will be on the ecosystem itself because it will not be great. Water will seek its own level at the end of the day. The real question will be the volume of manufacturing and services trade and how that translates into electronic transaction processing.
The ecosystem for electronic transaction processing in the aftermath of Brexit is still alive and well. While we are trying to anticipate what the bigger impact of Brexit will be for the future, we can take comfort that the footprint of the industry will continue to be felt, evolve, and be ever present in the lives of consumers everywhere.
Do you see any parallels (or potential parallels since we have yet to see things play out) on the economic side between Brexit and the events leading up to the Soviet Union break up?
I realize that there is a temptation to find a parallel between the breakup of the Soviet Union and the Brexit vote, but they are very different. In the case of the breakup of the Soviet Union, the countries were not only separating themselves politically, but they were forced into adopting free market economics in their own ways. I think it would be a mistake to pull them together in some way. Brexit is absolutely historic in its own right with no parallel.