What will Trump’s effect be on the EU?

Published on Open Europe's blog and Reaction.life. Also translated to Chinese by Wallstreetcn.com 

Unsurprisingly, in Brussels, people are not thrilled with Donald Trump’s election as new American President. Here’s an overview of what it means for the EU:

TTIP

The EU-US trade deal TTIP, which is still formally under negotiation, is already facing many hurdles in Europe. Now it is also facing a possible US veto, given Donald Trump’s scepticism towards trade deals. Current EU Trade Commissioner Cecilia Malmström has said that “we frankly don’t know” if Trump wants to continue negotiations, while former EU Trade Commissioner Karel De Gucht thinks “TTIP is now dead”. European Commission President Juncker has urged Trump to provide some clarity on the issue, adding, “I do not view that as something that would happen in the next two years.”

Trump has a history of wavering and U-turning but it’s hard to see how he would get away with breaking his protectionist promises, although of course the Congress and his own Republican Party are likely to serve as an obstruction.

Defence and Foreign Policy

US complaints about European NATO member states relying too heavily on US defence support are not new, but never before have they featured so prominently as with Trump, who has warned that “the countries we are defending must pay for the cost of this defence. And if not, the US must be prepared to let these countries defend themselves.” He even made US defence of the Baltics dependent on this, saying that if Russia attacked them, he would decide whether to come to their aid only after reviewing whether these countries “have fulfilled their obligations to us”.

Predictably, the usual suspects in Europe have used Trump’s elections to further the integrationist cause. Juncker has stated that the US “won’t look after Europe’s security for ever… We need a new approach to building a European security union with the end goal of establishing a European army.”

However, Juncker conveniently ignores the real reason why there is no EU army. This has little to do with America providing resources for Europe’s defence, and everything to do with the strong opposition within Europe itself against the idea.

If countries are already reluctant to pay for financial transfers or accept that the EU can tell them how many refugees they need to take, they naturally don’t enjoy the idea of being forced to send their young people fighting abroad if their own government is outvoted by foreign leaders. True, a lot of lip service has been paid over the years to the need for closer defence cooperation among EU member states, and we have “Eurocorps” and all kinds of other forms of voluntary cooperation, but none of this goes beyond what NATO already does. NATO itself consistently stays clear from the supranationalism pushed for by the European Commission. A number of EU member states, including the Netherlands, have already rejected the plans, so if Trump is serious (which is unclear, given that his running mate Mike Pence is more of a hawk towards Russia), EU member states will strengthen their own defence capacity first.

President-elect Trump hasn’t disclosed yet how he plans fight IS, as he thinks this needs to be a “surprise”. But Vice-President elect Mike Pence has already said that “Turkey is US’s most important ally in the region”, and that the US will be renewing good relations with Turkey. One of the first people Trump called after his victory was Turkish President Erdogan, so it doesn’t look like the EU has gained more leverage versus Turkey as a result of the election.

Monetary and fiscal policy

The Eurozone should be well aware that its fate is strongly linked to how Trump intervenes in monetary policy, because he’s said he won’t shy away from doing so.

Trump has been saying he’d print money to finance government spending, calling himself “the king of debt”. But there’s some confusion. While he has attacked the Fed for “keeping the rates down so that everything else doesn’t go down”, saying it “should have raised the rates”, back in May he warned that “if interest rates went up, our economy is not doing well at all. And it’s going to hurt the economy very badly. If interest rates went up, it would be a disaster”, specifying “I am a low interest-rate person”.

At least the markets seem to believe that Trump means higher interest rates. In the week after his election, for whatever reason, interest rates, which are not entirely driven by the Fed, but also by the market – are rising.

This matters in a crucial way for the Eurozone, where the ECB also only has a limited impact on interest rates, which are subject to the global environment that is partly controlled by the Fed. If the current trend of increasing interest rates continues, cash-strained Eurozone governments may face a problem, ultimately having to appeal to Eurozone “solidarity” again. We all know what that means: weeks and months of crisis meetings which ultimately culminate in bailout packages that mostly serve to kick the can down the road without fundamentally addressing the issue, while at the same time poisoning relations between European countries and propelling Trump-style anti-establishment parties to power.

Climate change

It’s no big secret that Trump thinks “global warming was created by and for the Chinese in order to make US manufacturing non-competitive.” There are some question marks about whether he has the legal power to withdraw from the Paris Agreement on climate change, but he’ll probably try to do so, with a number of lawsuits from Democratic-run states likely. If that takes too long, he’s able to withdraw unilaterally from the 1992 UN Framework Convention on Climate Change itself within one year. Either way, he may just ignore international climate commitments. This would increase the opposition in Europe against respecting those, as it would put Europe’s industry at a disadvantage, despite the fact that EU Climate and Energy Commissioner Miguel Arias Cañete has reacted to Trump’s victory by promising that “the world can count on the EU to continue to lead on climate”.

Trump has also pledged to cancel billions in payments to UN climate change programs, again likely to increase doubts in Europe about whether it should pay the rest of that bill. With Open Europe, we’ve made clear how any advantages from EU climate change rules are closely dependent on what the rest of the world does, which could be another reason for EU climate policies to be put into question.

Brexit

Trump and his allies have raised doubts about US protection of the Baltics. This in turn boosts the UK’s value as a military power in Europe, and that’s something Britain can use in Brexit negotiations. On the other hand, of course, the US election result may fuel the concerns among EU leaders about the prospect of having their own difficult domestic elections, and therefore prompt a more intransigent stance with regard to Brexit. Either way, a positive UK-EU relationship in a post-Brexit world will be needed, and Trump may upset that.

Nonetheless, the fact that the new President of the United States is an open supporter of Brexit will only further boost the case for it and also strengthen the argument that the EU has gone the wrong way and is in dire need of reform.

Populism

Trump’s victory is a great boost for the so-called “populist” forces who’re haunting Europe’s mainstream politicians and were among the first to congratulate Trump. On Sunday 4 December, Austria may well elect a far right President, while Italy could vote no against a constitutional reform – which could lead to the resignation of Italian PM Renzi, with the anti-establishment (and anti-euro) Five-Star Movement standing a fair chance of getting into power at the next general election.

In March 2017, the Netherlands is electing a new Parliament. While the far-right populist PVV formation of Geert Wilders was for a long time polling as the largest party, he has been recently losing ground a bit. But the situation is unstable, as Wilders is currently being tried for inciting hatred and as a result of the Dutch government’s refusal to respect a referendum vote against the EU-Ukraine Treaty. Then there’s also Marine Le Pen in France, who doesn’t stand a great chance to be elected but currently looks likely to at least make it to the final round.

Conclusion

Europe’s mainstream politicians should maybe look in the mirror and acknowledge that, at least when it comes to the prevailing anger against the EU, they bear part of the responsibility.

Instead of considering euro exits and government defaults as a solution, Eurozone politicians decided to organise transfers between countries that weren’t popular in countries paying for it nor in countries that had to respect the condition to allow intervention in domestic spending.

During the refugee crisis, mainstream politicians dragged their feet, resulting in chaos. It took until spring 2016 for EU governments to take strong action, which has resulted in refugee drownings ending between Greece and Turkey, but until then the EU’s focus was to harmonise asylum rules and try to impose refugee quotas that are pointless, given that we’re speaking of countries sharing a passport free zone.

The chaos and the EU’s eagerness not to waste a good crisis served as a boost for populism in the countries of the Schengen zone, which almost collapsed. It also may have helped to make the British even more hostile to the EU than they already were, even though the UK isn’t even in Schengen. In the same way, Trump’s anti-establishment victory may now have much more of an effect outside of the US than mainstream politicians assume.

How Holland's 'mini-Brexit' is about to be ignored

Published on EUObserver

As some may remember, the Netherlands had their own mini-version of Brexit in April of this year, when a majority of Dutch voted against the EU-Ukraine Treaty in a non-binding referendum which had been triggered by campaigners eager to give the establishment a good kicking. Something in which they succeeded.

Since then, Dutch Prime Minister Rutte has tried to find a way to avoid that the Netherlands would not have to veto ratification. It's the only EU member state which didn't agree to the Treaty yet.

Rutte's plan is to secure a “legally binding declaration” to the Treaty at the EU Summit in December, which should stress that it doesn't lead to Ukrainian EU membership or the Netherlands providing any extra funds to the country beyond those already committed and that it also doesn't oblige Dutch military cooperation with Ukraine. Such declarations are a well-established practice at the EU level to deal with cumbersome member states and have been applied for example to deal with the Irish no – vote against the Lisbon Treaty and more recently, with Wallonia's opposition to the EU-Canada trade deal CETA. There always are differences as to how “binding” such declarations are : sometimes under national law, sometimes at the EU level, sometimes only according to “international law”, giving lawyers a field day, helpfully confusing any critics.

Whereas the “EU27” seem happy to give Dutch PM Rutte whatever declaration he needs and Ukraine isn't needed to sign anything, Rutte's particular problem is that the coalition of his centre-right VVD with the centre-left PvdA doesn't enjoy a majority in the Dutch Senate, which is also needed to pass the EU-Ukraine Treaty. So far, of all the opposition parties, only the centrist, EU-federalist D66 party has suggested it will support Rutte's solution while the Christian democratic CDA hasn’t committed to support it just yet. Its leader Sybrand Buma has stated that Rutte's solution is unacceptable, saying: “if the Lower House ignores [the referendum result], we're fooling the people” as the declaration “would make clear that things that aren't in the Treaty really aren't in the Treaty” while it “does not change the Treaty. Still, it’s rumoured that the party would allow its Senators, which seem more keen to approve the deal than the party leadership, a free hand in deciding how they'll vote, so a solution may be near.

Still, the legislative process in the Dutch Parliament will only be activated after Rutte has secured his declaration at the EU Summit of 15 and 16 December, so it’s not excluded that there isn’t enough time to complete it before the Dutch legislative elections in March 2017. Those may result in less support for the ruling coalition and complicate the proposed solution.

This all happens to the backdrop of how the “European Constitution” was passed by the Dutch Parliament in the form of the Lisbon Treaty, despite a no vote in the historic Dutch referendum in 2005.

The whole issue is obviously made even more complex by the fact that many Dutch died in the attack on the MH17 plane over Ukraine, which investigators have blamed on Russia, while there's the ever more assertive policies of the Kremlin, which would without any doubt use a Dutch veto against the EU-Ukraine Treaty in its propaganda. Also, currently, the agreement is being applied on a provisional basis and a Dutch law withdrawing the mandate for the Dutch government to sign would in theory mean that the Treaty can no longer be provisionally applied but there is no precedent for that. That said, these considerations may trump concerns that ignoring a popular referendum on an EU issue is toxic and may only contribute to Euroscepticism.

If the Dutch government would effectively veto the EU-Ukraine Treaty, it looks like it would be the first time since the Swedish no vote against joining the euro in 2003 that an EU referendum which went the wrong way for Brussels would be respected. Thereby the jury is still out for Brexit, which hasn't happened yet, and for the Danish no vote against giving up a range of national opt-outs from EU cooperation. In the latter case, the EU Commission so far refuses to be flexible so Denmark can stay in Europol while keeping its opt-outs. The Swiss 2014 referendum vote to restrict freedom of movement from the EU, on the other hand, is about to be ignored, as the Swiss Parliament seems keen not to open the EU-Swiss arrangement and risk its exemption from ECJ rule.

Now we can likely also add the Dutch referendum on the EU-Ukraine Treaty to the list of referendums that are being ignored, just when it wouldn’t have been too hard to respect the will of voters. Redrafting the Treaty as a mere trade arrangement is something the Netherlands would agree to. It would keep the Treaty largely intact, while addressing many of the concerns expressed by Dutch no voters. The apparent refusal to drop relatively empty pledges about “increasing” Ukrainian participation to “EU-led civilian and military crisis management operations” may well come back to haunt the European Union when the Treaty becomes yet another symbol of how it may not be willing or even capable of addressing the concerns of citizens.

De voornaamste les uit het Waalse verzet tegen EU-Canada handelsakkoord CETA

Gepubliceerd op de Vlaamse opiniewebsite Doorbraak en de Nederlandse opiniewebsite Jalta

Wie had gedacht dat Zuid-België het zo hard zou durven spelen? Canada wordt niet enkel bestuurd door een prominente hogepriester van de “linkse Kerk” – Justin Trudeau, het is ook Franstalig. Dat was echter allemaal niet van tel.

Het verzet van de regerende Parti Socialiste heeft weinig te maken met het feit dat de Belgische federale regering uit centrumrechtse partijen bestaat, zoals sommigen suggereerden. De echte reden is dat de PS, aan de macht sinds mensenheugenis, in de peilingen stemmen verliest aan de zogenaamde Parti du Travail de Belgique (PTB), een extreemlinkse partij die het debat bestookt met halve waarheden over vrijhandel en het aantal belastingen die grote bedrijven betalen, waarbij de partij vaak enkel focust op de vennootschapsbelasting, terwijl het de grote loonlast op arbeid verzwijgt.

Daarmee past de PTB perfect in het verzet tegen de globalisering, dat ondertussen opgang maakt met Trump, Bernie Sanders, vele voorstanders van Brexit, Wilders, rechtspopulisten, Jeremy Corbyn, Syriza in Griekenland, de Vijfsterrenbeweging in Italië en het Front National in Frankrijk. Een gemeenschappelijk kenmerk van al die partijen is dat ze vinden dat ze hun lot niet langer voldoende eigen handen hebben.

Wat de Europese Unie kan doen om te verhinderen dat handelsverdragen zoals CETA onder vuur komen, is er voor te zorgen dat de tegenstanders echt geen punt hebben op dit vlak en dat dergelijke akkoorden enkel en alleen over het vrijmaken van handel gaan en niet over transfers van soevereiniteit.

Er zitten aspecten van harmoniseren van regelgeving in CETA, met name op vlak van intellectuele eigendombescherming, vaak het onderwerp van verhitte debatten over hoe genereus deze moet zijn.

Hoewel men zou kunnen verwachten dat de grootste kritiek zich hierop zou toespitsen, en in welke mate mogelijke nadelen hiervan de onbetwistbare voordelen van de afbouw van toltarieven compenseren, was dit niet het geval. Het meest onder vuur kwam het voornemen om eventuele geschillen via arbitragerechtspraak uit te vechten, via het zogenaamde “Investor-state dispute settlement” (ISDS) systeem. Privé-rechters, vaak zakenadvocaten, zouden als het ware hun klanten steevast gelijk geven in geschillen met overheden, waarbij zij op die manier democratische controle uit handen zouden geven. Ondanks het feit dat overheden ongeveer de helft van de ISDS zaken winnen en dat het systeem al sinds de jaren 1950 in gebruik is, deed de Europese Commissie toch een grote toegift op dit vlak, en schrapte ze ISDS, ten voordele van een nieuw systeem, het “Investment Court System” (ICS). waarbij er een permanent tribunaal bestaande uit Europese en Canadese rechters wordt gecreëerd.

Dit was een redelijk compromis, dat bovendien in het voordeel is van landen met een zwakke, als corrupt bekendstaande rechtspraak, zoals Roemenië, want dankzij het feit dat investeerders niet langer de Roemeense justitie als risicofactor zullen dienen te beschouwen zal het land broodnodige internationale investeringen makkelijker kunnen binnenrijven.

De regionale regeringen van Wallonië – en jawel, ook van Brussel, de hoofdstad van de EU – kregen uiteindelijk een aantal vrij inhoudsloze toezeggingen: bij de voorlopige inwerkingtreding van CETA, normaal gezien ergens in 2017, wordt het ICS-tribunaal niet voorlopig van kracht, wat sowieso het geval al zou zijn geweest, zeker na een arrest van het Duits Grondwettelijk Hof. Ook hebben de Zuid-Belgische deelstaten het recht om CETA alsnog te vetoën, wat een lege doos is, aangezien ze dat recht al voor het verzet van Magnette en co al hadden. Daarbij stellen ze dreigend dat ze “niet de intentie [hebben] CETA te ratificeren op grond van het [ICS] systeem (…) in zijn huidige vorm”.  Om die reden, en ook omdat de linkse partijen in de Duitse Bundesrat CETA hierover kunnen blokkeren, komt er een herziening van het ICS systeem. Om de gemoederen te sussen heeft de Europese Commissie nu beloofd in een verklaring bij CETA met de kritiek rekening te houden. Ook zal de Belgische federale regering aan het Europees Hof van Justitie vragen of ICS wel verenigbaar is met het EU-recht, wat zowat de enige concrete overwinning is van het Waalse verzet.

Heel wat bizarre argumenten werden de voorbije week geopperd, zoals het argument dat het toch niet kan dat rechters ook nog professioneel als advocaat in andere zaken actief zouden kunnen zijn, alsof dat niet via een eenvoudig verbod op belangenconflicten kan worden opgelost, net zoals bij de Belgische handelsrechtbanken, waar ook niet-beroepsmagistraten uit het bedrijfsleven zetelen.

Al die argumenten waren natuurlijk allemaal niet zo belangrijk meer nadat Waals opperhoofd Paul Magnette al een week internationale media-aandacht had genoten als de nieuwe Che Guevara, ondertussen wel gedegradeerd tot de nieuwe Alexis Tsipras.  

Laat ons wel wezen: zelfs zonder het ICS-systeem en zonder de mogelijkheid voor nationale en regionale parlementen om CETA goed te keuren was er vroeg of laat wel zware tegenstand opgedoken voor één van de handelsakkoorden die de EU afsluit. Dat het verzet net in Wallonië eerst opduikt, is geen toeval. Wallonië is na Engeland de eerste geïndustrialiseerde regio ter wereld. Net zoals Birmingham en Manchester hebben Charleroi en Luik zware klappen gekregen toen de oude industrie niet langer concurrentieel was en hebben ze een lang proces van industriële aftakeling achter de rug. In tegenstelling tot in Groot-Brittannië was er in België geen Thatcher die begreep dat zachte heelmeesters vuile wonden nalaten.

Integendeel hielden politici elke vermindering van de loodzware belastingdruk op jobcreatie tegen, aangezien dit niet in het belang zou zijn van de politiek geconnecteerde instellingen die door sociale bijdragen worden gevoed. Als gevolg hiervan kwamen er te weinig nieuwe jobs bij ter compensatie van de teloorgang van de oude industriële tewerkstelling.

Wallonië is niet uniek. Vlaanderen had geen industriële erfenis, dus was er ook geen industrie om kunstmatig in leven te houden, maar vernietiging van jobcreatie door overmatige belastingdruk en regelgeving is er evenzeer een probleem, net zoals in de rest van de Westerse wereld, de Verenigde Staten met hun hoge vennootschapsbelasting incluis. De expansieve geldpolitiek van de centrale banken houdt bovendien de rente laag, dit ter financiering van armlastige overheden die te veel geld uitgeven. Als gevolg hiervan worden de spaarreserves aangetast, terwijl mensen die net nodig hebben als kussen om hen te beschermen tegen de disruptie van de globalisering. Internationale concurrentie zorgt voor winnaars, meer keuze en lagere prijzen, maar de Westerse economieën en in het bijzonder de West-Europese welvaartsstaten kampen met een zware concurrentiehandicap. Hoe meer jobs worden vernietigd door een excessieve belastingdruk die dient om sociale hangmatsystemen en ambtenarenlegioenen te financieren, hoe makkelijker het voor de tegenstanders van de vrijhandel zal worden om steun te vinden bij een bevolking die ook nog eens zijn spaargeld op slinkse wijze aangetast ziet.

Daarom is het te simplistisch om voortaan lidstaten niet langer inspraak te geven over Europese handelsverdragen. In elk geval kunnen zij vooraf weigeren een mandaat te geven aan de Europese Commissie. Integendeel zijn er meer diepgaande economische hervormingen nodig. Van zodra jonge en vinnige startups ook in Wallonië of Detroit kunnen bloeien, zal het verdwijnen van de oude industrie de bevolking niet tot het sluiten van de grenzen doen besluiten.  

Met Het Oog op Morgen

Interview met Nederlands radio-programma: “Met Het Oog op Morgen”, onder meer over het al dan niet organiseren van EP-verkiezingen in het Verenigd Koninkrijk in 2019, ingeval het VK dan nog lid zou zijn van de EU:
http://www.npo.nl/nos-met-het-oog-op-morgen/10-10-2016/RBX_NOS_710750 

“Start-up cities” for refugees as a long term solution to the refugee and migration crisis

Published on CapX and by the Foundation for Economic Education.

It was also translated into French by Contrepoints and into Czech by Nechtenasbyt.cz. It was also highlighted here as well as on Spanish free market newssite libremercado.com

Much has been written about how to deal with the current refugee and migration crisis, but an actual comprehensive solution hasn't been provided. According to some estimates, one year ago, there were around 60 million refugees in the world. In 2015, around one million of these 60 million entered Europe by sea, which already caused a massive political crisis. Even those who’re keen to allow more migration should realise that even tripling the numbers allowed in last year would only provide solace to a tiny part of those in need. There is a more structural and comprehensive solution however. It combines the idea of “start-up cities” with simple historical precedents: to create a new city, very similar to Hong Kong, to welcome refugees. 

The example of Hong Kong

What was Hong Kong otherwise than a city governed by Western officials and populated largely by refugees from Maoist China? If it was possible for the British to provide a safe home for millions of people on the run in much more challenging times, why wouldn’t it be possible for the whole of the developed world – not just Western countries – to give any refugee the most precious thing the developed world can offer them: the protection of the rule of law, which has propelled the US, Canada, Europe, Japan, and parts of East and Southeast Asia to the levels of wealth they enjoy today.

I propose to create what I call “free havens”, which really are newly created cities, governed by officials from countries with a high level of rule of law, and where any refugee could go to. This idea is very similar to the concept of “startup cities” or “private cities”, whereby cities would be created by private investors from scratch in a bid to create a much nicer place to live than in existing cities and to provide a more beneficial investment climate by offering a much stronger protection of property rights than elsewhere. A territory should be rented from a state, similar to how the British leased Hong Kong from China for 100 years, but this time a fair price should obviously be paid to the landlord.

Where?

Where would this be located? It could be anywhere really where nobody lives, given that only around three percent of the world is urbanised. A similar proposal was made by Egyptian businessman Naguib Sawiris, one of the richest men in Africa, who has offered to buy an island off Italy or Greece in order to rehouse hundreds of thousands of refugees. He has identified 23 uninhabited islands of which he’d like to buy one to host refugees, but the Greek government wasn’t interested. Other alternatives would be to create it inside Syria or Libya after liberating an area from terrorist groups. Perhaps an offshore territory owned by Britain or France could be suitable, for example one of the two areas in Cyprus which currently host British military bases. If no State would agree, a more ambitious variety of the plan could be to locate these cities on newly created islands.

Politically unrealistic? Less than one would think: the only proven method to protect external borders results in the emergence of large off-shore centers for refugees:

Does this proposal sound politically unrealistic? Less than one would think. A similar campaign to create a “refugee nation” was started by American entrepreneur Jason Buzi, and many other prominent people have endorsed the idea, including Bob Pleysier, who headed the Belgian government’s asylum department for a long time and knows the ins and outs of the problem. The more people realise this challenge can’t be dealt with by tampering in the margins, the more they are warming to the idea.

Reality is slowly pushing politicians towards the idea, but rather indirectly.

Both in Australia in 2013 and in Europe in 2016, the so-called “Australian solution” of border control was implemented when the pressure on the external border really became too massive.

This solution involves telling anyone who tries to enter illegally to await their asylum a

pplication in refugee shelters near the border or off-shore, so they no longer have a terrible incentive to risk their lives but still retain the right to apply for asylum.

In Australia, this effectively brought down the recorded number of people drowning in Australian waters to near-zero from at least 1000 in the 13 years before . To realise this, Australia created off-shore shelters in Papua New Guinea.

In March 2016, Europe’s politicians decided to try a whole new approach in Greece, in desperation to avoid another Summer of discontent, following a strong increase in the popularity of right wing populists across Europe. Since then, only five people would have died in trying to make it from Turkey to Greece, a sharp decrease from the 805 who died last year in Greek-Turkish waters. This coincided with a sharp 95% drop in asylum seekers arriving in Greece from Turkey.

In implementing something like the “Australian” approach, Greece prevented asylum seekers from continuing their journey from the Greek islands close to Turkey to mainland Greece, while before they could make it to Greece’s mainland and then on to the Balkan and Germany very easily. However, despite the success of cutting the number of deaths-at-sea, just as in Australia’s case, the conditions in Greece’s so-called “hot spots”, where people are detained, are very troubling. The same must be said of Australia’s off-shore shelters. Of course the EU and Greece could have only copied the good aspects of Australia’s approach, while avoiding the bad ones, bud sadly, this didn’t happen.

Apart from this EU-induced policy change in Greece, two other major factors contributed to a sharp drop in drownings between Turkey and Greece. In the first place, there was the closure of the so-called “Balkan route”, with countries from Austria all the way to Macedonia implementing border controls, thereby preventing asylum seekers from making it to Germany and Sweden, where many desire to go. Secondly, there was the “EU-Turkey deal”, whereby Turkey promised to crack down on human smugglers and accept to “take back” both irregular migrants and asylum seekers, with Greece declaring Turkey a “safe country” so this would be legally possible. The implementation has been fraught with problems, but both factors did disincentive people not to risk their lives.

How different this is from the situation in the water between Libya and Italy, where an increasing number of people is trying to make the risky journey, with a lot of drownings as a result. There, on the “Central Mediterranean Route”, almost 2.900 refugees died in 2015 and already 2.606 in the first half of 2016 alone.

So far, well-intended coordinated military actions to save the lives of those trying to make it and combat human smugglers, have largely failed to stop human smuggling. More problematically, they have served to convince more people to risk their lives at sea. A well-intended operation to save lives is seen by many as a ferry for migrants keen to cross the Mediterranean. The House of Lords has acknowledged there is some validity in claims that these operations “act as a magnet to migrants and ease the task of smugglers”. Also the Libyan coastguard explicitly warned, to no avail, that the EU's "Operation Sophia" boosts migrant smuggling, explaining that "people, when they get rescued, call their friends to tell them that there are EU vessels only 20 miles from Libyan waters to save them."

To have a deal with chaos – ridden Libya is much harder still than it is with Turkey, so eventually also Italy will be forced to consider what Greece has done: to tell those applying for asylum that they need to await their asylum claim somewhere.

If the EU would create more temporary refugee shelter where asylum seekers are told to await their asylum claim, the pressure to provide decent standards will increase. Some people will be granted asylum, but others won’t. If the numbers remain as big as they are today, these kind of temporary refugee shelters may be overwhelmed and people may be forced to stay there for longer periods.

According to a top UN official, Europe must prepare for the arrival of millions more refugees from the Middle East and Africa as “young people all have cellphones and they can see what’s happening in other parts of the world, and that acts as a magnet.” 

Given the pressure which can be expected in the new few decades, with Africa’s population expected to more than double in 40 years, creating an actual city with law enforcement will then seem much less like an overambitious, costly plan than welcoming lots and lots of people in dodgy off-shore shelters where they have no perspective. Hence, events on the ground may drive policy makers to this solution.

How would such a “startup city” for refugees look like?

Would companies invest in such a “startup city” for refugees? Certainly. When facing the choice between Ethiopia, Pakistan, or a place run by countries with a high level of rule of law, it shouldn’t be excluded for the likes of Ikea, Nestle, Coca Cola or Apple to consider moving production capacity over there.

When wondering how to run such a place most efficiently, Hong Kong springs to mind. Sir John James Cowperthwaite was the British civil servant who acted as Financial Secretary of Hong Kong after World War II. He's considered the architect of its economic success. Having watched Chinese refugees arriving, he concluded they seemed to be getting along fine if left to themselves, so he made it the crux of his policy for the government not to do much to help refugees, beyond giving them freedom, security, the rule of law and a hard currency. His administration did provide public housing, but not much more. This policy of positive non-interventionism has been extremely successful despite later developments of more intervention. That some Chinese capital had moved to Hong Kong did play a role in the Crown colony’s success, but the fact that the Chinese border was closed meant the city experienced an economic miracle in the decades following World War II against all odds. The Economist described it in 1977 as follows: “A businessman setting up shop in Hong Kong finds low taxes, no foolish government interferences…a government leaning over to encourage him to make as much money as he can. He finds, blessed discovery, no politics.”

Crucial for the success of the development of Hong Kong was of course the fact that it could rely on British rule of law. This is also what proponents of “startup cities” want: to enable people living in corrupt juridisdictions to somehow enjoy the benefits of a higher quality of legal protection.

One example is a project to develop so-called “LEAP-zones”, something which Honduras allowed, under the name “ZEDE”. These are semi-autonomous zones on the territory of a certain state, with distinct legal, economic, administrative, and political (LEAP) protection for job creators. There, investors can count on the protection of US rule of law, which makes the project different from more traditional schemes to boost investment through reduced regulations or lower tax rates. The LEAP-zone project in Honduras may however not be a roaring success yet, given reports that it seems to be struggling with disputes over who owns the land identified for it.

This reminds of prominent development economist Paul Romer’s project to develop a foreign-run “charter city” in Madagascar and therefore lease out farmland to South Korean concern Daewoo, opening up the hub both to migrants from nearby countries as well as to locals. Regretfully, the project collapsed in 2009 after the country experienced a coup, apparently partly triggered due to anger towards the project, which was denounced as treason.

The lesson of these two experiments is obvious: such projects can only work if they are being developed on land which isn’t claimed by anyone and if they enjoy the same level of rock-solid independence from foreign intervention of Hong Kong.

Who would take the lead?

The European Union may not be perfect, but it does has some experience with “rule of law”-missions. Part of its EULEX-mission in Kosovo was to administer justice in the most delicate sectors over there. There have been major problems with the implementation, but at least Kosovo has known some kind of stability. Either way a crucial difference between free havens and the mission in Kosovo or historical Western “colonies” would be that anyone moving to such a place would do so voluntarily.

Of course, it’s clear that if the whole thing would be a private venture, things may be run much more efficiently, given that it’s not weak taxpayers but assertive shareholders of companies keen to see return on their investment that would be monitoring the project. Still, as Paul Romer’s experience in Madagascar teaches us: this is such a massive project that recognition by State actors in any way or another will be vital for its success.

What about the cost?

The Belgian State’s police and justice system costs around 3 billion euro per year, to serve 11 million people. Obviously a lot more would be needed to provide basic infrastructure, but to find funding, the EU’s 130 billion euro budget could be used. Anyone dealing with it knows massive spending improvements could be made. More than 270 billion euros are still being transferred to the already plentiful pockets of agricultural landowners, including the Queen of England, between 2014 and 2020. With Brexit, a major reform of the EU Budget is needed and given how the EU’s agricultural policies have been hurting developing countries for decades, it wouldn’t be such a bad idea to start looking there.

In any case, the refugee crisis has so far proven to impose a very high cost anyway. Germany's IFO institute has estimated the cost for Germany to be about 20 billion euro per year, although many other economists have claimed that to the extent these people can be integrated they’ll prove an economic boost.

Why would such a “Free haven” offer standards of justice and safety that are sufficiently high to make such a project succeed, so people would actually voluntarily want to go there, and companies would actually want to invest, thereby freeing up the resources needed to compensate the host State to actually allow such a Free haven to exist on its territory?

The answer is simple: For this project to be a success, it needs to become more safe than the most unsafe place in the world and its investment climate should beat the most horrible place on earth to do business, to attract those fellow human beings who actually have to survive there at the moment. Surely that shouldn’t be too much of a challenge. Would it really be so hard to do better than North Korea, Syria or Congo? Either way, the modest solutions have failed.