Brexit – what will the European Union do?
There’s been discussion on the potential for a British Exit (Brexit) from the European Union. 98% of the noise is uncritical electioneering from the Brexit supporters. Even the pro-EU folk have their anglocentric specs on. Good strategy looks at different perspectives. I think we should look at how other European countries might see Brexit.
European Perspectives on the EU
Britain sees the EU quite differently from the original founding members. We were one of the first wave of joiners, nearly twenty years after it started. Our membership has always been about economic benefit to the UK. In contrast the French, Germans and Benelux countries view it as providing political stability to Europe. Their driver was avoiding another European war. The original treaty was signed in 1954, nine years after WW2 ended. Much of Germany was still in ruins, France was little better. So from a European perspective the EU is about stability, which is why there are strict entry criteria. The British want more economic benefit, and we’ve been proponents of expansion.
Brexit is an Existential Threat to the EU
Another viewpoint that gets missed is that of the European institutions. If the
UKIP assertion that Britain could enjoy the benefits without being in the club was proved true it would be the death knell of the EU. In the face of this existential threat the EU will do everything it can to ensure Britain doesn’t benefit from Brexit. It is likely to put effort into campaigning for continued UK membership if it can.
Brexit will be a negotiated process. There aren’t provisions in the EU treaties for Brexit, nor is there a precedent. Negotiating is about where the power lies. Can Britain get what it wants? Only if the EU lets it. As outlined above the EU institutions will see Brexit as an existential threat. The core nations are likely to support this. So the EU is unlikely to be well disposed. Brexit won’t be an amicable parting or a conscious uncoupling. Brexit will be a very messy and spiteful divorce.
Where does the power lie in Brexit?
Both sides can impose tariffs on trade and restrict the movement of people and money. A Britain opting for Brexit might see the people restrictions as a benefit. However that will impact a lot of people. Never mind the permanent migrants, in both directions. Most ordinary working people in the UK who holiday overseas do so in the EU. There are more of these movements out than in, so a punitive holiday visa would hurt us more than it would hurt the Europeans. It would also impact on most of the UK electorate. That would make it a retaliation of choice.
When it comes to trade Britain would be seriously impacted by tariffs. It’s true that Britain is a net importer from the EU, but 40-50% of our exports go to the EU. As a proportion of our economy we export more to Europe than they do to us (because the total EU GDP is about 8 times larger than the UK on its own). Total UK net trade with the EU is somewhere in the region of 5-10% of the UK GDP. Most of this would continue even after Brexit. However there is likely to be a reduction if tariffs are introduced. So expect another recession.
If the tariffs end up on financial transactions then the City of London would definitely lose business to a European city. Banks aren’t stupid, they exist to maximise profit.
More on the people, economic and security impacts in other articles before the referendum.