Adam Putz June 21, 2016
Does it matter that most folks in the U.K. can't name an EU president? Boris Johnson, former mayor of London and figurehead for the campaign to leave the EU, thinks it certainly does; or, at least, that’s presumably why he begged the question during a recent live Q&A on the upcoming EU referendum. It’s a bit of a trick, actually, as there are currently three “presidents” of the EU, one for each branch of this complex set of institutions comprised of a European Council (Pres. Donald Tusk), Commission (Pres. Jean-Claude Juncker) and Parliament (Pres. Martin Schulz). But the thing to keep in mind here is simple: the EU started as an economic union and, for better or worse, a political union has also taken shape. And although it’s a democratic one comprising a mixture of elected officials and unelected bureaucrats, questions of national sovereignty shouldn’t take a backseat to economic considerations.
But that’s not why most Europeans feel like Brexit would be a very bad thing. In short, a broken EU, if indeed it’s broken, is better with a skeptical U.K. in rather than out of the mix entirely. And yet, here we are. The prospect is nigh of the first member nation to leave the EU, ever.
Here are some potential impacts to consider ahead of the vote on June 23:
Markets: Relief rally? As Chris Hughes has recently argued, “it might be best to be at the front of the queue regardless of which way the referendum goes.” [Bloomberg]
Trade: The U.K. will have just two years to finalize agreements with the other 27 EU members under Article 50 of the Treaty on European Union. In addition, it will need to renegotiate dozens of trade deals it was part of as a member of the EU. For context, the U.K. did £515 billion in trade, with 44% of deals involving the EU, 17% the U.S. and just 8% with Brazil, Russia, India, China and South Africa. The smart options according to most sources involve imitating existing trade models such as Norway’s membership in the wider European Economic Area (EEA) rather than going it entirely alone and relying solely on the WTO. [Financial Times]
The Euro: Recent fluctuations in value suggest the euro, not just the pound, could be in trouble in the aftermath of a U.K. vote to leave the EU. [WSJ]
European politics: Most commentators have observed that U.K. Prime Minister David Cameron will also have to go, if the U.K. leaves the EU, with Boris Johnson coming center stage for the Tories as a result. Likewise, some have said Scotland will vote to leave the U.K.—just two years after failing to do so—in order for them to remain in the EU. But the unity of the European Union may not survive this vote any more than the unity of the United Kingdom. [NYT]
A New J-Curve: For Eurosceptical parts of the U.K. and elsewhere in Europe, it might help to remember most Europeans enjoy levels of material comfort and opportunity that allow them to have their cake and complain while eating it thanks to the EU. [The Economist]
Government reports predict U.K. GDP could fall 3.6% in the ensuing two years following Brexit and growth in home value could fall by 10%. Closing access to the single market will hurt foreign direct investment in the City of London’s financial services. These aren’t dire predictions. Even advocates of Brexit acknowledge that voting to leave the EU will leave the U.K. in a bad way economically. But to this bad economic news, I have a prediction of my own to add. What was once a neat, if inaccurate, analogy between the spheres of economics and politics will continue to cloud our ability to distinguish diplomacy—even in its backroom dealings—from deal making—even in its front-of-house politesse.