Brexit: To Be Or Not To Be? Some Post-Referendum Scenarios
1. That WAS the question
On June 23, 2016, the United Kingdom had to chose to vote either to remain in the European Union, or to leave it — the so-called “Brexit.”
In the beginning, the camp of the status quo supporters seemed robust. But later on, polls showed trends reversals, in the sense that Brexit actually gained momentum. In May 2016, an Ipsos MORI telephone survey showed a 55-to-37 ratio of voters for the status quo (with the rest being undecided), while a June 16 survey indicated a 53-to-47 ratio (with no undecided) for the Brexit — also known as “No, thanks” — supporters.
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Irrespective of the final results, changes were being expected within the EU political construction.
2. Why do the Brits want to exit the EU?
There are several reasons. The U.K. itself used to be, in its colonial times, and still is, as a (formerly British) Commonwealth of Nations, a political construction much larger that the EU itself. The Commonwealth consists of 53 countries (compared with the EU’s 28), with a combined population of 2.1 billion people — almost a third of the world population — (compared with the EU’s 508 million), spread on Eurasia, the Americas, Africa, and Oceania.
Then, as a “mother country” for the U.S., it has been considered by many as the European turntable for America (or the other way around, depending on whom you talk with). In addition to that, the U.K. is a nuclear power.
Other reasons include satiety for the Brussels bureaucracy; distaste for the German-French dominance of the EU, with both of them being in a visible rapprochement with Russia; constantly permissive immigration policies; and lost patience for the EU constantly bailing out financially less responsible member states, like Greece, from their enormous debts. While “Grexit” was conceived as a EU sanction (but never applied), Brexit represents a local parliament initiative conceived, among others, to stop (at least for London) the continuous flow of assets and resources from the nations of makers to the nations of takers. Many British citizens’ attitudes toward the EU mirror many American feelings harbored against deals of NAFTA and Trans-Pacific Partnership (TPP) type.
3. The Advent of Brexit
The British Euro-skeptic politicians have constantly advocated alternatives to the U.K. membership in the EU. One of them was a Commonwealth free trade area. The concept of a Commonwealth free trade area has been popularized by Euro-skeptics well in advance the 2016 referendum, as a variant for a free trade treaty with the EU.
On January 1, 1973, the U.K. and Gibraltar joined the EU (known then as the European Economic Community) under terms negotiated by the Conservative government, then in power, through its leader, Edward Heath. The 1974 elections were won by the Labor Party, who formed a minority administration and held a referendum on continued membership in 1975, which was approved by 65% of the voters.
However, since withdrawal from the EU is a right of the member states, stipulated by Article 50 of the 2007 Treaty on European Union, Euro-skeptic British Parliament members have been having constant calls for a new referendum.
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A 2010 report showed that intra-Commonwealth trade (between members), is up to 50% more than with a non-Commonwealth member; and smaller and less wealthy states (like island members in the Caribbean and Pacific) have a higher propensity to trade within the Commonwealth (see: The Royal Commonwealth Society: A Working Paper, pp. 8–9).
In 2012, the British Euro-skeptics had proposed already a Commonwealth free trade zone.
However, at that time, such an idea had been labeled as “the ultimate Euro-skeptic fantasy.”
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On January 23, 2013, the Conservative prime minister David Cameron proposed in his “Bloomberg speech” a renegotiation of the terms of the U.K. membership and a new referendum on the EU membership.
EU speech at Bloomberg - GOV.UK
Prime Minister David Cameron discussed the future of the European Union at Bloomberg.
In 2015, the U.K. Parliament passed the European Union Referendum Act, which makes provision for the holding of a referendum no later than December 31, 2017.
Let us imagine several post-June 23, 2016 scenarios.
4. If the status quo prevails (which it did not) or is restored
We refer to an impact analysis on four levels: domestic (for the U.K.), regional (within the EU), transatlantic (with the U.S.), and international (which includes the British Commonwealth nations and the world).
Domestically, a more political than a financial impact is to be expected. The British political parties will have justified the results with their own interpretations and adjusted their actions accordingly in the near future. The Bank of England will have probably not intervened in sustaining the sterling pound, although some bulls and bears were expected to vary the stock exchange market in the period following Friday, June 24, 2016.
Regionally, the U.K. will try to redefine its status within, and relationship with, the EU based on the robustness of the victory percentages, or the lack thereof.
Bilaterally, with the U.S. transatlantic partner, this will have meant a folding on then-President Obama’s position for the status quo, emphasized during his April 2016 meeting in London with then-prime minister Cameron.
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Internationally, with the U.K. remaining in the EU, other nations (the British commonwealths, but also Russia and China) will have perceived it as a sign of stability for their own domestic situations, troubled occasionally by social unrest and separatist movements.
5. If Brexit prevails (which it did)
An impact analysis applied to the same levels (domestic, regional-continental, transatlantic-bilateral, and international) will reveal the following possible trends.
Domestically, the sterling pound will plunge, in variable levels. This is a reason for the Bank of England and various departments (British ministries) to intervene with emergency plans, based on their own money reserve availabilities. There is also the situation of the 1.3 million British residents in other EU countries (especially in Spain, Ireland, and France), whose future status should be clarified in the near future by both the British and EU authorities. Last but not least, the British executive will need to appoint more experts for the trade negotiations with the EU.
Regionally, several EU leaders, including Italy’s center-left then-Prime Minister Matteo Renzi, warned that Brexit would be a path of no return.
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Other EU nations will put in question the legitimacy of both the British euro-parliament members and European Commission experts. Some EU states will probably push for some decisions to be taken without the U.K.’s participation, where an unanimous vote is not required. Symmetrically, the EU residents’ status in the U.K. will have to be clarified (some of them will opt to stay, since later returns may prove more difficult).
Bilaterally, with the U.S., the British exit decision received mixed signals, since the U.S. itself was in full electoral swing during the same year. While the Obama administration already hinted that a withdrawal could render the U.K. a less valuable NATO ally, the U.S. conservative circles actually welcomed the decision and perceived it as an enhanced opportunity for a more flexible bilateral military relationship with their ally across the pond.
Internationally, Brexit could seriously impact the surge of other European separation movements, like in Scotland (the Scots are pro-EU), and Catalonia (the Catalans are also pro-EU, but so are the Spanish Castilians). In the case of these two nations, new negotiations and arrangements will be necessary for their re-accession to the EU.
Elsewhere in the world, some British commonwealth nations (American/Caribbean, African, Asian, and Australian/Pacific) will take concrete measures, of association or disassociation, depending on their own regional — political, administrative, economic, and trade — interests.
Commonwealth of Nations - Wikipedia
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6. The Caribbean and Pacific nations in a post-Brexit era
The British Commonwealth has 13 member countries in North America (Canada and 12 Caribbean Community nations). It is important to predict possible post-Brexit economic and trade trends for all English-speaking countries, and particularly the Caribbean and Pacific nations. The reason is a very important one. Which is this: after Brexit occurs, we will have another world power pole, namely a redesigned Commonwealth. In other words, Brexit will be the brick in the new architecture of the Commonwealth of Nations.
The Caribbean nations (in North, Central, and South America), on their part, possess a wide array of regional economic organizations, but I will emphasize in particular two of them: the Association of Caribbean States (ASC) and the Caribbean Community (CARICOM).
ASC has 25 full member states, (initially seven, and currently) 12 associate member states, and 20 observer states. CARICOM has 15 full members, five associates, and eight observers. A large part of them are English-speaking countries (aside from the Spanish-speaking, French-speaking, and Dutch-speaking countries).
The English-speaking countries fall into several categories: parliamentary constitutional monarchies (dominions or independent states, like Antigua and Barbuda, Belize, and Jamaica) — with Queen Elizabeth II as their monarch and head of state; republics (like Dominica, Guyana, Trinidad and Tobago); and Dutch territories with English as the official language, in addition to Dutch (like St. Maarten).
These differences may prove more or less important in terms of trade with a post-Brexit U.K., on one hand, and the EU, on the other hand. The Caribbean English monarchies may have a narrower leverage of negotiation with the EU and other states or group of states, due to their stronger connection to London. In contrast, the Caribbean republics, including the Dutch English-speaking territory of St. Maarten, due to their loose connection with London, may actually exercise to a much larger extent their margin of negotiations with the other world state entities.
In a post-Brexit era, the Caribbean nations, on their part, will need to enhance and improve the free trade agreements they currently have with the EU (like CARIFORUM), North America (NAFTA), South Asia, and other regions.
The Pacific nations (in Oceania) have 11 member states in the Commonwealth. Five of them are monarchies — with Queen Elizabeth II as their monarch and head of state (Australia, New Zealand, Papua New Guinea, Solomon Islands, and Tuvalu), one is a monarchy with its own monarch (Tonga), and five republics (Fiji, Kiribati, Nauru, Samoa, and Vanuatu).
Because of the small amount of land and limited resources (except Australia, New Zealand, and Papua New Guinea), the trade relations of the Pacific nations consist of economies in transition to a developed economy and infrastructure. The smallest Pacific nations rely on trade with Australia, New Zealand, and the United States for exports of goods and accession to other products (like cars, electrical equipment, machinery, and clothes).
The main trade blocs of the area are the Asia-Pacific Economic Cooperation (APEC) and the East Asia Summit (EAS). Currently, APEC has 23 members (among them, Australia, New Zealand, and Papua New Guinea), while EAS has 18 members (including Australia and New Zealand). A Pacific Island Countries Trade Agreement (PICTA) is in the process of being implemented.
The aforementioned remarks related to trade impact on the countries’ different status (monarchy with British monarch, monarchy with own monarch, and republic) remain valid for the Pacific nations, too.
On the other hand, the EU has been developing its own bilateral trade agreements, or is in negotiation for such agreements, not only with the English-speaking Caribbean nations, but also with Spanish-speaking commonwealths in the area, like Puerto Rico.
As for the Pacific nations, the EU has free trade agreements with Fiji, New Caledonia, Papua New Guinea and Solomon Islands, and agreements in negotiation with New Zealand.
The EU is also negotiating a comprehensive Economic Partnership Agreement with all Pacific nations, building on its interim agreements with Fiji and Papua New Guinea.
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7. Prelude for a new beginning
In conclusion, the time for an honest and efficient answer has come. The question is: to what extent political constructions, based on inclusion adopted on the expense of national and local value differences, are viable and durable.
Will a continuous reform work, or is dismantling the solution? Obviously, the post-Brexit realities will provide us with a long-awaited answer.
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