After the Brexit, EU Enters Unknown Territory

CPS Professor Steven Billet explains what happens after the UK’s vote to leave the European Union.

June 27, 2016

The United Kingdom awoke Saturday morning to find it was no longer part of the European Union following an unprecedented referendum in which 52 percent of voters cast their ballots in favor of a “Brexit.” The withdrawal came months after the UK had been struggling with issues of immigration, refugees and its own sovereignty. Immediately after the vote was called, the British pound took a nosedive and fell to its lowest point in three decades. Prime Minister David Cameron announced he would resign in October. (The Labour Party is challenging its leader, claiming that he sabotaged  the party’s effort.)

And the Brexit could continue to have damaging affects on the world economy, explains College of Professional Studies Professor Steven Billet. Dr. Billet, who wrote his doctoral dissertation on the EU and managed AT&T’s public affairs organization for Europe, discussed with George Washington Today how the Brexit will impact global markets, the EU and the United States.

Q: The UK has decided to leave the EU. What happens next?
A: While there has been an awful lot of work anticipating this possibility, there’s no way to prepare completely for an event of this dimension. The EU has scheduled summits for the next week to sort out how they’re going to begin the “unwind” process for the UK, but this is only the start of a long, tedious process. Many EU officials want to start the exit process as quickly as possible, since there is so much uncertainty in the investment environment.

No one has ever done this before—there’s no model. The EU's only guidance is Article 50 of the Lisbon Treaty. It gives some direction to countries that want to withdraw from the EU and it includes a negotiating process that’s supposed to be completed in two years. If it takes more than two years, the 27 remaining countries must agree to continue the negotiations. If these negotiations fail in the trade and tariff area, for instance, the default option is to treat the UK like any other signatory of the World Trade Agreement, subjecting them to a host of tariffs with the EU. That would be an unpleasant outcome for the UK. 

Q: What factors led to the referendum?
A: If it hadn’t been for the immigration and refugee crisis in Europe, the outcome of this vote may have been much different. Immigration was clearly the core issue for the Leave campaign, and other issues were used to amplify itterrorism, open borders, and the Schengen Agreemen,  along with the perception of 3 million EU immigrants “invading” England and taking away jobs. All of this together made immigration a powerful issue.  

Overhanging this more immediate issue was another matter that has warped and perverted the UK’s relationship with the EU over the last 40 years—their sense of national identity. The UK has never seen itself exclusively as a European power and never completely committed the UK to Europe’s “ever closer union,” as described in the Treaty of Rome. Historically, they are torn among many self-images (some more nostalgic than others), and see themselves as a transatlantic power, a commonwealth power and a global power.  As a result, they’ve never been in a place where they would embrace the European project without reservation.

Second thoughts about the EU didn’t begin in the last few years. They emerged since the Second World War; most powerfully with Margaret Thatcher. She loathed the EU, thinking it diluted the sovereignty of the UK. If Euroscepticism has a mother, she is it. Her Euroscepticism  evolved to become a defining and consuming force in the Conservative Party and spawned the creation of the UK Independent Party.

Q: How will this affect the United States economically and otherwise?
A: This could clearly have an impact on the global economy and on investors here. U.S. multinationals are big players in the UK. Simply understood, the UK provides complete market access to the whole of Europe from a UK base of operations. The EU has a market of 500 million people, and any company can use the UK as a launch pad. That’s now gone. Those who argued for the Remain campaign focused on the economic impact of the UK’s departure from the EU, and the particular impact on investment patterns. While there was lots of overstatement and bluster in the campaign, these implications are among the most worrisome.

The other component that the U.S. has to sort out with the UK is its so-called  “special relationship,” which extends beyond the EU arena and includes a wide array of security, diplomatic and defense arrangements vital to U.S. global interests. This has been a critical component of U.S. foreign policy since the Second World War, and the UK Brexit decision threatens to undercut that relationship by fundamentally altering the configuration of forces in the Western alliance. This is particularly important as Russia reasserts itself on the eastern flanks of Europe. The one world leader most pleased with the result of the vote was surely Vladimir Putin.

Q: Will the Brexit change anything about the EU’s relationships with its remaining members?
A: I really doubt the EU is going to offer a new treaty to the remaining EU members in the near term. But they need to come to grips with the fact that they’ve badly handled some questions starting with the refugee issue. I think they’ll do something in that arena by tightening border security within the region. They may also try to address the EU’s “democratic deficit” in EU institutions. Giving national parliaments a bigger role in decision-making in the EU could address this issue. Perhaps, in the end, the answer for a struggling democracy like the EU is more democracy.

Q: What about the domino effect? Will other countries try to leave the EU?
A: The possibility of other countries forcing referenda—maybe France or the Netherlands—remains to be seen. The political environment is Europe is fluid and ambiguous. While many Eurosceptic parties feel empowered just now, some are wavering.  If the UK exit is painful, as many suggest, or it turns out to be the fiasco many predicted, the zeal for referenda could dwindle quickly. The most important implication may be what happens to Scotland, which could vote on its own exit of the UK and become the 28th member of the EU. The Scottish National Party has been very aggressive since the vote.

This has been a hyperbolic and emotional campaign. The best thing for everyone just now is to sit back and take a deep breath. This is not a time to panic. Europe needs level-headed leadership at this trying moment. Hopefully, some will emerge as it has at other times of crisis.