By Nicole Gunkle, American University
On June 23, 2016, the United Kingdom voted by referendum to leave the European Union. This decision was triggered by a culmination of events, including the financial crisis followed by a recession, a refugee crisis, and a subsequent rise in anti-EU sentiments. Though most voters believed the EU would suffer more than the UK from this broken relationship, the after-effect has painted a dismal picture for the UK. In order to maintain the status quo in the UK, Prime Minister Theresa May should hope for a swift negotiation of a trade deal and dissuade Northern Ireland and Scotland from pursuing secession. On the other hand, the EU must maintain a firm position vis-à-vis the UK to prevent other countries from leaving the EU as well.
Prime Minister May’s insistence that the UK will pull out of the EU Single Market has necessitated swift trade negotiations with the EU. As of March 2017, the UK remained a net importer of EU exports, with a deficit of £14.3 billion.[1] This trade imbalance is likely to increase following the completion of “Brexit” because the cost of importing from the EU will rise. While the UK is currently one of the top 6 importers into the EU,[2] this may change once it’s no longer part of the union. Since Brexit, the UK has suggested pursuing a US-UK trade agreement; however, due to lower trade flows between the US and UK, this agreement would be less significant than one with the EU.
One option that the UK could pursue is a bilateral trade agreement similar to the one in place between Switzerland and the EU, which are currently party to a free trade agreement and seven sectoral pacts governing open borders, technical trade barriers, public procurement, agriculture, and air and land transport.[3] This type of agreement would allow the UK to access the Single Market without having to agree to controversial policies such as the freedom of movement of people. However, if Prime Minister May continues to insist that “no deal whatsoever would be better than signing the UK up to a bad one,” the UK must revert to “World Trade Organization (WTO) rules, which would reinstate tariffs and custom checks”[4] and require the UK to pursue individual trade agreements with each Single Market member—an inefficient, time-consuming, and unideal process.
Although maintaining trade relations is a key priority, Prime Minister May must also focus on retaining Northern Ireland and Scotland in the UK. In 2014, Scotland held a referendum on independence from the UK, which failed by a margin of almost 10 percent. One of the largest rationales against secession was the benefit of EU membership; if Scotland voted to secede, EU member states were unlikely to vote to allow Scotland in as a new member state as a result of their efforts to discourage their own local secessionist movements. Now that the UK has voted to leave the EU, the First Minister of Scotland Nicola Sturgeon has asked for another independence referendum, arguing that—unlike England and Wales—62 percent of voters in Scotland had voted to remain[5] and that Scotland will be among the UK regions hit hardest by Brexit.[6]
Meanwhile, Scottish independence is no longer the only threat to the UK’s territorial integrity; Northern Ireland is also considering its options. During the referendum, Northern Ireland voted 55.7 percent remain in the EU,[7] the third highest remain vote in the country. The rationale for the remain vote was the fear that Brexit would lead to a stricter border between Northern Ireland and the Republic of Ireland. There is also the potential for increased tariffs, a customs border regulating the movement of EU citizens, and a decrease in foreign direct investment, which has benefited Northern Ireland as a result of its lower corporate tax rates.[8] While Northern Ireland is less adamant than Scotland, Prime Minister May will be required to protect Northern Ireland’s interests, as well those of Scotland, during the Brexit negotiations. If Northern Ireland decides that EU membership is critical and offers benefits that far outweigh those of remaining in the UK, it could unite with the Republic of Ireland and immediately regain access to the EU, as East Germany did when Germany reunited.
While the UK must minimize Brexit’s repercussions, the EU should view this as an opportunity to bolster unity. During the negotiations, the EU needs to maintain a fair but firm hand with the UK. Like the UK, the remaining EU countries must minimize Brexit’s impacts on their own citizens, including those living in the UK or involved in business relations with UK firms. Nevertheless, the EU must discourage its member states from following in the UK’s footsteps and leaving the EU, an objective that can be achieved by denying the UK the same level of benefits that it had enjoyed as a member. As Brexit negotiator Guy Verhofstadt suggests, the EU “can never, never create a state for the British or any other country outside the EU which is more favourable than being inside the EU.”[9]
These negotiations also offer the EU an opportunity to explore deeper integration among current members. The UK has often opposed measures to deepen integration, but with the UK out, the EU has a chance to pass new initiatives. For example, because the UK “has long been key to ensuring that any EU defense efforts remained closely tied to NATO, some U.S. analysts worry that Brexit could embolden the EU to develop a more autonomous EU defense identity”[10]. Moreover, since the UK is no longer part of these discussions, the EU will also be able to address migration issues and counterterrorism with less internal resistance.
Finally, the Brexit negotiations open the door for other countries to rise in power and balance out or join the Franco-German stronghold. Currently within the Brexit negotiations, Italy has been spearheading the effort and could likely step into the “Big Three.”[11] In another scenario, other groups, such as an “Eastern group” or a “Northern bloc,” could emerge as counterweights to the traditional political powerhouses of the EU.
Regardless of which approach the UK and the EU will ultimately pursue, the next two years will be tough. On the one hand, the UK must fight for an agreement that will allow them to maintain the status quo while protecting its internal territorial integrity. On the other hand, the EU must be firm—not only to discourage other members from pursuing their own “exits” but also to bolster unity and growth among the remaining member states.
[1] "Related Links." Overseas Trade Statistics. HM Revenue & Customs, 11 May 2017. Web. 23 May 2017.
[2] "Intra-EU Trade in Goods - Recent Trends." Intra-EU Trade in Goods - Recent Trends - Statistics Explained. European Union, Jan. 2017. Web. 23 May 2017.
[3] "European Commission Directorate-General for Trade." Switzerland - Trade - European Commission. European Commission, 22 Feb. 2017. Web. 23 May 2017.
[4] Wheeler, Alex Hunt & Brian. "Brexit: All You Need to Know about the UK Leaving the EU." BBC News. BBC, 25 Apr. 2017. Web. 23 May 2017.
[5] "EU Referendum Results." BBC News. BBC, n.d. Web. 23 May 2017.
[6] Press, The Associated. "Why Scotland, unlike Its Neighbors,Voted to Stay in the EU." The Denver Post. N.p., 06 July 2016. Web. 23 May 2017.
[7] Foster, Peter. "How Will Brexit Affect Scotland and Northern Ireland?" The Telegraph. Telegraph Media Group, 24 Feb. 2017. Web. 22 May 2017.
[8] Ibid.
[9] Hunt, Exclusive Darren. "Ex-WTO Boss Says Brexit Will Damage UK MORE than EU." Express.co.uk. Express.co.uk, 18 May 2017. Web. 22 May 2017.
[10] Archick, Kristin. The European Union: Questions and Answers. Rep. Congressional Research Service, 21 Feb. 2017. Web.
[11] Ibid.