David Cameron: “We are approaching one of the biggest decisions this country will face
in our lifetimes.”
Dalibor Rohac: In late June, British voters will decide whether they want the UK to remain a part of the European
Union, or whether they want the UK to leave.
The consequences of Brexit would potentially be enormous and would go well beyond its effects
on the British economy or on the European economy.
It is therefore time to ask the question: What if the UK left the European Union?
So let's assume British voters on the 23rd of June decide to leave the EU. What are the
options for the United Kingdom?
First, if the UK wants to retain its access to the European single market, it could become
a member of the European Economic Area like Norway, or Liechtenstein, or Iceland.
By doing that, the UK would still have to apply a bulk of European legislation.
If you look at the example of Norway, you'll see that Norway still applies three-quarters
of the existing EU legislation, has to contribute into the common European budget, and has absolutely
no say over the content of the European legislation it has to apply in order to comply with the
rules of the single market.
And many Norwegians, therefore, argue that by staying outside of the EU, the sovereignty
of their country has been weakened, not strengthened.
The other option for the UK would be to negotiate a series of bilateral agreements with the
EU, guaranteeing its access to the single market.
But that would not solve the fundamental issue, either.
The EU is the world's largest economy and it is fairly obvious that it is therefore
in the better negotiating position vis-à-vis third countries than the UK would be outside
of the EU.
Furthermore, the UK would still be required to follow a large part of the European legislation,
namely that part that pertains to the single market.
The British could also decide not to be part of the single market.
It could decide to negotiate a trade agreement with the EU that would give them some form
of access to the single market.
Maybe be part of a customs union with the EU without being part of the single market.
That comes at a cost.
Most customs agreements—even the agreement that's being negotiated with Canada and the
EU—do not cover services.
And services are an important and growing part of the British economy, especially in
the area of finance.
The city of London is one of the most important financial capitals in the world. Its appeal
to large banks, hedge funds, venture capital firms, stems from the fact that it serves
as a gateway for operations throughout the European Union.
A single set of financial regulatory rules applies throughout the EU.
And if the UK were to leave, it's unclear that the city of London would still have that
same appeal if the UK decided to extricate itself from European financial regulations.
Therefore, many of these businesses, many of these banks would probably find it much
more interesting to operate from, say, Frankfurt than from London.
The critics of the EU sometimes contrast the European Union with a Europe of sovereign,
democratic nation-states that they want to return to.
Obviously, we could go back to a Europe of sovereign nation-states. But we should realize
that Europe, as it is described by Eurosceptics, is a completely ahistorical fantasy.
A Europe of sovereign nation-states of the end of the 19th century or early 20th century
was a Europe of rising protectionism, economic nationalism, authoritarian regimes, and ultimately
of recurrent conflicts.
The regime in the Kremlin has also been actively actively supporting nationalists and Eurosceptics,
and anti-establishment movements across Europe.
The more Mr. Putin undermines European unity, the more he weakens European resolve to confront
Russia's expansionism in Eastern Europe, the more Mr. Putin has to gain.
Therefore, it's not a surprise that on all the Kremlin-connected propaganda networks,
including Sputnik or Russia Today, we've been hearing praises of Brexit for months and months—
trying to dismantle the EU, which has been historically the most successful attempt to
bring peace and economic openness to the European continent, would likely jeopardize many of
the achievements that we've seen and that we are now taking for granted in Europe.
Nobody's arguing that the UK's exit from the EU, in and by itself, would be a geopolitical
catastrophe.
We've seen many friendly, amicable divorces of political unions in the past. One example
comes from my own home country of Czechoslovakia that disintegrated in 1992 on very friendly
terms, keeping many of the existing political, economic, social, and cultural ties intact.
However, at a time when Western unity comes under unprecedented stress, Brexit would give
ammunition to the enemies of free societies across Europe and beyond.
It would strengthen Vladimir Putin, it would strengthen nationalist movements, and could
lead to a whole range of unpleasant, unintended consequences going way beyond its immediate
impact on the British or European economy.
I have more to say about Brexit, about the EU, and about European reform in my forthcoming
book, "Towards an Imperfect Union"
which is being published with Rowman & Littlefield in May.
But what are your thoughts on Brexit? Please do let us know in the comments section.
Also, let us know if you'd like us to cover any specific topics in AEI's "What If?" series.