Consequences of Brexit
In the wake of the referendum David Cameron called out for the 23rd June 2016, discussions are heated and charged with emotion. The Prime Minister of the UK evoked the possibility of a referendum in order to win national elections, and thus got the discussions of a possible Brexit going. Little did he know that this discussion would develop its own dynamic, and could possibly even cost his mandate, as recent polls suggest. While Cameron forcefully rejected this, his party and Britain are largely divided, and some former allies sense political opportunities. However, since most polls suggest there is no clear indication on whether Britain will vote to leave or to stay in the EU, it is worth looking at how a possible Brexit would affect the UK and the EU — economically and legally.
The Legality of a Brexit
It is not since the Treaty of Lisbon (signed in 2007, entered into force in 2009) that leaving the European Union is an actual legal possibility. Article 50 of the Treaty of the European Union (TEU) lays down the framework for a withdrawal from the EU, and its mechanics have been debated on academic blogs. Assuming that Britain would vote to withdraw from the EU on the June referendum, this will initiate a process, which can last up two two years, as a Withdrawal Treaty (WT) will have to be negotiated. Since the withdrawal from the EU is of unilateral matter, the WT does not need to be ratified by the other 27 Member States, nor does it need a common accord in the Council, even though the WT would “be ‘accompanied’ by” amendments to existing Treaties. These negotiations will thus be held between the EU, with the Commission as broker, and the government of the UK, and Britain will remain a Member of the EU until negotiations are finished and the WT enters into force. The outcome of these negotiations, and the impact for both the EU and the UK are heavily debated, and Jean-Claude Piris, former Director General of the Legal Service of the Council of the European Union, presented 7 different scenarios of a possible outcome of the WT.
Consequences for economic relations
In these 7 scenarios, Piris examines how the relationship between Britain and the EU could be in the future. He first analyses the commonly expressed wish of the UK having a special membership, or a half-membership within the EU. The Treaties do not provide such a possibility and would thus need to be amended. As Treaty modifications concern all Member States of the EU, this would entail a ratification process according to each Member State’s constitutional requirements, which would require a referendum in some Member States. Piris argues that such a modification comes with political difficulties, and given the little leverage the UK has in such a scenario, he dismisses the scenario of a possible half- or special membership as highly unlikely. It is in the UK’s interest to keep access to the EU’s internal market, since over 50% of its export go to the rest of the EU, and this access would be at the heart of any agreement between Britain and the EU.
Piris further analyses seven different scenarios of a withdrawal, reaching from custom-made arrangements, joining the EEA (The European Economic Area), joining the EFTA (European Free Trade Agreement), follow the “Swiss way”, an own Free Trade Agreement between the UK and the EU, a Customs Union, and, lastly, the possibility of no economic relations, a complete Brexit. According to Piris, none of these scenarios are favourable for the UK, and only differ in the amount of damage taken to the national economy. Given the huge intertwinement and interdependence of UK trade and the internal market of the EU, the UK will still need to follow the standards of the EU in order to continue its export in the European Union, but will not be able to be part of the decision making process. Ironically, instead of returning to more national sovereignty, a Brexit would thus lead to less sovereignty for the UK.
Consequences for the UK
No matter what way the negotiations go and how economic relations will change between the European Union and Britain, Brexit would have a large set of consequences for the UK. Firstly, the UK would not be bound to EU law anymore, such as regulations, directives, the four freedoms, international treaties and so forth. This would entail policy fields such as fisheries, agriculture, justice, competition, etc. At the same time, other countries will not be bound to respect these laws towards the United Kingdom. The British government would thus need to adopt new laws, and evaluate inherited national law in order to see whether they want to keep it, modify it, or abrogate it; a process that could take years.
Secondly, a Brexit would have consequences for trade relations of the UK, not only with the EU, but also world wide. Being part of the EU for the past decades, Britain benefited from different trade agreements the EU has entered with different countries and regions in the world. The UK would thus need to renegotiate any of these agreements, and Piris argues that the UK’s external trade would be negatively affected for a few years to say the least.
Thirdly, a Brexit would also have consequences for individuals. Since the UK would lose its access to the four freedoms and other EU legislation, UK citizens would also lose their EU citizenship. Given the fact that more than two million British nationals live, study, or work abroad, this could have direct impact for these citizens. Until an agreement between the UK and the EU has been found, this would impact citizens directly and could entail consequences such as visa requirements, or in extreme cases people would even be forced to leave the countries. As all Member States are bound to the EU, no unilateral agreement could be found between different the UK and single Member States. Instead, a common legal framework for citizens is needed.
After having analysed possible scenarios for a Brexit, Piris concludes that “none of the seven options available to the UK, if it were to decide to withdraw from the EU, is attractive. Brexit would be negative for the UK.” He further argues that no matter what decision is taken, one of two overall scenarios will occur. Either the UK will become a sort of “satellite” of the EU, or to have serious negative impact on its economy, needing to renegotiate trade agreements from scratch. In any way, the discourse of Brexit leading to more autonomy is misleading, and a withdrawal from the EU would seriously harm the UK in the long term, and provide for economic instability in the short term. Both the EU and the UK government should thus take a more active role before 23rd June to avoid Brexit, to avoid that internal politics go all wrong and affect both the EU and Britain.
Picture: David Cameron at the European Council in December 2015. Credit: The European Union.