Behind the Headline: The UK votes to leave the EU

Brexit image from The Millennium Report

The vote is in: 51.9% of British voters approved leaving the European Union, a vote that has shocked the world and shaken the world’s economy. Already, the value of the pound sterling has fallen, there is talk of thousands of people in the UK losing jobs, and doomsayers predict the European Union falling apart as others decide to follow Britain’s path. In the run-up to the vote, most economic experts, big businesses, and politicians from around the world urged British voters to stay in the EU, with the most notable exception being U.S. presidential candidate Donald Trump. In response to the news, British Prime Minister David Cameron has announced his resignation, saying he will leave office in October.

So what, exactly, happened here? What happens now? And how will it affect you? It’s time once again to go Behind the Headline.

What is the European Union, and why was Britain a member?

I’ve talked about the European Union on Cat Flag before, so I’ll be brief: The European Union is a unique political entity covering 28 European countries that functions in some ways like an international organization made up of sovereign nations (members have their own militaries, embassies, passports, seats at the United Nations, and Olympic teams), and in other ways like a national government whose members are federal states (the European Union can pass laws that can override the laws of its own members, citizens of its members are also citizens of the EU, and people and goods can pass freely across its members’ borders with each other while the EU controls immigration and trade with the outside world). Many, but not all, EU members have agreed to use the euro as their common currency and to eliminate all border checkpoints between each other so people can cross from country to country the same way Americans can drive or fly from state to state.

The European Union evolved gradually over the decades into its modern form, originating in post-WWII trade and economic treaties that were designed to try to make a third devastating war in Europe impossible. It wasn’t even called “The European Union” until the 1990s; prior to that, it had been called the “European Communities”. Two simultaneous trends shaped the organization at this time – first, members gave the Union more and more power, and second, the Union admitted more and more members.

It was in this context that the United Kingdom joined in 1973, at a time when the European Communities were still a primarily economic and trade union that looked very different from today’s EU. It was primarily for economic reasons that the British joined; they were struggling economically, and hoped free trade with Europe could provide a big boost. This fact has long played a huge role in Britain’s relationship to the EU. To the British, EU membership was always about what was in it for them, and they never fully committed to complete integration into Europe as other members had. The British refused to adopt the euro, refused to throw open their borders to the same extreme degree as the rest of the Union, and repeatedly got into fights with the EU leadership and other EU members over the EU’s powers. Public approval of the EU has consistently been lower in the UK than most other member countries.

Still, there have always been pro-EU voices in Britain as well. While the vote to leave was close overall, 62% of Scottish voters had cast their ballots in favor of keeping the UK in the EU. British farmers have long been dependent on agricultural subsidies from the EU, and poverty-stricken parts of the UK such as Cornwall have been receiving economic investments from the EU for years. More than a million British citizens live, work, or own property in Europe. The most popular personality on YouTube, Felix Kjellberg, a.k.a. PewDiePie, is a Swedish national who lives in the UK and is able to do so because of the EU’s freedom-of-movement laws. The “Brexit”, as the British voters’ decision to leave has been called in the media, has put all of this in possible jeopardy. Already, many British voices are calling for a do-over because of these facts.

Why did the UK vote to leave?

That’s an easy question to ask, but a hard one to answer. The most common answer the political analysts seem to turn to is immigration. Even though the British had managed to get opt-outs of some of the EU’s open-border policies, at the end of the day, while it remained a part of the EU the British government had to give up control of its immigration policy to the Union’s decision-makers in Brussels. Furthermore, any person who was an EU citizen could freely visit and move to the British Isles. Thanks to the UK’s welfare laws, once somebody got in the UK, he or she could count on government-subsidized housing, taxpayer-funded health care, and government aid to pay for living expenses. Immigration has been a perennial issue in British politics for decades, with some arguing that the British Isles just aren’t big enough and don’t have enough jobs or resources to support too many immigrants, and some of the more extreme anti-immigration voices have been accused by critics of being racist or xenophobic. When you consider the haphazard way the European Union responded to the Syrian refugee crisis, it comes as no surprise that British voters may have felt the UK would be better off deciding for itself what its immigration policy is.

On the other hand, the European Union was in a crisis long before there was any talk of Syrian refugees in the news. Remember when the European Union faced a massive economic emergency in the wake of the Greek debt crisis? Or how Spain, Italy, Portugal, Ireland, and Cyprus also faced financial crises of their own at the same time? The economies of many of those countries are still weak, with unemployment reaching 24% in Greece, 20% in Spain, and 15% in Croatia as of February. Since EU members are required to send part of their tax revenue to the European Union, and 30% of the EU’s budget is spent on those regions that have lower incomes and weaker economies, British taxpayers have effectively been seeing their pounds spent on these other countries over the years.

Then there’s this analysis in the New Yorker, which looks at the demographic breakdowns of British voters who cast ballots for “Leave the EU” or “Remain in the EU”, and finds that the “Remain” voters tended to be well-educated, young, and well-off while working-class voters generally tended to vote “Leave”. The author of that piece suspects that working-class anger at Britain’s politicians, who have long been known to be more pro-EU than the general British public, helped tip the scales. I admit, though, that I am not an expert on British politics, so make of that as you will.

Is the UK the first country to leave the EU?

No.

In 1982, Greenland, a large arctic island with a population of just over 55,000 living under Danish rule just northeast of Canada, voted to leave the federation, largely due to the island’s inhabitants wanting control of Greenland’s fishing regulations rather than being forced to abide by Brussels’s fishing rules. In 1985, the Greenland Treaty formally ended the island’s membership, and since then the island has been largely self-governing. As Denmark is still part of the EU, Greenlanders are EU citizens, but EU law does not apply there.

So what happens now?

Exit sign image by Alton

In 2009, the Treaty of Lisbon entered into force, and one of the things that it did was create a mechanism by which members could leave. First, a member country would submit some sort of notification to the EU that it intended to leave, and then the EU would negotiate an agreement with that country on what the future relationship of that country to the EU would be after it leaves. For example, a country might want to leave the EU but still have free trade with it, still have a working relationship with it on military matters and security policy, and so on.

There is a two-year deadline from the date of notification to reach an agreement, unless the EU and the country in question should agree to extend that deadline. If no agreement is reached, the country’s membership just up and terminates on the deadline date, and the EU treats the country just like any other foreign country. A country that leaves the EU can rejoin later, but would not receive any special treatment in its application.

In response to the vote, British Prime Minister David Cameron had initially said he would leave it to his successor to formally notify the EU, thus delaying the withdrawal process. The idea behind this would be to give Britain more time to negotiate an exit that would allow the UK to retain access to trade with Europe. However, EU leaders have told the British government to start the process right away and not delay, going so far as to say that “notification” need not be a formal written document; as one official told Reuters, “He can just say it.”

Why so hasty? Well, the United Kingdom, a country that is home to more than 65 million people as well as one of the world’s most important financial centers, has a much bigger impact on the EU than Greenland. People are already speculating in the media about which country might be tempted to leave next, and there are a number of upcoming national elections in several EU members that are facing political shake-ups in the wake of the euro crisis and Syrian refugee crisis. Better to rip the band-aid off quickly, the thinking goes, so the economy and diplomatic relations can re-stabilize and find a “new normal”. If the exit process is delayed too much, it could make things even shakier for far longer.

How does this affect me?

Obviously, if there’s one thing markets don’t like, it’s uncertainty. We’re already starting to feel the economic shocks from the vote, but I expect that will probably stabilize once we have a clearer picture of what is going to happen in the coming years between Britain and Europe. Still, not great news for anybody’s 401(k) plans.

Obviously, the vote also complicates diplomatic relations between the UK and the United States, and likely will for some time, though I doubt our two countries’ long-standing alliance will be diminished. We are both members of NATO, after all.

But what about you, dear Cat Flagger, sitting here reading this? Well, it looks like a vacation to the British Isles just got cheaper, as a weaker pound makes it easier for Americans to afford British prices. This article from BBC News lists several more ways Americans will be directly affected by the Brexit, from the possibility that British investors might want to get into the American real estate market to the strong likelihood that popular TV shows made in Britain such as Doctor Who and Game of Thrones will take a huge hit in the wallet.

In the longer term, I expect international travel in Europe to become more complicated. Anyone travelling from Britain to anywhere else in Europe, or vice-versa, will likely have to abide by new rules and controls, and may even need to get visas. If other countries follow Britain’s lead, that’s even more border controls that weren’t there before a traveler would have to deal with. Trade will also likely be affected in the long-term, as the United States had been in the middle of negotiating a huge trade agreement with the EU that now looks like it may not happen. Expect the cost of goods imported from Europe to go up if the companies that ship them over here have to pay more in tariffs.

For now, we can only wait and see, as it will likely be a while – possibly months – before we get a clearer picture of what a post-Brexit Europe will look like. However, I am optimistic that once we have started to get that clearer picture, things will start to improve. I believe that people are adaptable, and are very good at finding the right path once they know what map it is they are looking at.

Advertisements

One Response to Behind the Headline: The UK votes to leave the EU

  1. auntleesie says:

    Thank you for your well-thought-out blog post. I hope your other readers will do their best to ignore the increasingly outrageous news reports. It was expected that European markets would tumble following the vote, and yes, S&P’s credit rating for the UK dropped slightly. Both are temporary reactions that should stabilize and rebound as things settle out. Perhaps even by the end of 2016. News media (since Monday, 6/27)– in an effort to gain readership/viewership and thus advertising dollars –has been blowing things far out of proportion. Its heinously irresponsible journalism. I follow some bloggers in the UK. Actual life long citizens of the UK. There are concerns, of course, but it isn’t near the catastrophe news media is making it out to be. It is, however, a wake up call for the EU, as other countries could reconsider their EU status if changes to the laws/regulations aren’t made. Thank you, too, for covering those issues in your “Strange Politics” posts.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: