Brexit Primer

The planned separation of the United Kingdom (UK) from the European Union (EU) will have serious international implications. We outline some of them below.

Brexit Vote

On June 23, 2016, the UK––which includes England, Wales, Scotland, and Northern Ireland–– held a vote to either stay in the EU, or leave it. Leave won with 51.9%–– about 17.4 million votes–– to 48.1% ––about 16.1 million votes.

Leave Campaign: The UK Independent Party (UKIP) leader, Nigel Farage, and the former London mayor and conservative politician, Boris Johnson, led efforts for the United Kingdom to leave the European Union. Michael Gove, the UK’s Justice Secretary was also in favor of the UK leaving the European Union. Older voters generally voted to leave the EU, with 50-64 year olds voting 56% to 44% to leave and those over age 65 voting to leave by 61% to 39%. England voted to leave the EU by a vote of 53.4% to 46.6%, with much of the countryside voting in favor of leaving. Wales voted to leave the EU by a vote of 52.5% to 47.5%.¹

Remain Campaign: UK Prime Minister David Cameron, from the Conservative Party, was the leading advocate for the UK staying in the European Union. London’s new mayor, Sadiq Khan and Scotland’s First Minister, Nicola Sturgeon, also led efforts to keep the UK in the European Union. President Obama argued in favor of the UK staying in the EU, as did EU leaders. Younger voters overwhelmingly voted to remain in the EU, with 18-24 year olds voting 75% to 25% to stay in the EU and 25-49 year olds voting to stay in the EU 56% to 44%.² Scotland voted to remain in the EU by a vote of 62% to 38%. Northern Ireland voted to remain in the EU by a vote of 55.8% to 44.2%. The city of London was also overwhelmingly in favor of remaining in the EU 60% to 40%.³

The vote itself carried no legal weight. The Prime Minister would have to call on Parliament to trigger the formal withdrawal process. Although the Prime Minister is under no legal obligation to do so, not starting the process would be seen as highly undemocratic.

Following the Brexit results, Prime Minister David Cameron announced he would step down as Prime Minister of the UK. On July 13th, Theresa May, the British Home Secretary of Cameron’s Conservative cabinet, became the new UK Prime Minister and began forming a new cabinet that includes Boris Johnson as the new Foreign Minister.

The European Union

The European Union concept developed soon after World War II in an effort to prevent another war through economic cooperation. In 1957, six European countries (France, Germany, Belgium, the Netherlands, Luxembourg, and Italy) created the EU’s forerunner, the European Economic Community (EEC). In 1973, the United Kingdom joined. Today, there are 28 countries in the European Union with over 500 million people. The EU is based in Brussels, Belgium. Members also include: Ireland, Sweden, Denmark, Poland, Finland, Estonia, Latvia, Lithuania, Slovakia, Hungary, Romania, Bulgaria, Greece, Cyprus, Slovenia, Czech Republic, Croatia, Austria, Spain, Malta, and Portugal.

The EU has also grown into a political partnership, in addition to an economic one. It established a variety of regulations on the economy, environment, and transportation sectors. There are four major institutions that run the EU: the European Commission, the European Parliament, the European Council, and the Court of Justice. The EU is a single market, so there are no taxes imposed on imports and exports between EU countries. The EU adopted the Schengen Area open-borders agreement, which allows free movement of EU nationals within EU borders without border checks, but the UK has not participated in this. The EU uses the euro as currency, which is only used by 19 of the member states –– the so-called “Eurozone.” The United Kingdom has kept pound sterling as its currency instead of switching to the euro.

Arguments to Leave the EU

Those in favor of leaving the EU made several arguments against continued membership:

• Save money: In 2014, the UK’s net contribution to the EU was 9.8 billion pounds (roughly $12.9 billion).⁴ Leavers claimed that this money would be used to revamp the UK’s National Health Service –– a claim they admitted was false after the vote.
• Immigration: Under the EU, the UK must allow EU nationals to travel and/or live in the UK. In recent years, immigration has significantly increased, alarming those who would like restrictions on immigration. The refugee crisis last year also added to fears of increased immigration.
• Reclaim sovereignty: Some believed continued membership in the EU eroded British sovereignty. Laws passed in the EU parliament are binding on EU member states. Those in favor of leaving the EU believed this hampered the UK’s self-rule.

Consequences of Leaving the EU

Major arguments for the UK to stay in the EU include:

• Global Influence: Leaving the EU will mean the UK loses a seat at the negotiating table for a variety of global issues, including security and trade. The United Kingdom has been in agreement with Germany in leading the bloc with harsh European sanctions against Russia for its aggressive posture in Ukraine. Without the UK in the European Union, this united front to counter Russia could be weakened. Following the vote, EU lawmakers suggested dropping English as its official language, which would complicate relations within the bloc, as well as U.S. relations with the EU.
• Economy: The UK currently benefits from participation in the EU’s single market, not having to pay taxes on imports and exports among EU members. Without EU membership, the UK will no longer have this benefit. The more immediate economic effects have already started to take shape. Soon after the vote, the British currency, the pound, dropped to its lowest value since 1985, and the global stock markets dropped significantly. The International Monetary Fund has predicted a 0 to 0.2% knock to global economic growth outside of the EU as a result of the vote. The full impact of the UK leaving the European Union will be better understood once the terms of the separation are finalized, which won’t happen for another two years, but the uncertainty in the meantime will contribute to a volatile market.
• Immigration: There are about 1.3 million British citizens living in Europe and roughly three million EU nationals living in the UK. The UK leaving the EU will likely impact their “right to work,” as well as other rights and services in the EU and the UK once a deal to leave is finalized.
• Independence votes: In 2014, Scotland held a referendum for independence from the United Kingdom, but the vote failed 55% to 45%. Because Scotland overwhelmingly voted to stay with the European Union, some Scottish leaders are calling for another vote for independence from the UK. Similarly, Northern Ireland overwhelmingly voted to stay in the European Union. Irish republicans in Northern Ireland have called for a referendum to leave the United Kingdom and be united with Ireland in order to remain a part of the EU.
  
  The vote has raised interest in other EU countries to leave the bloc, including in France, the Netherlands, and Germany. Politicians in France and the Netherlands have already called for a vote to leave the EU.

• Security: As a member of the EU, the UK is able to participate in intelligence and information sharing reserved for EU members, including sharing criminal records and passenger records. Without membership, the UK may be more vulnerable to security threats. All of the UK’s nuclear weapons are stationed in Scotland. If Scotland votes for independence from the UK, this deterrent will have to be moved elsewhere. No plans exist to find an alternative location for these nuclear submarines, which will cost billions and take years.

U.S.-UK Relationship

What will the Brexit vote mean for the U.S.-UK relationship? As President Obama noted, “one thing that will not change is the special relationship that exists between our two nations. That will endure.”

• United Nations Security Council: The UK is currently one of five states that holds a permanent seat on the Security Council, which grants them an overriding veto vote. The UK is a major U.S.-ally and generally votes in lockstep with the U.S., but the UK leaving the EU has the potential for other countries –– like Germany and Japan ––to seek a permanent seat on the council and alter the dynamic at the UN.
• NATO: The impact the vote will have on NATO remains to be seen. Lieutenant-General Ben Hodges, who is the commanding general of the U.S. Army in Europe, expressed concerns prior to the vote that the UK leaving the EU would show divisions in Europe while facing a variety of threats. He worried the vote could begin a process of breaking up the EU, which would have a major impact on the NATO alliance.⁵ However, following the vote, NATO Secretary General Jens Stoltenberg said “The UK will remain a strong and committed NATO ally, and will continue to play its leading role in our Alliance.”⁶
• Five Eyes: This is a decades-long intelligence-gathering alliance between five English-speaking countries –– the U.S., Australia, Canada, New Zealand, and the UK. –– that share intelligence and commit to not spying on one another. This alliance will continue with or without the UK’s membership in the EU.
• Trade: The U.S. has been negotiating a free trade agreement with the EU, the Transatlantic Trade and Investment Partnership (TTIP). With the UK’s departure from the EU, they will no longer be part of the future agreement and would have to seek a separate free trade agreement with the U.S.

The Process

The UK will not immediately leave the European Union. The British Parliament first needs to invoke Article 50 of the Lisbon Treaty to begin the separation process, which has not yet happened. The Prime Minister indicated negotiations to withdraw will formally begin in March of 2017. From that point, the United Kingdom will have two years to negotiate with the EU on the terms of their exit. However, the UK will no longer be a party to EU-member deliberations on the terms of the UK exit. If the UK and EU do not agree to terms of the separation at the end of the two years, the UK will depart the EU without a deal in place outlining the terms of their future relationship.