Great Britain: Saying Adieu to the E.U.?

by Nisha Kurani

Great Britain’s relationship with Europe can arguably best be described as “it’s complicated.” A “Brexit,” short for the British exit from the EU, has been festering for years, but seemed unlikely in early 2015. Today, that possibility is real, driven by the European debt crisis, the migration crisis, and increasing skepticism of EU integration (known as Euroscepticism). The fate of Britain’s membership in the European Union will be ultimately be decided by referendum, or popular vote, on June 23. However, a British divorce from the EU would have disastrous consequences for the UK’s domestic output and trade prospects, as well as the broader European economy.

Eurosceptics claim that EU regulations on business and trade have led to decreased British sovereignty and have hurt the British economy. But, consider the alternative: if Britain were to leave the EU, it would have to reimpose its own set of regulations in areas like agriculture, environment, and banking, and it is unlikely that the British government would risk significantly reducing regulation. In areas like greenhouse gas emission, Britain currently imposes more stringent rules than the EU.

The biggest benefit of EU membership is access to its single market, based on the hallmark freedoms defined in EU treaties: free movement of goods, capital, services, and people between member nations. This gives Britain the ability to trade tariff-free within the EU, a market of 500 million people and a 10.6 trillion GBP economy in 2015. While critics lambast the EU membership fee – 8.5 billion Great Britain Pounds (GBP) in 2015, 12.6 percent of the EU’s entire budget – the importance of free trade cannot be stressed enough. Overall, research finds that EU membership benefits British trade and increases GDP. Currently, 44 percent of British exports are sold tariff-free to other EU countries. If Britain were to break away, it likely would still have to pay fees to the EU, and abide by EU regulations on goods and services, much like Norway and Switzerland currently do as non-member nations. Without EU membership, some businesses would be more likely to move into other parts of Europe, due to the ease of moving people, money and products without worrying about import/export taxes or work visas. Polls show that most businesses support remaining in the EU.

In a global context, Britain would also suffer from the Brexit. Currently, EU trade agreements account for 60% of Britain’s trade. Britain is stronger as part of a 28-nation negotiating bloc than as a single entity.  As a non-EU member, Britain would lose political and bargaining power, and would have limited ability to influence European or transnational environmental, trade, and security policy. Contrary to Eurosceptic arguments, it is hard to believe that a UK without the EU market would have more success in trade deals with the US, India or China, with not as much to offer alone in exchange. Britain would have to compete with the EU and its 27 nations for trade agreements. As the third largest contributor to the EU, a British departure would most certainly harm the other 27 nations.  It would leave them with a greater debt burden, and damage relations, increasing the difficulty of reaching future trade agreements.

Supporters of the Brexit also criticize the open border policy of the EU and increased immigration of EU citizens (particularly from Eastern Europe) to Britain in recent years. They claim immigrants take away benefits from British natives. However, the net effect of immigration does not harm the British economy. Immigrants to Britain provide positive net contributions to national tax revenue. According to research from University College London, European immigrants are half as likely to receive state benefits or tax credits than natives. Most EU immigrants are young and come for work. Overall, they utilize fewer educational, pension, and healthcare benefits as compared to the native population. Britians living abroad benefit from open borders, too. About 2.2 million Britians live and/or work in other EU nations.

Should Britain stay or should it go? Economically and politically, Britain would benefit by staying in the EU. Currently, public polls show a slight preference for remaining. Let us hope that voters hold steady, realizing that a vote for the Brexit will come at a serious cost to their country.

Nisha Kurani is a Master of Public Policy student at the Goldman School of Public Policy and a senior copy editor at Policy Matters Journal.