The Basics Behind ‘Brexit’

What impact would the United Kingdom leaving the European Union have on immigration and trade?
February 28, 2016 Updated: February 28, 2016

June 23, 2016 has already been tentatively set as the date of the U.K. European Union membership referendum, and the results of the vote are likely to be tight. With the potential exit sparking fierce debate, we talk to Ronen Palan, a professor of international politics at City University London and expert in EU-U.K. relations, for more. He explains the facts on Brexit and what it means for the U.K.

ResearchGate: Why is the U.K. considering exiting the EU? And is it really, or are there other reasons for threatening to leave?

Ronen Palan: It is not that easy to explain the U.K.’s position. Proponents of Brexit speak mostly in symbolic language, of sovereignty—or rather, of regaining sovereignty. At the same time, they insist on continuing the preferential trade agreements with the EU that the U.K. currently enjoys. This implies that those who are pro-Brexit tend to support the “Norwegian” model of agreements with the EU. To maintain the current trading relationships, Britain will need to continue paying the EU and abiding by its rules, but will lose “sovereignty” as it will not be able to shape those rules. Proponents are also concerned with Britain’s orientation towards the EU at the expense of other interests, including the Commonwealth, the United States, and Asia—but again, it is not clear how the EU stands in the way of these other relationships.

The core reasons for Britain’s ambiguous relationship to the EU, in my view, go back to the strategic development model adopted by the Thatcher government. The Thatcher government sought to place the U.K. as the gateway to Europe, attracting foreign investment in finance and manufacturing. As such, The City is highly unregulated and serves in effect as the financial center of Europe, while former Prime Minister John Major insisted on British exception to EU labor laws.

RG: What would the pros and cons of the Brexit be?

Palan: Cons include serious threats to the role of the City as the financial center of Europe and to British developmental policy. It is very difficult to identify any economic benefits. The best scenario is a mild negative impact on the U.K. economy—for example, the pound falling by 20 percent, as estimated by researchers at Goldman Sachs. A pro of the pound falling is that it may encourage manufacturing growth, however, in the worst case scenario, the U.K. could go into serious depression. How this would work is that the fall in the pound would lead to inflation (as the U.K. is an importing country), and inflation would generate pressure on interest rates at times of falling demand and stagnant growth, which would plough the U.K. into an extended recessionary period.

Additionally, in the case of the U.K. leaving the EU, the U.K. itself would probably be split up as it’s highly likely that Scotland would withdraw from the U.K., followed by Wales.

RG: The media has been focusing on a reduction in immigration in the Brexit debate. Can you tell us what impact the U.K. leaving the EU would have on immigration?

Palan: Very little that truly worries those segments of the British public concerned about immigration—that is, immigration from third-world countries—is unlikely to be affected. Meanwhile, intra-European migration works both ways—many Brits move to the continent and vice versa. The immigration issue is a spin by politicians.

RG: Would EU citizens still be free to work and study in the U.K. without requiring visas? What would other practicalities to consider include?

Palan: It depends on the agreement that is settled upon following the withdrawal. If the U.K. follows a Norwegian or Swiss model, which seems likely, then they would be able to stay.

RG: Whats your stance on whether the U.K. should stay in or leave the EU?

Palan: I’m in favor of staying in the Union.

RG: In your opinion, how do you see the EU developing and changing in the future?

Palan: The core EU will move towards greater integration, while Britain and a few other countries will remain at the periphery. There will be, in effect, two EUs. The two-track EU could work very well, with the larger EU as a global player in any bi-lateral and multi-lateral negotiations, including the WTO, financial regulation and security issues, and the core EU serving the purposes of those countries wishing to integrate more significantly.

This article was originally published on ResearchGate.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.