Brexit and Its Impacts on the European Union

By Mei Zhaorong*

The referendum on Brexit on 23 June 2016 represents a major turning point in the history of the European Union (EU), because it has not only dealt a heavy blow to European integration, but will also exert far-reaching impacts on EU’s development.

In order to correctly understand and assess this “political earthquake”, it is necessary to review the context and intention behind the initiation of the referendum by former British Prime Minister Cameron. People who have some knowledge of Europe’s post-war history know that the UK’s accession to the European Community (EC) in 1973 was not due to its interest in furthering European integration, but rather in the benefits promised by the large single market of the EC. Since its accession to the EC, which later evolved into the EU, it has always acted in its own ways and has been dubbed as an unfaithful and fastidious member state, i.e., the UK only wishes to profit from the EU’s single market for the benefit of its own economy and London as a financial center without whole-heartedly supporting EU integration. It emphasizes British sovereignty and opposes a “federal Europe” or the “EU Constitution”. That is why it refuses to join the euro zone or the Schengen Agreement, both of which are fruits of European integration. With the development of European integration and, in particular, the continued exacerbation of the European sovereign debt crisis, the innate deficiencies of the euro manifest themselves along with those of the EU bureaucracy. The supranational institutions established by the EU to tighten financial and economic disciplines such as the banking union, coupled with the heavy blow struck by the refugee crisis, fermented doubt about the EU among the British public and the ruling Conservative Party and gave rise to the growth of anti-EU forces. Two camps thus emerged: one for staying in the EU and the other for leaving. In light of this, the then British Prime Minister Cameron declared that if he was to win the 2015 general election, he would put Brexit to a referendum in 2016. Cameron’s aim was three-fold: first, he wanted to pacify the Eurosceptics in the Party and alleviate intra-party contention, so that the Party would not fall apart; second, he wanted to win people over for the general election, so that he could consolidate his position as the Party leader and the prime minister; third, he wanted to press the EU to make concessions to issues that concerned the UK. His scheme had worked out. On the one hand, he won the 2015 general election by a large margin; on the other hand, the EU made two concessions in the negotiation to keep the UK: first, the EU agreed to the UK’s selective participation in the European integration process which meant recognizing the principle of a “two-speed Europe” or a “multi-speed Europe”; second, it agreed that EU citizens working in the UK would not enjoy, within a certain amount of time, the great welfare benefits offered to British citizens. Cameron found these so-called outcomes very satisfactory, but in return, he had to honor his words by calling a referendum.

In the preparation for the referendum, there had been heated debate from top to bottom over to stay or to leave, which not only lacerated the British society but also churned up the entire West. A few leaders and political dignitaries of major European countries urged the UK to stay. US President Obama personally exerted influence and pressure, and a large number of senior US officials visited the UK to warn of the consequences and harm of Brexit. However, their efforts only intensified the aversion of the British public, and at last the “Leave” camp won by a narrow margin with a percentage of close to 52%. After the result was unveiled, something surprising happened. When Cameron took the blame and resigned, Johnson, the triumphant leader of the “Leave” camp in the Conservative Party, quitted as well. Theresa May, former Home Secretary who advocated “Remain”, took over the leadership of the Party and the country, and the new cabinet she installed consisted of supporters from both camps. However, when the feverish debate cooled down, some Members of Parliament (MPs) and ordinary voters on the “Remain” side disapproved the result, while others even regretted voting for Brexit and demanded a second referendum. After this public unrest receded and the new cabinet declared that it would officially submit the application for leaving the EU by the end of March 2017, MPs on the “Remain” side claimed that procedures for leaving the EU should be launched with the approval of the Parliament and that their appeal had already been adjudicated by the Supreme Court. The May government refuted such a claim and declared that it would appeal to the Supreme Court for a rejection. It also reiterated to leaders of Germany, France and the EU that London would launch the process on schedule.

These happenings lay bare the fact that the decision to hold the referendum was made out of the Party’s selfish interests, which, however, led to the split-up of the British society. As pointed out by the European media, the use of such emotional means as the referendum to decide on such a significant and complex issue as Brexit which bears on the trajectory of the nation would not lead to any rational result. This is a kind of “inferior democracy” which exposes the grave crisis western democracy has been sinking into.

According to Article 50 of the European Union Association Agreement, negotiation on leaving the EU should be concluded within two years. The EU urged the UK to file the application quickly for an early launch of the negotiation. Yet, the UK deliberately delayed the application for want of a plan. The main reason is that both the “Leave” and the “Remain” camp miscalculated the outcome and found themselves poorly prepared after the referendum. However, it was time-consuming to cope with the chaos afterwards, converge different opinions and draft a negotiation plan. It can be predicted that the negotiation will be complicated, arduous and tortuous, and that tension and contingencies cannot be excluded. For the UK, it is believed that the best outcome should benefit itself without hurting the EU. As to the EU, it should, for the sake of its interests, make the UK pay a heavy price for its exit; otherwise, other member states will follow suit and set off a chain reaction. However, heavy punishment will only stall the negotiation, the uncertainties of which mean huge loss for the European economy. Furthermore, despite its exit from the EU, the UK remains a NATO member which is still closely connected to the EU politically and economically. A stalemate in bilateral ties contravenes the long-term interests of either side. In addition, many issues wait to be sorted out in this negotiation, at the core of which is how to shape the future business, investment and financial ties and whether, to what extent and under what conditions the UK will stay in the EU’s single market and ensure that London’s status and interests as a financial center stay intact. A similar issue in this connection is to what extent citizens from EU member states can freely enter the UK and enjoy its great welfare benefits. These are key issues that the UK, the EU and, in particular, countries like Poland, Hungary and the Balkans tend to focus on and bargain about.

Whatever the outcome of the negotiation, the impacts of Brexit on the EU are multi-faceted and far-reaching. Actually, some of the impacts have already surfaced, which can be roughly summarized in the following.

Firstly, the strength and influence of the EU will be undermined and its international standing will fall. British economy takes up 15% of the EU’s total and its population 12.5%. It has the largest stock investment in the EU and is the second largest contributor to the EU’s budget and a major driving force of the single market. As a permanent member of the UN Security Council, a nuclear country and a NATO member which boasts special relations with the US, the UK’s contribution to the EU’s diplomacy, security and global clout is not to be underestimated. Brexit will impair the EU in size, weight and strength.

Secondly, Brexit will encourage and strengthen the extreme forces of Eurosceptics in EU member states, which will cripple the foundation of European integration. The referendum reflects four tendencies: growing social tension as a result of widening wealth gap, deep dissatisfaction of the grassroots sector with elite rule, increasing antipathy towards EU bureaucracy and rising anti-globalization mood. It should be pointed out that these tendencies exist more or less in EU member states as well. The precedent set by Brexit will undoubtedly encourage such right-wing populist forces as the National Front of France, the Five Star Party of Italy, the Liberal Party of the Netherlands and the Alternative für Deutschland of Germany, although Brexit also sounds the alarm to the EU and sets people thinking about how to repair defects through reform. For instance, foreign ministers of France and Germany have changed their rhetoric from “a bigger Europe” to “a more flexible Europe”, to “listen to their people” and to “the question lies not in how to make member states cede more sovereignty to Brussels”, so on and so forth. But such rhetoric is only lip service. No consensus-based specific measures have yet been taken.

Thirdly, Brexit will change the internal structure and affect the policy trajectory of the EU. The EU is a conglomeration of sovereign states, and each member state enjoys diplomatic independence according to EU Constitution. Yet, all member states try to leverage the EU to elevate their respective international standing and pursue their respective interests, while in the meantime, sticking together as best as they can on major diplomatic and security policies. As the UK, France and Germany are stronger than other member states, they have greater say and influence in EU policy-making and have established a trilateral relationship featuring mutual leverage and mutual counterbalance. For example, Germany makes use of both the UK and France to its own benefit. On the one hand, it uses the UK to press France on business policies; on the other hand, it allies with France to prompt the UK to further political integration. France and the UK assist each other to check Germany from becoming the ruler of Europe. After Brexit, the mechanics of leverage will change. As the closest ally of the US, the UK’s influence on EU’s foreign policy will weaken considerably or even be reduced to none. And with the decline of French strength, Germany’s appetite for EU dominance will grow, which might arouse suspicion, fear and resistance on the part of less strong member states and intensify conflict and tension within the EU. Germany has to choose between “Germany’s Europe” and “Europe’s Germany”.

Fourthly, the US needs to find a new “helping hand” in the EU to replace the role previously played by the UK. Various evidences have shown that the US have been luring Germany to play this role, given Germany’s political and economic weight in Europe and the stronger Atlantic complex of Merkel than any of her counterparts in France, Italy or other EU countries. Yet, it remains to be seen as to whether and to what extent Germany will play the role of the UK in the EU as wished by the US. Nevertheless, it is worthwhile to follow the trajectories of Germany’s domestic and external policies and of Germany-US relations. In this sense, the impacts of Brexit will transcend Europe.

* Mei Zhaorong is Former Chinese Ambassador to Germany and Former President of CPIFA.