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UK Brexit vote could mean new look for economies, borders

The United Kingdom’s June 23 decision to leave the European Union after a 44-year association sent global markets tumbling and many around the world wondering what comes next.

Britain’s exit, or Brexit, as it has popularly been called, marks the first time a member state has left the EU since its formation in the late 1950s. The move has been greeted with jubilation by many populists in Britain who have sought what they believe to be a more economically and culturally independent nation, but with skepticism by many in Britain and abroad who believed the UK was better off sticking with its European economic allies.

Steve Sieberson, Ph.D., a professor in the Creighton University School of Law, said two primary factors triggered Brexit: first being Britain’s initial reluctance to join the EU in 1972, given an abiding sense among Britons that they stood apart from the rest of Europe.

“Britain has relished its ‘differentness,’ its offshore geographical position, and its special relationship with its former colonies and the United States,” said Sieberson, who is the author of several books on the EU, including 2008’s Dividing Lines Between the European Union and its Member States: The Impact of the Treaty of Lisbon. “Britain was unwilling to let France and Germany drive the EU agenda, while at the same time unwilling to fully participate in the process of further integration. As a result, Britain from time to time negotiated ‘opt-outs’ from EU legislation, most notably the creation of the euro currency, which the UK did not adopt.”

Secondly, the continuing repercussions of the 2008 financial crisis have exasperated some in Britain who believe migrants from distressed EU countries like Greece and Poland have come to British shores to take British jobs and avail themselves of a substantial social safety net.

Sieberson said when the present British government, led by Prime Minister David Cameron agreed to the Brexit referendum in 2013, most in government and in Britain, generally, believed the economy would certainly improve over the next three years and any voices for an EU exit would be stifled.

“The feeling was that by 2016 the European economy would have recovered, and the British people would have had a renewed sense of optimism about the EU,” Sieberson said. “What were not anticipated were the recent events of terrorism in the world and the mass migrations triggered by the Syrian civil war. These events increased the fear of unwanted immigration, and triggered xenophobic nationalism in the UK and in other EU nations. As a result, the timing of the referendum could not have been worse, and we now see the results.”

With Brexit now the will of the British people, Cameron, who argued vociferously for remaining in the Union, subsequently announced his resignation as prime minister. Scotland, which held a defeated referendum on leaving the UK last year, has begun revving the engines for another UK exit vote.

Around the world following the vote, futures markets plummeted and the question of how international trade will work with the British absconding is on many an economist’s mind.

“Britain’s exit creates significant ambiguity as to how it will negotiate trade terms like tariffs and quotas with its closest and arguably most important trade partners in Europe,” said Kristie Briggs, Ph.D., an associate professor of economics in Creighton’s Heider College of Business. “In addition, the loss of mobility of labor both to and from Britain into other EU member countries raises the question of how current non-British EU citizens living and working in Britain will be addressed, and vice versa. It is much easier to relax the constraints on labor mobility across countries than to restrict it. Undoubtedly, these unknowns in trade and labor have direct impact for the businesses located in Britain and engaging in business with Britain. In short, the consequences are far reaching for global business.”

The next steps, Sieberson said, involve Britain’s annunciation of its intention to withdraw from the EU, an up to two-year period of adjustment for both parties as they negotiate the separation and reckon their relationship to one another in the days to come.

Britain will have to replace potentially thousands of applicable EU laws with its own versions of such laws and will also have to reset its trade treaties with just about every country on the planet.

“We can expect full employment for lawyers and technocrats both in the UK and the EU, and the process of fully implementing the withdrawal will likely take a decade or more,” Sieberson said.

Briggs said Britain will also have to contend with how it does business with the many European corporations already doing business in the UK, and how British companies in greater Europe will operate, estranged as they will be from the EU.

“It remains unclear how these business interactions will change, as an economic plan for Britain’s departure is not set,” she said. “But, as long as uncertainty about these changes exist, the market faces potential slowdown. Investors, consumers, and most economic agents value certainty. Britain now must address these concerns by answering questions of how their departure from the EU will and will not change current business operations in these countries.”

And if the divorce from Europe wasn’t enough, the UK may also have more internal fissures to counteract. In addition to Scotland, Northern Ireland, another of the UK’s constituent countries, also voted overwhelmingly to remain in the EU.

The Republic of Ireland remains an EU member and Sinn Fein, the most vocal Irish Republican party, has already made overtures that a united Ireland could be another bargain on Brexit, should Northern Ireland, like Scotland, hold a vote to leave the United Kingdom.

Though the unknown variables are heady, Briggs noted that despite its membership in one of the world’s largest economic unions, Britain held on to its own currency, something that might mitigate Brexit in the long term.

“The fact that Britain has remained sovereign in its currency use of the British pound, never entering the Eurozone, to some degree mollifies the complexity of breaking from the economic union of the EU,” she said.

Creighton University is a Jesuit, Catholic university bridging health, law, business and the arts and sciences for a more just world.