David Cameron’s electoral triumph has brought the prospect of the Brexit from the EU a step closer to becoming a reality. The idea of Britain leaving the EU is almost analogous to the separation of the English church from Rome in the sixteenth century. Whereby, a separation from Rome at the time meant that Henry VIII could implement various laws and regulations, in an attempt to get an annulment for his marriage. Similarly, the possibility of an EU exit could mean that the UK will now be free to implement its own regulations, especially in industries such as the banking sector. This article explores the highly controversial topic of an EU exit and what the potential complex implications are.
The general attitude of policy analysts around the world is that Britain may lose international prestige and influence if it were to leave the EU. Feng Zhongping, the assistant president of the China Institutes of the Contemporary International Relations claims that from China’s point of view it does not think that the UK, France, Germany or any single European country can play a global role. In essence, Feng Zhongping brings to light the fact that the UK’s political and economic influence will be greater if it were to stay within the EU. The idea that Britain leaving the EU will diminish its international status is further corroborated by Ivo Daalder, the former US ambassador to NATO who says that:
“The idea that the UK could have influence in the world outside of the EU is risible”
This implicitly suggests that Britain’s power and influence comes from being a strong leader in Europe. Therefore, if a Brexit were to become a reality, then its global power will ultimately decrease. EU skeptics, however, argue that Britain could regain a unique and influential voice in the world, once it breaks away from its former collective European identity.
Economists have tried to quantify the potential cost or gain for Britain if it were to leave the EU. It’s important to acknowledge, however, that all the following estimates are solely hypothetical and do not serve as a true reflection. The Centre of Economic Performance (known as the CEP) claim that Britain could have it’s GDP fall by 8%. In essence, the CEP claim that in a worst case scenario Britain could face loses similar to the ones that were experienced during the global financial crisis. From an optimistic view point and under ideal conditions, the CEP claim that the British GDP will only fall by 2.2%. Essentially, an EU exit could potentially cause the UK economy to contract. EU skeptics argue that this contraction is only temporary and that the elimination of strict regulations in the financial sector will outweigh the transitory contraction of the UK economy.
Supporters of the EU argue that an EU exit could create economic unsuitability and could cost the UK thousands if not millions of jobs. Contrary to the beliefs of many politicians and supporters of the EU, the Institute of Economic Affairs claim that jobs are associated with trade, rather than the membership of a political union. There are no early indications that would suggest a substantial fall in trade between Britain and the EU, meaning that severe job cuts is not a likely event. Moreover, an EU exit could mean that Britain may be forced to look beyond its European trading partners to countries that are experiencing faster growth such as India and Brazil to form free-trade agreements, which may boost economic growth and consequently increase the standard of living in Britain.
The prospect of Britain leaving the EU has shed light on possibilities that were not so conspicuous at first. For instance, leaving the EU could force Britain to evolve and play a different role on the international stage. Britain could look beyond the vicinity of Europe to other emerging countries to form trading agreements with countries that have faster growing economies. But with an EU exit also comes the possibility of investors and foreign companies seeing London as less attractive, as it may no longer act as the main gateway to the rest of Europe.
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