Brexit? Huh?

In just two days, the United Kingdom will vote on whether to remain a part of the European Union (EU ) or to leave, an issue known as ‘Brexit’ and one that is of concern worldwide, not just in Europe.  However, one of our candidates vying to be the next U.S. President, when asked his opinion on Brexit during a 31 May press conference had the following response:

Reporter Michael Wolff: “And Brexit?  Your position?”

Trump: “Huh?”

Wolff: “Brexit.”

Trump: “Hmmm.”

Wolff: “The Brits leaving the EU.”

Trump: “Oh yeah, I think they should leave.”

Forgive him, friends … he knows not of what he speaks.

Since then, Trump has decided that Britain should definably leave the EU, and to that end he has announced that he plans to travel to the UK on June 23rd, the day the British people will vote on the referendum.  I have no doubt that British Prime Minister David Cameron is excited that Trump plans to come offer his expert advice.  (dripping sarcasm intended)

In April, President Obama visited the UK and put his two cents worth in, saying, in part, “The United Kingdom is at its best when it is helping to lead a strong Europe. It leverages UK power to be part of the European Union.”  I fully agree with what he said and honestly believe he was hoping to sway some people toward David Cameron’s hope of staying in the EU, but to a large extent it backfired, as many were offended, feeling that Obama was meddling in their affairs.  Boris Johnson, the mayor of London, said “The Americans would never contemplate anything like the EU, for themselves or for their neighbors in their own hemisphere.  Why should they think it right for us?” He has a point there, actually … there is already an outcry here over NAFTA (North American Free Trade Agreement), which is merely a trade treaty, much less of a commitment than the EU.  I can just hear the furor now if President Obama proposed forming a NAU, or North American Union with Mexico and Canada!  Although I believe Obama’s intentions were pure, perhaps he overstepped his bounds.

So, why do some 43% of Britons clearly want to leave the EU?  The answer is far more complex than I could possibly cover in a short blog post, and while I have done extensive research, I still do not understand both sides of the issue well enough to write an intelligent post about it.  I am sure that my European readers have a much better understanding of the issues surrounding Brexit than I.  I do not know what the odds are that the UK will actually withdraw from the EU, though bookmakers continue to lay odds against the referendum passing. I can only make an educated guess at what the consequences of such an action would be, for Britain or the European Union.  So, now that I have told you I am unqualified to write about Brexit, you are asking why I am writing about Brexit, right? I am not, per se, writing about Brexit, but rather from a U.S. perspective, why we should care and whether it might affect our security and economy as well. Americans tend to sometimes forget that we are a part of an international community, and as such are affected by goings-on across the globe.  It would behoove us to remember this.

Economically, the fallout would likely be in two areas:  investment and trade.  The United States is the largest single investor in Britain, and for many firms it is the gateway to free trade with the 28 nations that make up the E.U. A Brexit could jeopardize the access of U.S. interests in the UK to those markets, potentially reducing revenue and forcing some firms to consider relocating their European operations elsewhere.  The United States exported $56 billion worth of goods to Britain last year, and has some $588 billion in U.S. investment there, in sectors ranging from banking to manufacturing to real estate. Likewise, Britain has invested nearly half a trillion dollars into the United States and employs more than a million workers here. A prime example is Caterpillar, which has 16 plants employing some 9,000 people in Britain.  Much of their product is exported throughout Europe and other parts of the world, eased by the E.U.’s open market and standing trade agreements. Approximately 25% of Caterpillar’s sales are in the EU and might be seriously jeopardized by Brexit.  The U.S. and the EU are members of the World Trade Organization, and the framework for their trade is set by the international organization. But after a Brexit, the U.K. would be required to adopt new tariff schedules and trade regulations for Europe and the U.S.

In terms of security, it is again uncertain what the ultimate effect will be.  Part of the very raison d’etre for the EU is to make the nations that comprise it stronger than the individual nations or their sum.  This makes the EU a formidable ally for the western world.  There is a fear that if the UK successfully pulls out of the union, a domino effect will transpire, and other nations may consider their own exits.  All of which could have major security implications, especially in today’s world where international terrorism is a security threat to every nation on earth.

Even the wisest analysts cannot say with certainty what will happen in the event the referendum passes on Thursday.  Some predict gloom and doom, others say the effect will be minimal, particularly here on the other side of the Atlantic.  To learn more about what would happen in the immediate and long-term aftermath of a ‘yes’ vote, this article in The Guardian is the best I have found.  Obviously, the effects will be much more relevant in the UK and EU themselves than for those of us in North America, however if there are major effects, I believe we will all feel the shock waves to a greater or lesser extent.

On 16 June, Jo Cox, British Labour Party politician and a  Member of Parliament was murdered for her views that Britain should remain with the EU.  Fellow-blogger Erik Hare of Barataria has written an excellent post about that and I encourage you to check it out. “Brexit” Turns Violent.

By the time we here in the U.S. sit down to our lunches on Thursday, enough of the vote should be in to make a call.  What will happen next?  Stay tuned, folks …

 

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