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Thursday, July 28, 2016
Harold James

Harold James

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Q&A: What would a 'Brexit' mean for the EU?

On Feb. 19, British Prime Minister David Cameron struck a deal with European leaders to give Britain "special status" within the European Union should it decide to remain part of the 28-nation economic and political alliance.

The United Kingdom has long been threatening to leave the EU, and with a June 23 referendum on the horizon, a British exit — or "Brexit" — is a strong possibility.

Harold James, the Claude and Lore Kelly Professor in European Studies and a professor of history and international affairs at Princeton University, answered questions about Cameron's recent deal and the likelihood of the U.K. leaving the EU.

James, who directs the Program in Contemporary European Politics and Society, studies economic and financial history and modern German history.

Question: Cameron just secured a deal that gives Britain "special status" in the EU. Can you explain the deal and what it means?

Answer: The basic deal, as many critics of Cameron point out, does not amount to that much. There is one very large emotional issue in the United Kingdom — migration: as in the United States, many workers, especially those with lower incomes, fear being displaced by immigrants. They also see immigrants as a cultural deep challenge, even when outsiders might see cultural complementarity. As an example, some British Catholics get upset when their churches seem to be taken over by devout Poles. The negotiated deal contains the possibility of an "emergency brake" on employee benefits (often referred to as "in-work benefits" in the U.K.) to EU migrant workers. The deal might limit current government child support payments (welfare benefits are currently paid to children of EU nationals in the U.K, even when the children themselves may not live there.) These measures are a watered-down version of what Cameron wanted and probably won't affect migration at all.

Another big issue was the protection of the financial sector in the City of London from EU regulation. There is a new mechanism in place that allows the U.K. to challenge new EU measures and also a firm acceptance of the principle of nondiscrimination (i.e. that U.K. financial institutions may offer financial services to the whole of Europe in accordance with the principles of the Single Market); but there is no change to the EU voting rules.

The details of the deal hammered out in Brussels really matter less than the symbolic parts. And those more rhetorical elements are at the core of the referendum campaign: the recognition that the euro is not the only EU currency and the specific British exemption from the ever-closer union, or in Cameron's phrasing, the acknowledgment that "Britain will never be part of a European super-state." The problem is that all of that was actually clear long before: the Maastricht Treaty of 1992 gave the opt-out possibility, non-eurozone members are represented on the European Central Bank's admittedly not-very-active General Council, and in any case, almost no one thinks that Europe is going to be a super-state.

Q: Do you agree with Cameron that Britain is "safer and stronger" in the EU?

A: He is absolutely right on this. There are big global challenges — the security issue in the Middle East and in Ukraine, the organization of energy supply in the face of global warming, the stability of the international financial system — that demand collective action. The Brexit campaigners — notably Michael Gove, a minister in Cameron's cabinet as lord chancellor and secretary of state for justice — argue that the U.K. has the most vibrant capital city and the greatest "soft power" in the world, and that this soft power is diminished by the interference and the malfunctioning of the EU. But it is hard to see how "soft power" is going to help Britain deal with any of the big global challenges.

Q: If Britain leaves the EU, it would be the first country to do so. What are the consequences of such a move?

A: First, the consequences for the U.K.: it is likely that not all parts of the U.K. would vote to leave, and this could ultimately result in the break-up of the United Kingdom. In particular, the Scottish National Party is campaigning vigorously for EU membership, and, at the same time, for Scottish independence. A "yes" vote in Scotland to stay in the EU followed by a new referendum producing a "no" vote for staying in the U.K. would be the end of the old union of 1707 that produced Great Britain. That would leave a rump England in an isolated position, even more dependent on the financial sector. There are many in England who would find it uncomfortable were the U.K. to try to be a Switzerland or Singapore, a small offshore provider of financial services. Those intermediaries are dependent on being open — the very thing that many of the Brexit campaigners dislike.

Second, what happens to the EU? Over the past years, as Brexit was discussed, many politicians in southern European countries stated that they wanted Britain in the EU as a counterweight to German power; and at the same time German politicians saw Britain as a free market ally against statist high-spending regimes in southern Europe. Both views obviously cannot be right. In fact, the protracted and awkward negotiations on the U.K. package, at a time when the EU has very many serious challenges, have persuaded many Europeans that the EU would be better off without Britain. In fact, during much of the financial and debt crisis in the eurozone, the British government, like the U.S. government, made the point that combating the crisis effectively required a greater degree of fiscal integration, the capacity to deploy the so-called "big bazooka" of coordinated government spending to deal with crises. But that is just what Britain is in practice resisting. So a U.K. exit might really be a new chance for Europe. Europe's leaders might grasp that chance, or they might engage in the kind of tussles that have polarized Europe over the past years.

Q: Some say Britain opens itself up to potential terroristic attacks if it stays in the EU. What are the chances of this?

A: This is a complete red herring. The U.K. is vulnerable — like every state — to terrorism. There are already strict border controls, and the U.K. never signed up to the Schengen Agreement, which was signed in 1985 and removed internal European border checks. But not being in Schengen did not protect the U.K. from attacks in the past, like the coordinated 7/7 London bombings of July 2005.

Q: Britain never joined the single EU currency, the euro. Does that make it any easier to exit?

A: Yes, it does. It certainly removes one complication of exiting, but that fact does not mean that the U.K. would not have to engage in very complicated trade negotiations to retain access to EU markets, which are of great importance to the British economy. The "outs" always refer to the possibility of a new relationship that resembles that of Norway (a member of the European Economic Area, but not of the EU) or Switzerland (not a member of either, but tied to the EU by a complex series of painfully negotiated bilateral treaties), without contemplating the way in which the new treaties that would be needed would tie the U.K. just as surely as the EU treaty does. There is no reason why the other EU countries would have any strong motive to negotiate a deal that would get the U.K. out of a hole that its politicians have dug for themselves.

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