EUROSCOPE. To Brexit or not, that’s the question

On June 23 this year British and Commonwealth citizens (Indians included of course) resident in the UK and over the age of 18 will be asked to vote on the question “Should the United Kingdom remain a member of the European Union or leave the European Union.”

It’s the second time the country will have faced the question; the last time was in 1975, when 67 per cent voted in favour of EU membership.

A succession of polls over recent months and weeks have suggested things are far closer this time round — according to one of the latest polls conducted by YouGov 38 per cent to intended to vote in favour of leaving, and 37 per cent remaining, following the conclusion of negotiations between the EU and Britain on the terms of its membership the week before.

Since then, from being an issue somewhat on the sidelines of the debate on the state and direction of the global economy, Brexit has shot to prominence.

This was highlighted following the G20 meeting at the end of February in Shanghai when finance ministers — reportedly at the instigation of Britain — issued a statement identifying the “shock of a potential UK exit” as one of the major downside risks and vulnerabilities challenging the global economic recovery. This was a message reiterated by ministers from member states. Jack Lew, the US Treasury Secretary, has been among the most outspoken declaring remaining in the EU was in the national and economic security interests of Britain, the EU and the US.

These warnings have provided a reminder of how the impact of Brexit could extend well beyond the British economy -- or the multinationals that operate on its shores.

With fears of contagion echoing those of when a Greek exit was on the cards, there is the fear that it it could eventually trigger the unwinding of the world’s largest trading block.

There has been a flurry of other warnings too: in a note on the performance of the UK economy in February, the IMF, noting Britain’s “strong economic performance” pointed to risks including from the referendum.

Economists at HSBC have warned that a Brexit could drag the pound down to levels last seen in the 1980s and to parity with the euro, while analysts at Societe Generale have predicted that leaving the EU could lead to a 1 per cent decline in growth in the UK per year for the next ten years (as well as a quarter point loss of growth each year for the EU for the next decade).

However, the starkest warning has come from the UK government itself: a Cabinet Office paper published in February set out details of the” decade” or more of uncertainty that would follow a vote to leave and the subsequent triggering of the EU Treaty’s “article 50” — which deals with how a member state could leave the union.

Pointing to the large number of forces that would be involved in decision making around an exit — from all member states, the European Commission, and the European Parliament — the paper notes that not only would the country have to embark on an exit process never before used by any member state, but it would also have to rapidly agree the terms of its post-exit trade and economic relationship with the EU (a region to which some 44 per cent of UK exports currently go). This is a negotiation that would have to take place within a two year period, according to EU rules.

Failure to do so within that period would lead to trade relations with the EU being governed by WTO rules, with the EU applying tariffs to UK goods that apply to all WTO members — a huge shift from the zero-tariff regime currently enjoyed by UK exports to the region.

Among the sectors to suffer the hardest would be automakers (the British auto sector has undergone a boom, fuelled by demand on the continent, which has come despite the slowdown in China), financial services (which would have to disentangle from the EU’s regulatory framework), and farming which would no longer be eligible for subsidy scheme, and preferential access to European markets.

“A vote to leave the EU would be the start, not the end of a process. It would begin a period of uncertainty, of unknown length, and an unpredictable outcome,” the report concludes.

The warnings have of course been promptly dismissed as scaremongering by champions of Brexit — notably London Mayor Boris Johnson: who labelled as “baloney” Prime Minister David Cameron’s attempt to position the Remain camp as “Project Fact” as opposed to “Project Fear” (the name accorded to it by the Brexit camp).

But in truth, while supporters of Brexit may have done a good job of pointing to the weaknesses and downsides of EU membership, they’ve had little success at projecting a concrete image of an alternative.

Attempts to portray Britain emerging from the EU as a stronger nation, regaining control over its economy, and legislation, has struggled to convince, particularly for a nation that represents less than 3 per cent of global GDP.

Author Hugo Dixon who in a 2014 book on Why Britain should stay in the EU and Fight to Make it Better ” rejects the routes pursued by Norway and Switzerland (something that some Eurosceptics have pointed to as alternatives, which involve access to the EU market but from the outside) pointing out that they have often involved accepting the trade rules of the EU, without having any voting power.

Rather, in the public eye at least, the debate has largely centred round limiting immigration from within the EU, hardly the most wholesome or positive of perspectives to build around a campaign for a nation’s future.

COMMENT NOW