The roots of Brexit

This article is written by Robert Hutton. It appeared first on the Bloomberg Terminal.

Countries band together to promote trade, defend human rights, protect the environment and repel threats.

They sign treaties and join international groups, and each time they do, they give up a bit of their own sovereignty as independent countries. That happened in a big way with the creation of the European Union, a free-trade zone and global political force forged from the fractious states of Europe. For the people of the United Kingdom, it was never an easy fit. In a June 2016 referendum, they shocked the world by voting to leave the bloc they’d joined in 1973. The way many Britons saw it, the EU was expensive, out of touch and a source of uncontrolled immigration. They chose what’s become known as Brexit.

The situation

Brexit took place on Jan. 31, 2020, when the U.K. legally revoked its membership in the 28-nation EU. Voters had supported the move by 52% to 48% more than three years earlier, after a rancorous 10-week campaign that exposed anxieties about globalization and raised questions about the consequences for a united Europe. The vote jolted financial markets, sending the U.K. currency tumbling on the prospect of years of uncertainty about how Brexit will work. Younger citizens and residents of cosmopolitan London voted overwhelmingly to remain in the EU. So did people in Scotland. U.K. Prime

Minister David Cameron resigned after the surprise result and was replaced by Theresa May, who triggered the complex and chaotic  process of negotiating Britain’s exit from the bloc. The wrangling didn’t end until another prime minister, Boris Johnson, won a general election on the promise to get the job done. After Brexit, the U.K. and the EU entered into an 11-month transition period and set a new deadline of December, 2020 to unwind agreements in areas as diverse as fishing quotas, financial services and safety standards.

 

The background

The U.K. waited 16 years to join the European Economic Community after it was formed in 1957, and some people immediately argued that it should pull out. Prime Minister John Major’s government almost fell in 1993 when some of his party’s lawmakers voted against him over signing the Maastricht Treaty, which deepened cooperation and created the EU. The same euroskepticism kept Britain from adopting the single currency when it was launched in 1999. The bloc added eight eastern European countries in 2004, triggering a wave of immigration that strained public services. In England and Wales, the share of foreign-born residents had swelled to 13.4% of the population by 2011, roughly double the level in 1991. In the years before the Brexit vote, migrants were lured by Britain’s economy, which was growing at twice the pace of the euro zone’s. The U.K. agreed to hold the ballot after the anti-EU U.K. Independence Party won 13% of the vote in the 2015 general election. Because the free movement of citizens is a basic tenet of EU law, leaving the bloc is the only sure way for the U.K. to stem the flow of people. Before the vote, the U.K. was the second-biggest EU country by economic output and the third-largest by population, after Germany and France. There’s still a queue of countries waiting to join the bloc. 

Source: U.K. Electoral Commission

The argument

Brexit campaigners used worries about immigration to create a populist backlash against Europe’s political elite, overcoming concerns about the fallout from Brexit on trade and the U.K. economy. They argued that the EU is morphing into a super-state that increasingly impinges on national sovereignty. Britain has global clout without the bloc, they said, and can negotiate better trade treaties on its own. The question remains whether the U.K. can strike a trade deal with Europe that retains preferential access to the EU’s tariff-free single market of 450 million people, the economic backbone of the world’s largest trading bloc. The vote to leave the EU has hurt the British economy and has left deep divisions among Britons. German Chancellor Angela Merkel and other EU leaders want to prevent the bloc from splintering further, insisting the U.K. must bear the costs of Brexit.

Source: Lord Ashcroft Polls