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Mainstream, VOL LIV No 33 New Delhi August 6, 2016

Domino Effect of Brexit

Wednesday 10 August 2016

by Bharti Chhibber

The recent vote for Brexit has jeopardized seven decades of European integration. Many are already calling the then Prime Minister David Cameron’s election promise of a referen-dum a historic blunder which he initiated with no additional safeguard. It has resulted in a political uncertainty and negative impact on the global economy. It may alter the international scenario in the economic field with repercussions on the geopolitical space too. Brexit ushered in a major international change with many countries willing and demanding to leave the European Union (EU).

For many years the world was looking up to the EU as an ideal of regional integration. It was given as an example to be emulated across the world. Member-states have gained economically and politically as part of the EU. Starting with cooperation in coal and steel in 1952 in the form of the European Coal and Steel Community, in the later years the EU brought together two major powers, Britain and Germany, who fought three major wars earlier. In the post-Second World War phase from war-ravaged economies relying on US support, the EU has come a long way now giving economic competition to America. Membership of the EU has collectively provided the Western European countries an international standing.

In the economic sphere, Brexit resulted in shockwaves across the global economy with the pound falling to its lowest since 1985. David Cameron resigned as the British Prime Minister paving way for Theresa May to take over as the Premier of the United Kingdom. She has made it clear that Britain will commence the process of leaving the EU only next year.

Issues that have played a crucial role in Brexit include the anti-immigration sentiment representing an anti-globalisation tendency. David Cameron, in the 2015 general election campaign, had promised a referendum as many in his own Conservative Party believed that Britain has suffered economically as part of the European Union. Although David Cameron tried to persuade European leaders in the beginning of this year to review the terms of British membership of the EU, the end-result of the arduous negotiations was not good enough for the ‘leave’ campaigners. Now the British Parliament will have to repeal the 1972 European Community Act under which it joined the EU and negotiate with the European Union for its exit. However, till then it will have to abide by the EU laws without being part of the decision- making.

Earlier in the 1975 referendum Britain voted in favour of membership of the European Economic Community (EEC) by more than 60 per cent vote. However, the present vote seems to have not only changed the ground realities of Europe with ripples across the world as its economy is the second largest in the European Union with a strong military strength.

An astounded world, especially the rest of European Union states, fear a domino effect with other members going for referendum in future threatening the unity of the EU as an organisation. Many have already raised their concerns in France and the Netherlands demanding vote on EU membership. It is ironical that in an age of globalisation, when countries are integrating, where the European Union is given as an example of economic success, Brexit has put it back in time. Also this is a moment for introspection for the European Union with German Chancellor Angela Merkel and French President Francois Hollande calling for EU reforms.

It has generated a chain reaction. While Britain is on its way to leave the European Union, Scotland wants to leave Britain. Scotland is pro-EU and there may be a demand for another referendum in Scotland to leave Britain. Scotland voted by 62 per cent to 38 per cent to stay in the European Union. Scottish youth value the European labour market for employ-ment. Another critical issue is that of Northern Ireland. Northern Ireland also backed ‘remain’ by 56 per cent to 44 per cent. If Scotland proceeds with another independence vote, it could prove consequential in the heightened demand for Northern Ireland to be merged with the Republic of Ireland as an EU member.

The domino effect could also be seen in countries like the US where a debate is already raging in California and Texas, which have high level of GDP and due to their economic strength they can be members of the G-8 on their own. The economy of California is large enough to be comparable to that of the largest of countries. California’s gross state product, GSP, is larger than the GDP of Russia, Italy, India, Canada, Australia, Spain and Turkey. Now many are asking if there can be Brexit why not Trexit. Texas also has economy larger than many countries. Texas’ $ 1.5 trillion gross state product puts it behind Australia. If given a chance many states would like to form a new country.

Brexit may have far-reaching impact on Britain itself. Already there are chances that Brexit may further hurt the British economy as it relies on the EU’s migrant workers whose free movement would be curtailed. Moreover, foreign companies may relocate their headquarters if Britain moves out of the EU’s single market. But Brexit would be a long process where under the Lisbon Treaty Britain has to notify the European Council about its decision initiating exit under Article 50. In two years time Britain and the EU leadership would negotiate the terms and conditions of exit. Even after two years talks could be further extended. Britain also has the option of following the Norway model which is a member of the European Economic Area. It has access to single market and contributes to the European budget but has stayed out of the European Union. This way Brexit’s reper-cussions could be minimised in the economic arena if Britain goes in that direction.

Dr Bharti Chhibber teaches Political Science at the University of Delhi. Her e-mail is: bharti.chhibber[at]gmail.com