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The Brown Political Review is a non-partisan political publication that seeks to promote ideological diversity. All of the views reflected in BPR’s content are views held by authors and not reflective of the views held by the wider organization or the Executive Board.

Union Jack of All Trades

Britain really wants to know: Should it stay or should it go? The concept of British exit from the EU, popularly dubbed “Brexit,” has dominated headlines in advance of the country’s June referendum on EU membership. Brexit’s supporters have railed against perceived and real limitations on British lawmakers, particularly regarding immigration policy, lawmaker accountability, domestic use of tax money, and international influence. However, as the referendum looms large over the economic and political identity of the 23-year-old union, there’s one aspect of Brexit that its supporters have been far too keen to dismiss: the price tag. While Brexit supporters have legitimate grievances with the EU and its governance, they cannot brush aside Brexit’s enormous economic costs.

In many ways, Brexit comes as a bit of a shocker. By most accounts, Britain’s partnership with the EU has been positive in economic and political terms. But as a wave of isolationism crashes through Europe, England’s been caught in the riptide. In particular, the deeply conservative UK Independence Party (UKIP), led by Nigel Farage, has tapped into xenophobia and frustration among a sizeable segment of the British population. Farage, one of the strongest voices for Brexit, has argued that it is necessary for Britain to gain “our democracy back…control of our borders…[and the ability to] negotiate our own deals on the world stage.” To mollify the growing number of Brexit supporters, Prime Minister David Cameron’s middle-right Conservative Party made a commitment to put the issue to voters through a referendum this summer.

Politics aside, the economic consensus on Brexit’s impact is clear: It’s a bad idea. Efforts to quantify the economic impacts of EU membership are notoriously difficult, but experts think that British membership may constitute 4-5 percent of annual GDP. If England were to leave the EU, 70 percent of leading British businesses anticipate “some or significant damage to their business” and UBS predicts the pound will fall equal to the euro from around its current €1.30. The Bank of England estimates that, following Brexit, GDP could increase by a maximum of 1.6 percent or decrease by a maximum of 9.5 percent — odds that aren’t exactly comforting. Among economists, then, the idea of Brexit is about as terrifying as can be; markets look ready to shudder the moment Britain leaves.

In light of these economic realities, proponents of Brexit have launched a number of specious claims about separation and economic growth. Most often, Brexit supporters claim that the EU’s regulatory barriers and the slow politics limit British businesses. For example, David Bannerman, a member of the EU Parliament and vocal supporter of Brexit, argues that “once we have secured this access to the Single [EU] Market…we’d be free to remove the suffocating red tape that has seen the EU plunge in world competitiveness.” Those arguments are based on the assumption that Britain could forge new free trade agreements with the EU, leaving British companies able to trade freely with the remaining EU members as before — just without uncompetitive rules.

However, creating better trade deals with the EU is a lofty notion. Regardless of Britain’s EU membership, British companies will still need to pass EU regulations to export to EU countries. An unburdened Britain looks just like an EU member, only without voting power. As Sam Bowman of the Adam Smith Institute explains, “At best [Britain] can hope for a situation where only British exporters (and their suppliers) are bound by EU rules; at worst, one where we end up with exactly the same set of rules, only now without any say in how those rules are made.” Further, the assumption that a trade agreement with the EU would quickly emerge following the separation is naïve. Regaining access to Britain’s current trade relationships, which today include 53 such deals and the potential for more with China and India, would take time and resources — not to mention political goodwill, which may not be forthright after such a strong rebuke of EU policy.

Brexit would also sacrifice the EU’s strength, size, and influence in negotiating beneficial trade agreements with other nations. Supporters of Brexit say Britain would be more maneuverable and responsive in negotiations than the EU. Even still, Britain’s loss of negotiating power would be detrimental, especially since adverse economic conditions have undercut global support for free trade. Globally, growth is slow, and emerging markets responsible for so much recent dynamism are now turning inward. Consider a recent European Parliament study that chastised the G-20 for failing to respect its commitments to reduce protectionism. Specifically, “the BRICS countries [Brazil, Russia, India, China and South Africa]…[introduced] the highest number of new trade-restrictions in the last year.” And even the EU, for all of its progressive aspirations, has upped the ante on tariffs, most recently imposing 13 percent penalties on Chinese steel. If Brexit supporters want Britain to forge new and fruitful trade partnerships, it’s not exactly clear how the country could do so.

The conclusion is obvious: Better trade is a long shot and in the current global political and economic environment, Brexit cannot offer the economic upside its supporters claim. Proponents of an exit may still think that other issues are more important, but British voters should be clear about the tradeoff between economics and sovereignty. Independence has never been free, of course. Still, like teenagers all too ready to move out of their parents’ house, Brexit supporters clearly have not taken stock of just how expensive independence might be.

Art by Roland High

About the Author

Austin Rose is a staff writer for the Brown Political Review.