Brexit Vote Looms: What Will it Mean for the EU and the U.S.?

The Takeaways

All eyes are on Britain this week.

The longest political campaign in the country’s history will come to a close on June 23rd as voters consider the future of Britain’s membership in the European Union. While the so-called “Brexit” vote has no shortage of potential domestic consequences, it also has profound international implications.

On June 21st, the Wilson Center’s Samuel Wells moderated a discussion on Brexit between several prominent academics. James Goldgeier, Dean of American University’s School of International Service, participated along with Michelle Egan, a Professor, also at American University, and a Fellow at the Wilson Center. They were joined by Michael Geary, an assistant professor at Maastricht University in the Netherlands, and a Wilson Center Global Fellow. The conversation was introduced by Wilson Center Director, President, and CEO, Jane Harman.

Polls thus far indicate a tight race, albeit with the “Stronger In” pro-EU campaign edging ahead in recent days. Yet a whopping 10 percent of voters indicate that they are undecided on Brexit—an enormous faction, electorally speaking.

In a strange twist, views on the referendum have cut across traditional party lines. Prime Minister David Cameron, leader of the Conservative Party, is campaigning hard to maintain membership, despite the fact that  the Eurosceptics in his own party  pressured him into allowing such a referendum in the first place. Because the Tories remain locked in a stalemate, Geary argued,  Labour voters voices will be magnified in the referendum results.

Many  opponents have warned that Brexit will damage the British economy. Both the UK Treasury and International Monetary Fund have made their concerns clear, and there seems to be little doubt among officials that several quarters of negative economic growth would follow Brexit.

The post-Brexit economic forecasts have not swayed supporters of the “Vote Leave” campaign, however, most of whom take issue with several of the central tenets of EU membership. The free movement of people, one of the most important conditions, has become the “lightning-rod of the campaign in recent weeks,” according to Geary. In interviews, many supporters of Brexit express concern about the effects of immigration on public services and the job market -- the percentage of foreign-born residents in Britain has doubled since the mid-1990s.

While voters are largely worried about perceived domestic costs of EU membership, Goldgeier stressed that the vote will have severe international consequences. The enduring result of Brexit will be the “greater importance of Germany to U.S. foreign policy and…lesser importance of the U.K.,” he argued. As the U.S. watches its closest historical ally decline in international prominence, it will inevitably look for a new best friend. Moreover, international agreements will be thrown into upheaval should Britain vote to leave. Finally, a Brexit could reignite debate in Scotland over leaving the United Kingdom, an initiative which failed by a 55-44 margin in 2014.

The British referendum has also resulted in calls for similar referenda in other EU member states, threatening to destabilize the bloc as a whole. Should Brexit come to pass, it is unlikely the EU will grant Britain favorable terms of divorce in hopes of dissuading other countries from following suit. If Britain hopes to leave the EU and its regulations behind but retain access to its single market, Egan believes they may be in for a rude awakening. If Britain wants access, it “will probably have to adopt most European rules and regulations” without having a hand in shaping them any longer, she argued.

The referendum is causing volatility in the markets before a single vote has been cast. Britain has already seen $105 billion in capital flight, and several large banks are considering moving their headquarters to Ireland as investors and business leaders lose confidence in Britain’s economic environment. However, these developments are only a shadow of the kind of uncertainty we may see if a “Brexit” takes place.