The UK’s Potential EU Referendum

May 6, 2015

by Molly Shutt

British Prime Minister David Cameron

Viewed as a political move to recapture the far-right, in 2013 British Prime Minister David Cameron guaranteed a public referendum on Britain’s European Union membership in 2017, if his party wins the general election coming up on May 7th. This move reignited the longstanding internal debate over UK-EU relations, and will continue to dominate the political scene for two years if the Conservatives win. The UK has been a member of the EU since the Maastricht Treaty in 1992, though it negotiated an opt-out of the single currency and often sets limits on Brussels’ reach. For instance, Cameron rejected new EU budget mandates, implemented in response to the financial crisis, in 2011.

If such a referendum were to reach a public vote, the outcome is tough to decipher. While a recent Opinium/Observer poll estimated that 51 percent of Britons would vote to leave the EU, signs of economic recovery on the continent are boosting support within the UK to stay. After the vote to leave or stay, Britain would have to renegotiate its relationship with the EU, which could take on a few different forms – all would have serious economic and political ramifications for the country. While the stir about such an event creates much speculation, the following evidence suggests that remaining in the EU is best option for Britain.

Post-Brexit Options

If the British electorate chooses to dissociate itself from the EU in 2017, relations with the island’s primary trading partner would need to be redefined. There are four main choices, according to the Institute of Economic Affairs, and as summarized by The Telegraph:

[The] UK could become a member of the European Economic Area (whose non-EU members are Iceland, Liechtenstein and Norway) and the European Free Trade Association (which also includes Switzerland); it could become a member of the EFTA but not the EEA (which is described as ‘somewhere between the positions of Switzerland and Turkey’); it could work to develop a global free trade association; or it could try to develop closer trading partnerships with the Commonwealth and wider Anglosphere.

All of these potential arrangements would increase barriers to trade with most of the continent. If British citizens vote to leave the EU, a watered down relationship with the continent would hurt British business and undermine relations with the Union.

Economic Implications

The economic argument set forth by proponents of continued EU membership largely hinges on the fact that the EU is the UK’s top trading partner, and that tariff-free access to the EU market and coordinated regulation warrant membership. On the other hand, the appeal for leaving stems from an interest in regaining economic autonomy back from Brussels and the possibility of expanding into other markets. Most business leaders prefer to stay in the EU, as access to the European market far outweighs the possibility of new frontiers. In fact, a recent study from the Centre for European Reform contends that the most economically vulnerable regions to a Brexit are manufacturing areas such as the West Midlands and the Northeast, where opinion polls also report the highest euroskepticism. Specifically, the tariffs the EU would place on British exports would amount to 197 million pounds, mostly on car manufacturing. This and other projections suggest that the grassroots political support for a Brexit reflects more emotional reasoning than economic self-interest.

While the robust British financial center occasionally laments the burden of European regulations, experts predict that a break from the EU, which is the UK’s primary financial customer, would result in strained relationships and a tangible, negative impact on the overall economy. Specifically, one study estimates that despite saving 0.4 percent of GDP in contributions to the EU budget, Britain could lose as much as 14 percent of its GDP – suggesting that a Brexit would be significantly more damaging to the UK than it would be to the EU.

Political Implications

The political fallout of a Brexit would be complicated and far-reaching. Leaving the EU would jeopardize British influence within the Union, leading to deeper isolation and costing Britain its say in the Transatlantic Trade and Investment Partnership negotiations and its role as a key partner of the U.S. in Europe. A Brexit might also weaken the EU by emboldening euroskeptic moves on the continent. Gibraltar and Scotland, moreover, have expressed plans to remain in the EU regardless of Britain’s decision; though Ireland questions its place in the EU if the UK were to leave its current agreement. With the fall of the euro’s value, Germany’s growing influence on the continent, and concerns about Greece’s future in the Union, it could be in Ireland’s interest to follow Britain out rather than staying in the EU and the Eurozone. Citing Britain’s place as Ireland’s top trading partner and as the third largest economy in the EU, and the Irish link to the U.S., the argument follows that Ireland would still have those economic relationships if it decides to leave continent behind. In this case, a Brexit might yield more influence over the unraveling of EU ties than a Greek exit would.

Elevate the Debate

British political parties and non-governmental organizations on the left and right that support continued membership must press the British populace to reevaluate their motives for pushing to leave the EU. If they are based on economic evidence, which is possible given the fluid and hypothetical nature of the situation, then a vote to leave could be warranted; however, if their motives are based on a belief that disassociating from the malaise of the euro and complete economic autonomy will deliver better results, voters should reconsider. Cameron and the Conservative party should take greater account of the geopolitical ramifications of accidentally cutting ties with the EU, from compromising counterterrorism coordination to complicating the lives of millions of Britons living and working in the EU and vice versa. Ultimately, diminished UK-EU relations would destabilize markets and hurt the British economy.  

Molly Shutt is a transatlantic economy analyst at the Streit Council. Photo credit: Number 10


For additional analyses on Britain’s potential exit from the EU, please read the following:

Ever Closer Union: Britain’s Outdated Euroskepticism

The Dangers of a “Brexit” from the European Union

A Tale of Two Unions

The Grass is Always Greener…British Euroskepticism and the U.S.-EU Free Trade Agreement



Ever Closer Union: Britain’s Outdated Euroskepticism

July 10, 2014

by Will Rose

Just two days shy of the centenary of the assassination of Archduke Franz Ferdinand, late last month the leaders of the European Union’s 28 member states met in Ypres, Belgium – the site of the first full-scale chlorine gas attacks during WWI – to reaffirm their solidarity. At the conclusion of the summit, somewhat less in the spirit of harmony, EU leaders announced the much-anticipated selection of a nominee for the presidency of the European Commission. In an unprecedented move, the European Council voted by qualified majority instead of deciding by consensus, as has been done in the past. The 28-person body, composed of the heads of all EU member states, decided overwhelmingly to nominate former Luxembourgish Prime Minister Jean-Claude Juncker as the next Commission president. The only dissenting votes came from British Prime Minister David Cameron and Hungarian Prime Minister Viktor Orbán, who have both expressed concerns about transgressing the bounds of the EU’s Lisbon Treaty. The vote was a resounding defeat for Cameron in particular, who had been campaigning against Juncker’s nomination since the European elections in May.

The European People’s Party (EPP) was the most successful grouping in the European elections, and as the party’s declared choice for Commission president, Juncker argued that he had a mandate for the presidency. However, Cameron, with the support of all major British political parties, countered that Juncker’s presidency would be a mistake as it would move the EU toward a closer political union; that is, toward a federalist system. In early June, Cameron attended a summit along with German Chancellor Angela Merkel, Swedish Prime Minister Fredrik Reinfeldt, and Dutch Prime Minister Mark Rutte to discuss finding an alternate candidate. Initially, the Swedish and Dutch Prime Ministers united with Cameron to oppose Juncker’s appointment, but they both announced shortly before the European Council vote that they had switched their positions – leaving Cameron isolated in opposition.

While this latest scuffle over the next Commission president underlines British dissatisfaction with the EU, the UK has a long history of distancing itself from European integration. Britain did not take part in the founding of the European Coal and Steel Community in 1951 and declined to join the European Economic Community (EEC) in 1957. A change of heart four years later was rebuffed twice by French President Charles de Gaulle, who viewed Britain as an insular nation with exceedingly close ties to the United States. It was only in 1973, after de Gaulle left office, that Britain was able to join the EEC – the forerunner of the EU. In 1975, a referendum on British membership in the EEC marked the high point of British enthusiasm for the European project; those in favor, supported by all major British parties and newspapers, outstripped those opposed by a factor of two to one.

In the almost forty years since, Britain has maintained a somewhat wary stance toward the EU by, among other things, refusing to join the common currency and receiving opt-outs on aspects of the Lisbon Treaty. The Juncker debate is also not the first time that a British Prime Minister opposed a Commission president nominee seen as too federalist: in 1994, John Major vetoed the candidacy of Jean-Luc Dehaene and in 2004 Tony Blair did the same to that of Guy Verhofstadt. However, the current era of euroskepticism in Britain started in 2011 when, in the midst of the Eurozone Crisis, Cameron vetoed an EU treaty on new budget rules because he was dissatisfied with what he deemed were insufficient exemptions for the UK. Two years later, Cameron promised a referendum on continued British membership in the EU. The referendum is not scheduled to take place until the end of 2017, but Cameron’s humiliating defeat over Juncker’s presidency makes it less likely that the British prime minister will be able to use the threat of a UK withdrawal to reform the EU.

In line with this history of British euroskepticism, the fight over Juncker’s appointment was fundamentally about the future form of the European Union. As the prime minister of Luxembourg for almost two decades, Juncker is a European insider well-known for viewing continued integration as the proper path for the EU. His opponents fear that he will aid the erosion of national sovereignty in favor of concentrating power in Brussels. This is not an unwarranted fear, but the EU’s most monumental achievement to date – monetary union – necessarily transfers authority to supranational bodies and deprives national leaders of power over critical aspects of their domestic economies. Juncker will likely push for deeper European integration in this and other important areas. At the recent summit, the vast majority of EU leaders agreed – deeper union is the key to a peaceful and prosperous Europe.

Britain’s euroskeptic worldview emphasizes an exceptional place for the UK that no longer corresponds to present European and global realities. While the UK is one of the largest and most prosperous EU member states, it cannot halt the deepening European project; and it is clear that if the UK were to leave the union it would lead to more costs than benefits. Among others, Britain’s biggest industry group – the Confederation of British Industry – recently asserted that a withdrawal from the EU would be disastrous for companies and workers in the UK. Though British leaders have done their best to keep Europe at length, forty years of integration and a more global economy have made the future of Europe crucial to the future of Britain. While Cameron’s actions are well-received at home, attempting to hold the EU hostage is not conducive to pushing ahead with reforms that are in the EU’s, and Britain’s, interests. 

Will Rose is an Intern at the Streit Council. Photo credit: The British Prime Minister’s Office

The Dangers of a “Brexit” from the European Union

February 27, 2014

by Nicholas Hager

UK EU flags

The rise of Eurosceptic parties across the EU has some policymakers and commentators concerned for the future of the Union. While they are expected make modest gains in elections to the European Parliament in May, these fears may be somewhat overstated as the Parliament is currently projected to remain in the hands of establishment parties. One notable exception, however, is the continued popularity of Britain’s United Kingdom Independence Party (UKIP), whose national influence is robust— even overtaking the ruling Conservatives in a recent poll — and its message of separatism unrelenting. The UKIP is spearheading calls for a renegotiated relationship with the EU, followed by an in-out national referendum in 2017, citing a quickly integrating Eurozone and immigration as top concerns. It views the UK’s current woes as directly connected to its EU membership, and therefore sees withdrawal from the Union as a silver bullet to resolve them. But a British exit — or “Brexit” — from the EU is far from a solution; rather, it would only exacerbate the challenges the EU and UK currently face while creating a slew of new ones.

To start, the notion that an exit would somehow bolster the UK’s flagging economy is misguided. Indeed, while some believe that an unencumbered and fully sovereign UK could bemore flexible in attracting investors, there is ample evidence that this would not be the case. Citigroup CEO Jim Cowles, for example, has warned that “international companies will stop investing in Britain…at the scale we have become accustomed to.” This concern is echoed by UK Business Secretary Vince Cable, who has been working diligently to reassure international investors that the UK is a stable investment market. Economists Nigel Pain and Garry Young argue that this could reduce “long-term growth prospects [and the] productivity [of] the UK economy,” such that it would permanently be “2¼% lower…than it otherwise would have been.”

A slow drift of investment away from Britain and toward the continent would be a modest consequence of withdrawal. In the worst case, losing access to the EU market would severely diminish British trade as the EU is estimated to account for at least 30% of its total goods trade and about half of Britain’s total exports. Though the EU market is weaker than it once was, nearly all of the UK’s top trading partners are EU members. Aside from the trade barriers that would inevitably emerge from a Brexit, the UK would also find itself on the outside looking in in terms of EU policy. With an estimated 13 trillion euro GDP, the EU is a massive economy and the UK would ultimately be forced to accommodate EU standards regardless, because it is simply not a robust enough economy to dictate terms. This is amply demonstrated by the Swiss banking industry, which is “subject to significant influence and indirect control through…biased market forces [such as] U.S. and EU regulation.” Phaedon Nicolaides, a Senior Fellow at Maastricht University, confirms this in a recent paper, noting that formal withdrawal will not “confer real policy independence” to the UK because its domestic and economic law would still be “affected by developments in EU law.” In short, EU membership affords the UK, particularly in the realm of trade and foreign investment, a number of benefits that would be impossible to match in the case of its withdrawal. Therefore, contrary to the arguments of Brexit advocates, the economic health of the UK is strongly tied to its membership in the EU.

While the EU would not be undone by British secession, it could take a severe hit if that occurs. Tim Oliver of the German Council on Foreign Relations estimates that losing the UK would divest the EU of “12.5 percent of its population and 14.8 percent of its economy.” It would also force other member states to make larger financial contributions to meet budgetary expectations, and would mean the loss of the “one of [the EU’s] two serious military powers.” In addition, not only would managing an economic contraction consume a vast amount of time and resources — given that formal withdrawal has never been invoked, and Article 50 of the Lisbon Treaty, which provides for secession, offers only an opaque guideline for the procedure — it would also open an ideological “Pandora’s Box” whereby other member states could begin to leave en masse.

A Brexit would also hurt the EU economy more indirectly. The UK has always been a vital, if not always willing, partner in the European project, and is essential for the EU’s economic future. Mats Persson, director of the think tank Open Europe, discusses this through the lens of a potential trade war between the EU and China over the dumping of Chinese solar panels onto the EU market. This dispute has since been largely resolved, but the case is illustrative. China responded to the EU’s anti-dumping policies by attacking its wine subsidies through the WTO, which only encouraged the largest wine producers — France, Italy, and Spain — to lead the charge on the tariffs, which could have had disastrous implications for the burgeoning economic relationship between the two regions. Germany, a major driver of EU policy, nonetheless relies upon the UK to support its policies. With the UK’s help, Germany could form ablocking minorityto counterbalance the protectionist measures that were proposed by Mediterranean states; if the UK were to exit, however, Germany may have trouble mustering a sufficient coalition to deal with similar situations.

In the last analysis, it is clear that neither the UK nor the EU stand to gain from a withdrawal as it would diminish the strength of both economies and undermine their political influence. The current arrangement may or may not be in need of reform, but the advantages of union are too great to ignore and the consequences of ending it would be too devastating to justify.  

Nicholas Hager is an Intern at the Streit Council. Photo credit: kalyan3


Voting on Voting

May 17, 2011

by Griffin W. Huschke

Voting in the 2004 plebiscite

The leaders of the United Kingdom’s ruling coalition, David Cameron and Nick Clegg, have seemed a bit like the odd couple in the last several weeks.  Cameron, the conservative leader who famously slashed governmental services and raised tuition for students, has thus far been effective at maintaining the coalition’s focus on the Conservative party’s agenda, even if many of those planks were expressly repellent to the coalition’s junior partner.  But Nick Clegg and the Liberal Democrats were only going to play nice for so long, and part of the reward for holding their nose through all this NHS drama was a referendum to revamp First Past the Post electoral system currently in place.

The Liberal Democrats argue that the current system is broken because it isn’t proportional, and marginalizes minority parties.  Opponents of the Liberal Democrat’s proposed system, including the Conservative Party, say the new system is confusing, and would create weaker ruling parties, leading to more dissolved Parliaments and ineffectual government.  And in general, the public has agreed with the Conservatives–in a referendum held last weekend, voters widely rejected the Liberal Democrats proposed “Alternative Vote” system by almost 2 to 1.

In thinking about various voting systems used around the world in governments and international institutions like NATO and the EU, it’s almost impossible to offer some sort of objective analysis; voting systems are the result a country’s culture, history, and underlying political philosophies.  The system used to elect officials or make decisions speak to the values a country places on intangibles like preoperational representation, consensus, minority opinion, and the amount of political agency in the electorate.   While there are changes that can be made that affect the efficacy of an institution—the Streit Council has long argued for changes in the decision-making processes of NATO and the election methods of the European Union—the counter-arguments to these changes are usually rooted in arguments about political philosophy and state sovereignty that are convincing to many state leaders.

It seems that the public of the United Kingdom has spoken loudly about the value it places on these issues, but that doesn’t mean the First Past the Post system is necessary better or more capable of electing the best leaders in the most democratic way possible.  Sometimes issues are just a matter of public opinion.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo credit: Peterwalshprojects (

bin Laden’s NATO Legacy

May 2, 2011

by Griffin W. Huschke

Government Illustration of bin Laden's Compound

Well, its over.  As you’ve heard by now, probably the largest and most expensive manhunt in U.S. history is at an end.  After a decade, the perpetrator of the terrorist attacks on September 11th, Osama Bin Laden, is finally dead.

There isn’t a lot to be said about this man that isn’t already being spoken about elsewhere, and the details remain pretty sketchy. We’ll obviously be covering this for weeks to come, so let’s take a moment to think about the effects of bin Laden’s actions on the world community, and how the 17th son of a Saudi construction magnate managed to have such an outsized effect on the way our world works.

In his own unfortunate way, bin Laden drastically changed the way security organizations, especially NATO, thought about possible threats.  Al Qaeda brought to light the threat of radical Islamic terrorism, and engendered massive shifts in force structure, command and control, and information sharing across the world as countries aligned to combat this “new” threat.   Al Qaeda also gave the Atlantic Alliance a new way to focus its resources on smaller scale units, like the Special Operations forces that ended up capturing bin Laden and development projects in areas hardest hit by the seemingly endless war in Afghanistan. NATO has grown into this role in fits and starts, and there’s plenty more work to be done, but Europe and the U.S. remain to be each other’s strongest strategic allies, and the Alliance continues to adapt.

Al Qaeda also changed the way NATO thought about itself.  9/11 solidified the notion that NATO would no be used to defend Western Europe in a pitched tank battle in the Fulda Gap, but would need to respond to new threats as infrastructure became more vulnerable and the world became increasingly globalized.  NATO’s new focus on a range of threats, including cyber attacks and WMD, are a total result of this post-9/11 soul-searching, as are NATO’s continued search for out-of-area “partners” like Japan and Australia.  The Alliance realized that global threats, like terrorism and cyber attacks, require global allies in all theaters.

We obviously all wish that NATO never had to make these changes in thinking; that bin Laden had renounced violence that would claim so many lives.  But now that we have had to live through a painful decade of war and recession, let’s hope those tasked with protecting us are more able than they were a decade ago.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo credit: TalkMediaNews (


The Streit Council’s Obligatory Royal Wedding Post

April 29, 2011

by Griffin W. Huschke

Just a couple of kids gettin' hitched


Ok, I thought we were going to get out of this unscathed, but its reaching a critical mass, we really can’t ignore it anymore.  Unfortunately, we’re not talking about the protests in Syria, which the transatlantic community hasn’t done much about because, according to UK Defence Minister Liam Fox, “There are limitations to what we can do.”  No, we’re talking about the omnipresent, deathless, semi-sentient God-head of news coverage that is the royal wedding of Prince William to Kate Middleton.

Indeed, the stateside news coverage of the noble nuptials has been so inescapably asphyxiating it must say something about the state of transatlantic affairs.  Looking at the two love-birds, it’s pretty easy to discern their opinions of European integration, and even though they may be on different sides of the debate, “the heart loves who it loves.” (Editor’s note: none of this is actually real, but neither are commentators about hats, so all’s fair in Royal Wedding coverage.)

You can tell just by looking at Kate Middleton that she certainly identifies with the “neo-funcationalist” school of explaining European integration.  Neo-functionalists argue that if you created a common institution between two countries, like, hypothetically, a common coal and steel community, the effects of that cooperation would “spill-over” into other areas, like fiscal policy.  The more areas of cooperation, the more integration would spill over into other areas. This would continue to increase the spill over until the proverbial snowball of supranational integration was hurtling down the mountain.

Of course, Prince William, born with the top-down sensibilities of a monarch (let them eat cake, indeed!), would never support such assertions. He most certainly identifies with Jurgen Habermas, who was the granddaddy of studying how and why countries in Europe started cooperating together after those couple of millennia of internecine warfare.  Habermas, (as certainly as Prince William does) didn’t believe that the slow march of international institutions was necessary at all.  Instead, Habermas argued that people would lose ties to their nation if they were given a supranational identity, like a constitution.  A supranational organization, Habermas argued, could be created if there was a supranational constitution that gave citizens something to believe in.  This construction would give disparate people without a common ethnicity or culture, a common symbol of unity.

In the end, neither Kate’s neo-functionalists nor the Prince’s  explain the last few years of European integration, especially the “period of reflection” since the Maastricht treaty’s tepid reception by European publics. While such deep disagreements would certainly tear a lesser couple apart, here at the Streit Coucil we wish them all the best.

Griffin W. Huschke is the Mayme and Herb Frank Fund Research Fellow at the Streit Council. Photo credit: It’s a Foot! (




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