TROY, Ala. — United Kingdom residents voted Thursday to leave the European Union, but what exactly does the vote mean and what impact will it have on Alabamians and other American citizens?
Dr. Steven Taylor, Dean of the College of Arts and Sciences at Troy University, said the first thing to understand is the makeup of the EU.
“The European Union is the name given to the formal amalgamation of 28 countries in Europe into one common economic market that accounts for a combined gross domestic product, which makes it the second largest single market in the world at $19.2 trillion,” Taylor said. “This is an arrangement in which all of the member states share common external tariffs (i.e., taxes on goods coming into that market) and allows the free flow of goods, services and labor internally. So, just like all trade agreements entered into by the United States affect all the U.S. states equally, so too does the EU enter into, and enforce, trade agreements.”
However, the 50 states in the U.S. comprise one country, while the EU itself is not a country but a confederation of 28 sovereign states, Taylor said.
The EU as we know it today formed as a result of the Maastricht Treaty of 1991 and is governed by a parliament, the members of whom are elected on the country level.
“There also is an extensive bureaucratic structure in place to enforce numerous regulatory obligations. These regulations were one of the bones of contention for the Leave supporters in the U.K.,” Taylor said. “It is important to note that the member countries remain sovereign (i.e., conduct their own foreign policy, have their own internal laws), but that in areas where they have agreed on shared policies, they have to follow EU regulations.”
The next important aspect to consider is that Thursday’s vote to exit (known informally as the Brexit) didn’t actually remove the U.K. from the EU.
“The Brexit vote does not immediately remove the U.K. from the EU,” Taylor said. “Rather, it provides a political mandate for the British government to do so. In fact, the formal procedure to exit the EU requires the evocation of Article 50 of the Treaty of Lisbon. This would have to be triggered by the prime minister and would launch a process of negotiation with the EU for the exit of the U.K. This process will require extensive negotiations. The UK’s exit from the EU will take at least two years.”
Regardless, the effects have been widespread and immediate, from the plunging value of the British pound to the reignition of calls for Scottish independence.
Scotland, part of the U.K., voted to remain in the EU and may seek an independence referendum, something that nearly passed in 2014.
“As such, the vote to remain in the EU could result in the U.K. itself breaking apart,” Taylor said. “There will also be issues in regards to the border between the Republic of Ireland (which is an EU member) and Northern Ireland (which is part of the U.K.).”
For Americans, the effects will be seen economically, particularly in regards to foreign trade.
“The short term means that the dollar has strengthened relative to the pound, and it also means that the dollar’s role as a global reserve currency is enhanced,” Taylor said. “It will also mean that U.S. exports will be more expensive in the global marketplace and will, therefore, negatively affect the trade deficit. It also means short-term volatility in global stock market. As of midday on June 24, the day after the vote, the Dow Jones Industrial Average is down over 500 points.”
Looking into the future, Taylor said it will be important to watch how the upheaval affects the global economy, which is still weak after the Great Recession.
“It certainly will influence U.S. companies who seek to do business in the U.K. and Europe,” he said.
Even after the U.K. exits, however, Taylor doesn’t foresee an end of the European Union, since other countries will likely try to avoid the negative effects being seen in the U.K.
“In my opinion, the EU will remain intact,” Taylor said. “Given the immediate and obvious negative economic impact on the U.K. (which is likely to continue, and perhaps deepen), I suspect that EU members will be quite reluctant to go that route.”
Finally, Taylor pointed out parallels between the underlying sentiments that led to the Brexit vote and the upcoming U.S. presidential election.
The origins of the EU trace back to post-World War II Europe as a means of combating the extreme nationalism that had fueled numerous continental wars, Taylor said.
“The move does seem to suggest a significant assertion of nationalism by half of the population of the U.K.,” he said. “This reflects long-term tension in Europe and also is reminiscent of the nationalism we see being invoked by Donald Trump in the United States.”
