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In 1957, the Treaty of Paris was signed which established the European Economic Community (EEC) which preceded the European Union of today. This was the last attempt of economic cooperation between European nations after World War I. It was believed that if nations traded with one another, going to war with one another would be a less likely occurrence. The United Kingdom first applied to the EEC in 1963 but was vetoed by France’s President. Finally, in 1973, the UK would become a part of the EEC. The Brussels-based European Union (EU) was created in 1993 and the EEC was then renamed the European Community (EC) after the Maastricht Treaty was signed. The EU was intended to politically and economically integrate Europe’s nations under a united foreign policy, common citizenship rights, and establish the euro as the single currency.
After plans of an official EU constitution failed in 2007, the controversial Lisbon Treaty was negotiated by the member nations, giving Brussels more power. In 2011, UK Prime Minister David Cameron became the first to veto an EU treaty. He promised renegotiation of EU membership in 2013 if his Conservative Party won the majority in the general election. Support was beginning to grow with British voters for the UK Independence Party (UKIP) and their stance against the EU.
Support of British exit from the EU or Brexit increased after ongoing migrant crisis and economic unrest in the eurozone. In 2015, Cameron won reelection and began renegotiating the UK-EU relationship, which included reform with migrant welfare, financial safeguards and ways to block EU regulations for Britain. In February 2016, negotiations results were announced by Cameron set June 23 as the referendum date. There was 71.8% participation for the referendum equaling more than 30 million voters. The referendum passed by just 52% to 48%, but with split opinions among the UK. Ireland and Scotland voted to remain in the EU, while England and wales voted for Brexit.
Leave.EU ran a separate campaign to Vote Leave, a pro-Brexit group was found against by the Electoral Commission following irregularities during the referendum campaign on May 2018. This has been a part of ongoing litigation since 2017 regarding the constitutional strength of Brexit. The High Court of Justice ruled that Brexit was an executive decision made by the Prime Minister delegated to her by the Notification Act, but this ruling is subject to appeal. The impact irregularities are the basis for the executive decision is being challenged based on R. (Wilson) v. Prime Minister.
PROCEDURE FOR LEAVING THE EUROPEAN UNION
Article 50 of the Treaty on European Union is the governing document for withdrawal from the EU. Under Article 50, a member notifies the council and the EU is required to, “negotiate and conclude an agreement with [the leaving] State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the [European] Union” (Article 50). Negotiations will be for two years unless extended. The 2015 Referendum Act did not require invocation of Article 50, but the UK government expected a leave vote to follow withdrawal. Cameron resigned after the referendum result and stated that Article 50 would be invoked by the new incoming Prime Minister.
Reversal of Article 50 invocation is subject to litigation which a group of Scottish politicians and the Good Law Project brought to the Court of Justice of the European Union. The UK government was unsuccessful in attempting to block this litigation in the UK Supreme Court. Withdrawal is set for March 30, 2019, Brussels time or Central European time, unless the EC along with the UK agree to extend the time period. Residency rights were negotiated in June 2017 after French presidential and Parliament elections, while full negotiations along with trading agreements were in October of 2017.
IMPACT ON THE UK
In 2016, German Chancellor Angela Merkel stated that the UK could remain in the European Single Market (ESM) if the UK accepted the four freedoms of movement: for goods, capital, services, and labor. Prime Minister Theresa May announced that the UK’s priorities were to end EU law jurisdiction and free movement from Europe along with British and EU companies having freedom to trade in the UK and ESM. In 2016, Prime Minister May proposed residency for the EU immigrants in Britain to keep their well being and livelihood from being bargained with during Brexit negotiations. The proposal was blocked even after initial approval from majority of EU states.
Referendum results has increased UK inflation by 1.7 percentage points while 2% of GDP were already an economic cost of the Brexit vote. An analysis by Financial Times stated that, referendum had reduced national British income by 0.6% and 1.3%. Consumer confidence has gone down, and spending has declined following the Brexit referendum bringing it to its lowest levels in four years. In November 2017, banks reduced UK assets after the vote and was expected to continue to the March 2019 Brexit date.
It is nearly unanimous among economists that Brexit will adversely affect the British economy in the medium and long-term. They believe that the UK’s per capita income will be reduced, and the long-term Brexit result will make the UK poorer because of a creation of new barriers to trade, immigration, and foreign investment but they are unsure how big the effect will be. The UK’s own analysis predicted that the UK economic growth will be slowed by 2-8% for approximately 15 years. The Institute of Fiscal Studies reported that if Britain did not retain membership in the Single Market, it would lose upwards of £70 billion in reduced economic growth. Mervyn King, former Governor of the Bank of England said that the warnings of economic downturn from leaving the EU were over sensationalized and that leaving would create more opportunities for improved economic performance.
Short-term effects of the referendum would create more financial market uncertainty and reduce consumer confidence. Andy Haldane, Chief Economist and the Executive Director of Monetary Analysis and Statistics at the Bank of England, has said that the Bank of England’s own forecast of called for economic downturn was inaccurate and claimed the opposite of strong market performance after the Brexit. The consensus between analysis of banks and economist are divisive at best.
IMPACT ON UK RELATIONS
The European Union has 1,139 bilateral and multilateral agreements with third parties. This ranges from trade, development and sectoral economic issues such as aviation, energy and fisheries, to matters related to visa, human rights, and the Common Foreign and Security Policy. If the European Union and the third party are the sole signatories to the agreements, they are bounded by them. If any agreements are mixed, it is more complex. The mixed agreements are concluded by the third party and the EU and its member states. There are 28-member states and they must ratify alongside the EU.
On Brexit day going forward, international agreements concluded by the EU will no longer be applicable to the UK. Agreements concluded by the EU are only binding upon the institutions of the Union and its Member States. The UK will cease to be a member state and no longer bound.
After the Brexit, the UK and its overseas territory will have issues with trading. The EU has a territorial application clause that restricts the application of the agreement to territories involved with the Treaty on the European Union and the Treaty on the Functioning of the European Union. The change will trigger objections by third parties to the agreements with the EU. The trading partners will feel cheated because they are losing access to a huge part of the market and the cost and time involved with renegotiating a bilateral agreement with the UK. With the UK not being part of the Union, there is little that these third parties can do because most EU agreements include a termination clause or denunciation clause.
Brexit will impact the UK relations with several borders such as France, Spain, and Ireland. France will probably make concessions for the UK to protect their economies. The UK accounted for France’s largest trade surplus in goods. A no-deal Brexit would risk chaos at French borders, economic pressure on surrounding regions, and headaches for certain companies. The two areas that will be most affected by Spain because of Brexit are trade and tourism. The UK has been Spain’s main foreign investor for quite some time now. Since you cannot access the European market from the UK after Brexit, there will be a possible sharp fall of investments from the UK. To serve the domestic. market, many British companies may need to set up in Madrid. Northern Ireland is part of the UK and Southern Ireland is an independent country and part of the EU. If the UK remains in the EU Customs Union, it prevents a hard border between Northern and Southern Ireland. This will continue during the transitional period of Brexit. After the transitional period is over it must be revisited. The UK can leave the customs union only if they negotiate a trade agreement that eliminates border controls in Ireland. If the controls are eliminated, they may find a technological solution to avoid border infrastructure.
Brexit will have several consequences that affects the budgetary structure, parliament and legal.
The size and nature of the Brexit bill will determine the gap in the EU’s finance. Also, the fall the UK net contributions will affect the budget structure. The expenditures must be cut and increasing contributions and finding new revenue sources are needed for this yearly gap.
Parliament will be playing a huge role when it comes to the exit deal, new deal, and the possibility of no deal if they cannot conclude within the two-year time frame.
Several areas will be affected by Brexit such as taxes, capital market, M&A, contractual disputes, antitrust, and financial services. The UK might seek to join the European Economic Area: They can adopt the Norwegian model when negotiating bilateral trade agreements; They can adopt the same customs union as Turkey; They can adopt a free trade agreement like Canada; and the UK can adopt a WTO membership. Regardless of which model is adopted, the UK will not be required to apply some, if not all, of the EU legislations. The UK has implemented certain EU laws as part of their English laws and it will stay the same unless amended. And there are other laws that will fall off after Brexit if they do not have the need of implementation. Therefore, the UK will have to perform a complex exercise on which EU laws or EU derived laws they wish to keep.
In conclusion, Britons are completely divided on where to go from here. They think that the Brexit deal does not respect the referendum result. They are split on whether a second in or out referendum is appropriate. If they are forced to choose, the Britons rather leave the EU with the deal than without it, but some voters are left thinking that a no deal Brexit is a good thing. Regardless, they think that Theresa May was the best candidate to be involved with this.
- Hunt, Alex. Wheeler, Brian. Brexit: All you need to know about the UK leaving the EU. Bbc.com. 11 Dec 2018. https://www.bbc.com/news/uk-politics-32810887. 13 Dec 2018.
- Pruitt, Sarah. The History Behind Brexit. History.com. 29 Mar 2017. https://www.history.com/news/the-history-behind-brexit. 13Dec 2018.
- Taub, Amanda. Brexit, Explained: 7 Questions About What It Means and Why It Matters. Nytimes.com. 20 Jun 2016. https://www.nytimes.com/2016/06/21/world/europe/brexit-britain-eu-explained.html. 13 Dec 2018.
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