Introduction
The European Union is the result of the flow of economic integration in the world. It was created in 1958 and became a powerful economic group. Within the framework of the Union, the benefits of mutual trade are established, the general economic policy is carried out, and restrictions on the movement of goods, capital, and labor are constantly removed (Krugman, Obstfeld, and Melitz, 2014).
The creation of the EU was due primarily to the fact that in Western Europe after the Second World War, the contradiction between the international character of modern production and the narrow national and state boundaries of its operation most powerfully manifested. In addition, until the early 90s, Western European integration was pushed forward by the direct confrontation on the continent, the two opposing social systems. An important reason also concerned Western European countries’ striving to overcome the negative experience of two world wars and eliminate the possibility of their occurrence on the continent in the future (Carbaugh, 2012).
Initially, Britain refused to join the community, because it believed that it had no trade and economic opportunities. At that time, the British authorities and the business community relied on the expansion of ties with the US and the British Commonwealth members. January 1, 1973, Britain became a member of the European Economic Community (Husted and Melvin, 2012). However, June 23, 2016, the UK had a referendum, in which the citizens decided the issue of the country’s membership in the European Union. Although the referendum was not legally compulsory, that is, the government and the Prime Minister had the right to ignore the results, the fact that David Cameron initiated the referendum himself, it is unlikely to ignore its results (Centre for European Reform, 2016).
Thus, the purpose of the paper is to examine the country’s opportunities in case of exit from the EU single market. It is important to understand the development of relations between the EU and Britain, define the main prerequisites, which led to the referendum, and specify the crucial advantages of the country’s leaving.
The Development of Relations between the European Union and Great Britain
After World War II, there were two models, which Western Europe followed, namely a model created by France, Italy and Germany, which has developed into a modern European Union; and another model, which was established by the United Kingdom, Norway, Sweden, and Switzerland, and was focused on the creation of a free trade union (Lipsey and Chrystal, 2015).
So, in 1960, as opposed to the European Economic Community on the initiative of the UK, the European Free Trade Association (EFTA) was established. It included Austria, Britain, Denmark, Norway, Portugal, Sweden and Switzerland. Within this organization, the integration was limited to the formation of a free trade zone. However, with the successful development of the EEC, EFTA countries sought to move into the EEC (Husted and Melvin, 2012).
The proponents of the formation of European integration won through the creation of a single exchange rate mechanism, then through the transition to a single economic system and single economic space, with the gradual development into a single political space. Later, Britain decided to join the states when they joined the EU, knowing that otherwise could lose the economic competition in the process and become an outcast among the countries of Western Europe (Carbaugh, 2012).
In 1962 and 1967, the United Kingdom applied for admission to the EU, but was prevented by France. The French President Charles de Gaulle was the main opponent of Britain joining the EEC. He believed that because of its special relationship with the US, the UK would play a negative role in the union, undermining its unity and independence in its relations with the United States. Negotiations on the UK joining the European Community began only in 1969, shortly after the resignation of de Gaulle (Campos and Coricelli, 2015).
However, since the first years of stay in the EEC (from November 1993 – the European Union, EU), the United Kingdom sought to maintain the greatest possible independence in important economic and political issues. In particular, the country did not accede to the major integration projects: the Schengen Agreement (1995) on the abolition of visa checks at their common borders and the introduction of the single European currency – the euro (1999). In March 2012, at the EU summit London refused to sign the so-called Fiscal Pact, lobbied by Berlin and Paris and introduced strict rules of financial discipline (HM Government, 2016).
For numerous reasons, the UK has always taken a distinct place in the European Union. Such situation can be undoubtedly explained through the temperament of the British, which was formed on the ground of territorial belonging. The United Kingdom is known to be a giant island, which belongs and does not belong to Europe at the same time. This is affected by the exceptional “island thinking” of British residents. Overall, the UK contribution to the EU budget is estimated at about 11.3 billion euros a year (Global Counsel, 2015).
Prerequisites of Britain’s Leaving from the European Union
In the UK, disputes with the European Union partners repeatedly appeared. They were fueled by the presence in the United Kingdom of the influential political and social forces, speakers of the country’s participation in the EU on the grounds that it limited national sovereignty and involved additional financial expenditure (Lipsey and Chrystal, 2015).
Convinced liberal politician, Thatcher considered European dominance primarily as a threat to the united socialist state. The Conservative Era was replaced with the occupation of Tony Blair his position in Britain, many of which associated him with the ideas of European integration. During his control, the steps in the direction of the Lisbon Treaty were made, who was conceived for the reform and modernization of the European Union. Blair actively advocated the enlargement of the EU at the expense of ten new countries, adopted in the block in the middle of the 2000s. At the same time, at the end of his stay at the head of the British cabinet, Tony Blair said that would fight “the dragon of European federalism” (European Movement International, 2016).
In December 2009, the Lisbon Treaty entered into force. In the same year, the new British Prime Minister David Cameron formed a new eurosceptic faction in the European Parliament, together with colleagues after leaving the European People’s Party, which represents a block of right-centrist politicians in Brussels (HM Government, 2016).
In recent years, in the British management’s announcements and the documents of the ruling party, the demand on the revision of balance of powers between London and Brussels was claimed. Tories threatened to withdraw from the Charter of Fundamental Rights of the EU, to limit the jurisdiction of the European Court, to review the laws of the EU Employment, to amend the directive on working hours (in particular, to abolish the 48-hour maximum), to reform the common agricultural policy, which takes 40% of the budget of the EU and so forth (HM Government, 2016).
The issue of a referendum has arisen in the country since 2011, when given the economic crisis in the UK the dissatisfaction with the host country in the European Union increased. After winning the election, May 28, 2015, the British government led by Cameron introduced a bill in Parliament for a referendum on Britain’s exit from the EU. In June 2015, the House of Commons supported the bill. November 10, 2015, the Prime Minister announced the official start of the campaign for a change in Britain’s membership conditions in the EU (Global Counsel, 2015).
Currently, the EU and Britain face with a variety of inconsistencies. British anti-integration sentiment is connected both with the historical events of the state and the relations with the European Union. Mentioning the conflict with the EU, the important items of the British government’s requirements concern the economy – authority – movement of human forces. Many British do not like the UK principle of worldwide monitoring over the economy, finance, and law. The government often called upon to ease regulation of the European economy, restrict the postponement of the single business and provide Member States with the capability to block the impact of the Brussels instructions (PwC, 2016).
One of the leading requirements was also a necessity to identify that the Euro is not a single EU currency – in order not to interfere with the values of non-Eurozone states. The availability of a single monetary unit – euro – in most EU Member States is the vulnerability of the European Union. The mutual currency is exceptionally damaging for states, which are economically less advanced (Confederation of British Industry, 2013). Less rival states are required to continually upsurge the outward debt as the mechanisms to regulate the balance of payments do not work in them. A state with its own currency through devaluation can improve the effectiveness of its exports and limit imports (European Movement International, 2016).
The UK inhabitants are not contented with the mutual farming policy, which really damages the UK economy, because it causes high prices for food and the unproductive application of natural resources. In the EU, it is still not possible to harmonize tax policy and fiscal policy in total. Consequently, there are poorly controlled movement of cash and assets, relying on which state holds some policy. The funds go to more capacious market, higher earnings, more skilled and well-paid workers, greater value added, that is, to the same Germany, France and several minor but highly advanced EU countries. This also disturbs the EU and forms disproportion in various states (Krugman, Obstfeld, and Melitz, 2014).
In 2012, the British Prime Minister David Cameron, addressing his views at the annual session of the Confederation of British Industry (CBI), stated about the importance to control immigration and that he examines the implementation of quotas or restrictions on entry of other European states. From the EU point of view, discussed strategy is improper, and the United Kingdom is obliged to stand by a Europe-wide immigration policy (Confederation of British Industry, 2013).
Thus, the country is very advantageous to exit from the EU, because it has not linked to the European financial mechanism and the Schengen area. At the moment, it is the most influential global financial center. Tomorrow, it can become a state, which is the center of a separate autonomous Atlantic civilization.
Competitive Advantages of the Leaving for the EU
The main objective reasons for the UK exit of the European Union are (PwC, 2016):
The British reluctance to subsidize the weaker economy, ensure other states, whole nations;
The EU social policy towards migrants and the norm of autonomy of movement of human resources;
The economic dissimilarities on numeral problems;
The principle of international monitoring over the economy, business, and legislation;
The EU farming strategy;
The labor law, dedicated to social welfares;
The increasing unsteadiness in the world;
The popular discontent solution to the issue of security; and
The general crisis of the European Union, which is manifested in the economic crisis, monetary weakening, a divine crisis, the demolition of moral standards, and the progress of fundamental sentiment in society.
In terms of external policy, the United Kingdom will lose its authoritative position in the capitals of other powerful European countries, namely Belgium, France, and Germany. The British administration has always considered a vital element in the EU for carrying out its international policy goals. In case the country will take official decision to leave the EU, it will lose mentioned reserve. On the contrary, the lack of the UK in the structure of EU will lead to the weakening of Union’s position regarding that Europe in the UN Security Council will be represented by only France. For the most part UK, Brexit is inappropriate in this regard, the country will definitely remain a strategic participant of NATO as well as the UN Security Council, and that is exceedingly essential nuclear power (European Movement International, 2016).
In connection with national policy, proponents believe that the way out of the EU will only reinforce the consensus, as Parliament will be fully sovereign. Britain will also not be subject to European acts and regulations.
Activists for Brexit say that immigration statistics should be significantly decreased, and the single way to this is to recover monitoring over the boundaries and to state own immigration directions. Brexit will permit the authorities to recover monitoring over the labor regulation and the domestic healthcare system. Moreover, lower immigration theoretically should mean additional occupations for the individuals who remained in the state, but on the contrary, labor shortages may adversely affect the rate of development of the UK economy (Centre for European Reform, 2016).
Supporters of leaving claim that in the deficiency of EU paperwork and its myriad of guidelines, SMEs will thrive, which will cause the employment progress, as they trade with other EU countries with smaller quantities than the other companies. The significance of the European market for Britain has changed over time, and the ongoing crisis in the Eurozone will only reinforce this tendency (Business for Britain, 2015).
Using the WTO, the United Kingdom can conclude consensual trade contracts with states with promptly developing economies, such as China, Singapore, Brazil, India, and Russia. Much will rely on what exactly contracts the UK can sign with the EU and other states. There are plenty of options for the conservation of trade dealings with EU states (Federation of Small Businesses, 2012).
The Norwegian version means that the United Kingdom comes from the EU structure and joins the European Economic Area, which will ensure it an entree to the European single industry, excluding the monetary segment. It will also relieve Britain from the EU regulations in the areas of farming, fisheries, legislation and internal affairs. The Swiss version considers that the United Kingdom will track the model of Switzerland, which is not part of the EU or in the EEA, and conclude separate agreements with Brussels on each segment of the economy. Turkish version explains that the United Kingdom may enter into a customs union with the European organization, which will ensure its market free entree to the European market, but the monetary segment will not receive such access (PwC, 2016).
Britain may also try to sign a wide-ranging contract on free business with the EU on the Swiss pattern, but with the access guarantees of the monetary segment of the economy to the European market, along with a definite level of regulation over the formulation and execution of common trade rules. Britain could completely break its relations with the EU, and only rely on the WTO rules (Centre for European Reform, 2016).
Supporters of leaving from the EU believe that the open borders mean “open door” for terrorists. In this case, the closure of boundaries will allow better control the flow of immigrants arriving in the UK (European Movement International, 2016).
Thus, certainly, the UK leaving from the EU may, from one side, have a positive, and from the other side, a negative effect both on the UK and the Union. London will face a decrease in the power in Europe. The problem stands up of 1.4 million British citizens occupying other European states, because they lose the ability of permitted movement across the EU, as well as over two million people of the EU member countries living in Britain. An economic issue will also exacerbate. Presently, over half of the UK overseas trade is carried out with EU states (Care, 2016). For the EU, the UK yield may call into question the overall European initiative and bring it to the door of the other states, whose residents do not welcome the integration.
Conclusion
The United Kingdom has always played a major role in the European organization. Even despite its territorial belonging and location on the separate Big Island. The country considers the EU base on the federal principle and its claim of a federal superstate conceptually improper. It robs Britain of its traditional belief in the British distinctiveness and British dominance. The United Kingdom cannot be a virtuously European state as it is not a mainland state. Also, for the past many years, the UK and the EU have faced a contradiction on a large quantity of issues in diverse fields.
Of course, the cessation of the UK’s membership in the EU can cause some reduction of its investment attractiveness. Thus, the products exported to other European countries, after the exit from the Union will be subject to customs tariffs, while their exporters will face the local bureaucracy. However, the exit by itself will not destroy the British investment appeal as such. Moreover, the consequences of this step will be able to minimize as much as possible if London realizes the benefits that it will have with newfound independence in decision-making, in particular by improving the efficiency of its regulatory legislation in comparison with the pan-European (English Democrats, 2016). In this case, foreign direct investment may not be reduced – indeed, it may even increase.
Therefore, the results of the referendum and the consequences are different. Everything will depend on the diplomatic steps of the UK, the EU and making the member countries of Eurozone. However, the vote was held, supporters of the exit from the EU have won. Currently, only time will show where it all will lead.
References
Business for Britain (2015). Britain and the European Union What SMEs think. Available at: <http://forbritain.org/SMEpoll.pdf> [Accessed: 19 January 2017]
Campos, N. and Coricelli, F. (2015). Why did Britain join the EU? A new insight from economic history. Available at: <http://voxeu.org/article/britain-s-eu-membership-new-insight-economic-history> [Accessed: 19 January 2017]
Carbaugh, R. (2012). International Economics. Boston: Cengage Learning.
Care (2016). EU: Pros and Cons. Available at: <https://www.care.org.uk/sites/default/files/EU%20Pros%20and%20Cons%20article.pdf> [Accessed: 19 January 2017]
Centre for European Reform (2016). The economic consequences of leaving the EU: The final report of the CER commission on Brexit 2016. Available at: <https://www.cer.org.uk/sites/default/files/smc2016_26april2016.pdf> [Accessed: 19 January 2017]
Confederation of British Industry (2013). Our Global Future: The Business Vision for a Reformed EU. Available at: <http://www.cbi.org.uk/cbi-prod/assets/File/pdf/our_global_future.pdf> [Accessed: 19 January 2017]
English Democrats (2016). Arguments to Leave the European Union. Available at: <http://englishdemocrats.party/wp-content/uploads/2016/05/Arguments-to-leave-the-European-Union.pdf> [Accessed: 19 January 2017]
European Movement International (2016). The consequences of a British exit from the European Union. Available at: <http://europeanmovement.eu/wp-content/uploads/2016/05/EMI_16_PolicyPosition_Brexit_17_VIEW_FINAL.pdf> [Accessed: 19 January 2017]
Federation of Small Businesses (2012). FSB response to consultation on Top 10 SME burdens. Available at: <http://www.fsb.org.uk/LegacySitePath/policy/assets/final%20fsb%20top%2010%20burdens%20response.pdf> [Accessed: 19 January 2017]
Global Counsel (2015). BREXIT: the impact on the UK and the EU. Available at: <https://www.global-counsel.co.uk/sites/default/files/special-reports/downloads/Global%20Counsel_Impact_of_Brexit.pdf> [Accessed: 19 January 2017]
HM Government (2016). HM Treasury analysis: the long-term economic impact of EU membership and the alternatives. Available at: <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517415/treasury_analysis_economic_impact_of_eu_membership_web.pdf> [Accessed: 19 January 2017]
Husted, S. and Melvin, M. (2012). International Economics. 9th ed. New York: Pearson.
Krugman, P., Obstfeld, M. and Melitz, M. (2014). International Economics: Theory and Policy (10th edition). Upper Saddle River: Prentice Hall.
Lipsey, R. G. and Chrystal, A. (2015). Economics. Oxford: Oxford University Press.
PwC (2016). Leaving the European Union: Implications for the UK Economy. Available at: <https://www.pwc.co.uk/economic-services/assets/leaving-the-eu-implications-for-the-uk-economy.pdf> [Accessed: 19 January 2017]
