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As the initial shock of Britain's rejection of the European Union receded, a more sober assessment of its impact on financial markets, European unity, and security arrangements in NATO began to emerge. Although at this writing it's not prudent to offer a longer-term assessment of the consequences of Brexit, it's possible to cite historical developments and draw some tentative conclusions.
The European /Economic Community (EEC) was founded in 1958 when six European states--France, West Germany, Italy, Belgium, Netherlands, and Luxemburg--formed a closely-knit trading bloc. Britain chose not to join. Instead, it formed the less formal European Free Trade Association (EFTA) whose members were Britain, Norway, Denmark, Sweden, Portugal, Switzerland. and Austria.
An essential difference between EEC and EFTA was that France and West Germany wanted to move toward closer European economic and political unity while Britain, Denmark, Norway and others preferred a looser arrangement. In the late 1960s, Britain made overtures to associate with the new French and German-led European Community (EC), but French President Charles de Gaulle blocked its entry because, he asserted, Britain wasn't a true European partner.
After de Gaulle left office, integration efforts proceeded and in 1973 Britain and Denmark joined the EC's Common Market. In a 1975 referendum on the EC, Britain's public approved despite significant opposition. When a fully integrated European Union (EU) was formed in 1992, Britain joined even though opposition was voiced on the requirement of free flow of labor across borders. However, Britain decided not to adopt the euro, EU's common currency, when it was introduced on the continent in 2002.
In reality, Britain has been a reluctant dragon on joining Europe ever since its inception in the 1950s. So, what's the outlook for Britain, Europe, and the U.S?
The U.K. is in political chaos as a result of Brexit's rejection of the EU and could unravel if Scotland, which voted "no" in the referendum, stays with the EU and decides to separate from Britain. That may result if London doesn't have a new government soon and fails to negotiate a revised arrangement with other EU countries. Additionally, Britain's economy will decline and the large financial influence of London may gradually move to Frankfurt and Paris. London will also need to negotiate new trade relationships with the U.S. and Canada. Finally, its exit from the EU presents NATO with a major problem. If looming financial stress forces London to cut its defense budget and the armed forces, Britain will be a less reliable US ally.
Like Britain, the European Union's leaders face problems about unity in their own countries. But unlike Britain now torn by political turmoil, Europe's key players, Germany and France, currently have stable governments. They also display a moderating influence on post-Brexit fall-out in other member states. But danger lies beneath their calm behavior. In France and other members, the EU is so unpopular that governments won't risk holding referendums. The main problem is the EU's bureaucracy in Brussels with its huge influence on the laws of member states. Resistance in Britain to the free flow of workers across borders, a key requirement of the EU constitution, is shared in other member countries. Coming months will determine whether leaders in Germany and France support enough changes in EU administration to hold its 27 members in harness.
As the U.S. heads into an election campaign, Washington's influence on events in Europe and elsewhere is ebbing. President Obama went to Ottawa two weeks ago to confer with his Canadian and Mexican counterparts about coping with Brexit's impact on the North American Free Trade Agreement (NAFTA). These leaders foresee growing opposition to free trade during the U.S. election campaign and beyond. Continued close relations on trade and commerce are important U.S. interests, but the overriding US priority is the strength and cohesiveness of NATO. It was responsible for forging peace and prosperity in Europe for nearly seventy years and eventually bringing former Soviet satellites under its defense umbrella. If the EU begins to unravel under the stress of nationalist pressures, NATO's defense shield will remain a vital U.S. interest in Europe.
Although it's easy to be pessimistic about the EU's and Britain's future, I'm more hopeful. Europe has weathered many difficulties over its post-1945 drive to build economic and political unity, and Britain too will find a way to "muddle through" this crisis. However, can the U.S. avoid turning inward after so many years of heavy involvement in Europe? We will know more after November.
File last modified on Wednesday, 15-JUN-2015 1:52 PM EST