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The Brexit Aftermath
Britain's withdrawal from the EU will have influence beyond European boundaries
By Jiang Shixue | NO. 27 JULY 7, 2016

British Prime Minister David Cameron announces his resignation outside 10 Downing Street in London on June 24 after Britons voted to leave the EU despite his campaign for a vote in favor of remaining (XINHUA)

Britain's exit (Brexit) from the EU has actually kicked off, as Leave supporters won a majority by 51.9 to 48.1 percent in a historic referendum held on June 23. After the final result was announced, Prime Minister David Cameron of the Conservative Party said outside 10 Downing Street in London that he will stand down by October.

"I think the country requires fresh leadership to take it in this direction," Cameron said. The prime minister campaigned for Britain to remain as an EU member, but the result went against his wishes.

Lukewarm relationship

Europe and the rest of the world have been shocked by Britain's decision to leave. However, for the British people, Brexit is not a fresh idea. Britain has a long history of maintaining relative isolation from the European continent in the past.

There was even suspicion among the British when other European countries conceived the idea of regional integration after World War II.

On September 19, 1946, Winston Churchill delivered a speech at Zurich University in Switzerland expressing support for European integration. "We must build a kind of United States of Europe. In this way only will hundreds of millions of toilers be able to regain the simple joys and hopes which make life worth living," Churchill said. Critically, though, he dismissed British membership of Europe's regional organization. "France and Germany must take the lead together. Great Britain, the British Commonwealth of Nations, mighty America, and I trust the Soviet Union… must be the friends and sponsors of the new Europe," he added.

Britain became a fully-fledged member of the European Economic Community (EEC), the predecessor of the EU, in 1973 under the Conservative Government of Prime Minister Edward Heath. Heath was optimistic that the accession would bring prosperity to his country. "It is going to be a gradual development and obviously things are not going to happen overnight," he said. "And this will enable us to be more efficient and more competitive in gaining more markets not only in Europe but in the rest of the world."

The Labour Party first supported Britain's EEC membership, but it later accused the Conservative Party and Heath's government of accepting unfavorable terms in the negotiation process. After it came to power in February 1974, the party decided to consult the public on whether Britain should exit the community.

The first referendum in British history was held on June 5, 1975, with 67.2 percent of voters choosing to stay in the EEC.

Anti-Brexit protesters call for a second referendum on Britain’s decision to leave the EU during a demonstration in London on June 26 (XINHUA)

Staging a referendum

On January 23, 2013, Cameron made an important speech on Europe. He listed four major challenges facing the EU—dysfunction within the eurozone, the immigration crisis, the lack of competitiveness, and a question of legitimacy. He said that if the EU couldn't overcome these challenges, Britain would opt to quit the bloc.

Cameron also announced a plan to hold an in-out referendum on Britain's EU membership before the end of 2017 if he was re-elected prime minister in 2015.

Having achieved re-election, Cameron spelled out a list of British demands for the renegotiation of its EU membership terms on November 10, 2015. He reiterated that if Britain's demands couldn't be met, there would be a genuine possibility of a Brexit.

Cameron's core demands were: protecting the single market for Britain and others outside the eurozone, writing competitiveness into the DNA of the whole EU by such as cutting the total burden on business, exempting Britain from an "ever closer union" and bolstering national parliaments, as well as tackling abuses of the right to free movement and enabling Britain to control migration from the EU in line with its manifesto.

On February 2 this year, President Donald Tusk of the European Council, the highest decision-making body of the EU, put forward his proposals for a new settlement for Britain to remain in the EU.

"Keeping the unity of the EU is the biggest challenge for all of us and so it is the key objective of my mandate." Tusk said in an open letter. "I deeply believe that our community of interests is much stronger than what divides us."

At an EU summit held in Brussels, Belgium, on February 18-19, Cameron and leaders of other 27 EU members agreed on a new settlement for Britain within the union, supposedly addressing all of Cameron's concerns without compromising fundamental EU values.

After the meeting, Cameron announced that the EU membership referendum was to be held on June 23. He also pledged to try his best to persuade voters to back staying in a reformed EU, claiming that Britain is far better off inside. However, the result of the June 23 referendum proved that his efforts had failed.

According to Article 50 of the Lisbon Treaty that sets out how an EU country might voluntarily leave the union, negotiators have two years to conclude Britain's withdrawal deal from the date of an official notification of Brexit.

The Brexit effect

Britain itself will suffer heavy economic losses from the impending EU exit, since it is already economically highly integrated in the EU. Although it can seek alternative markets, the cost will be high and this will not be realized immediately.

One of Britain's remarkable advantages is London's status as an international financial center. But the withdrawal from the EU might diminish the country's role in global finance and it is likely to repel foreign investors. Citigroup estimated that Britain's annual GDP might reduce 3-4 percentage points over the next three years due to the exit.

Britain's relationship with the rest of the world will also be affected. It has to somehow regain a unique and resonant voice in world affairs once it breaks away from a collective EU. In regard to European affairs, on the contrary, Britain will have less rights to participate in decision-making in the future. The United States also loses a channel to exert influence on the EU through its close partnership with Britain. The "special relationship" between the two countries will change in a subtle manner.

The political division in British society has widened after the recent referendum. Pro-Leave voters defeated those who backed the Remain campaign by less than a 4-percent majority, about 1.2 million voters. Furthermore, many citizens could face uncertainty concerning their life, jobs and income due to the EU referendum, aggravating "remainers" even more.

Scottish First Minister Nicola Sturgeon said at a press conference in Edinburgh on June 24 that a second Scottish independence referendum is now "highly likely." Scotland, Northern Ireland and London are three areas in which the majority of voters backed the Remain campaign . The threat to the national unity of Britain is growing.

Brexit is also a hammer blow to the EU, a great achievement of regional integration that Europeans have made over the past decades. Within the union, there is free movement of people, commodities, services and capital, which is often regarded as the pinnacle in efforts to attain human unity in the world.

However, Euroscepticism has been on the rise on the continent throughout the past few years. After Britain's EU membership referendum, people fear more member states would follow Britain out the exit door. Although such a chain reaction seems unlikely, the European integration process has suffered a significant setback.

Currently, both the European and the world economy remain fragile, with Brexit only enhancing global uncertainty. As one of the world's largest economies, Britain's impact remains noticeable. On the day the result was announced, the British pound plummeted, resulting in wild international currency fluctuations and record stock market selloffs.

Chinese implications

As China maintains close economic ties with both Britain and the EU, Brexit will inevitably have some influence on China-UK relations. If Britain will no longer be a part of Europe's single market, it must enhance trade ties with other regions. Against such a backdrop, strengthening Chinese relations would be a lucrative option for Britain, particularly if British trade diverts from the EU significantly. In addition, Britain would be free to talk with China on free trade and bilateral investment without the restrictions imposed by EU laws. According to the Lisbon Treaty, EU members are not allowed to reach free trade agreements or bilateral investment deals alone with any third party.

However, China would lose Britain as a gateway to access the EU market and to promote the use of China's currency renminbi in Europe.

In addition, Britain might be less attractive to foreign investment after withdrawing from the EU, but it would not lose its competitive advantage in industries. China's direct investment in Britain might be influenced negatively, but it should not fall sharply.

Last October, Chinese President Xi Jinping paid a state visit to Britain. Xi and Cameron jointly announced that the two countries would work together to build a global comprehensive strategic partnership for the 21st century. Brexit will not fundamentally change the China-UK partnership and Britain may attach greater importance to developing bilateral relations with China in the future.

The author is deputy director of the Institute of European Studies at the Chinese Academy of Social Sciences

Copyedited by Dominic James Madar

Comments to liuyunyun@bjreview.com

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