Brexit: the global fall-out


Picture of Shada Islam
Shada Islam

Managing Director at New Horizons Project

European Union leaders may not have the time or inclination to dwell on the global ramifications of Brexit. They should find a moment. Britain’s decision to leave the EU is sending tremors across the world.

The market turmoil triggered by a falling pound has prompted some of Asia’s biggest economies to warn that Brexit could cast a shadow over the world economy for years to come.

US Secretary of State John Kerry’s visit to London and Brussels is a high-profile indication of Washington’s worries as regards the future of the EU and a possible impact of the British decision on NATO. Meanwhile, global business leaders are already rethinking their export and investment strategies to take account of Britain’s imminent departure from the EU.

Global business leaders are already rethinking their export and investment strategies

More is at stake, however. The EU has long inspired nations across the globe with its message of reconciliation among former adversaries and as a project for peace and stability. In varying ways and to varying degrees, many have also looked to Europe in their own quest for regional integration and cooperation.

That reputation has now taken a body blow. Both Britain and the EU appear diminished to a closely-watching world. Those opposed to regional cooperation are likely to take heart from the EU’s difficulties. But it would be unfortunate if the EU crisis puts the brakes on other regions’ plans for integration.

Significantly, none of the EU’s foreign partners – except Donald Trump, the presumptive Republican nominee for US president and possibly Russian President Vladimir Putin – is applauding.

EU leaders may insist that the 27 member states will push ahead as planned or even speed up integration now that the perennial argumentative nay-sayer has abandoned ship. But as the bickering begins on Europe’s future direction and the speed of Brexit, nobody is fooled about Europe’s shattered unity.

Europe’s important partners have invested heavily in Britain as a ‘gateway’ to Europe

The world knows that the Union, which was already on flimsy ground over its messy response to the refugee crisis, the rise of populist leaders and governments and difficulties in the eurozone, has cracked. The EU as an inspiration for other countries seeking to work together for peace and prosperity has taken a possibly fatal beating. And as uncertainty over the future of both Britain and the EU looks set to continue, many have been left wondering if Europe – and the world – will ever be the same again.

That will depend on how British and EU leaders conduct themselves over the coming weeks and months. Britain’s pro-Leave campaigners have already sullied the country’s reputation by misinforming and misleading their citizens and by fanning the fires of hatred and racism. It will be tough to correct their mistakes – if that is indeed what the next British Brexit government intends to do.

EU leaders, meanwhile, face a stark choice: they can either listen to and respond to the real concerns of their citizens, including on immigration, and seek a dignified response to the latest crisis. Or – as many fear – they can engage in yet more squabbling over Europe’s future direction. The route they take will determine whether or not other eurosceptic movements will become even stronger in the days ahead and present their own blueprints for an EU exit.

Europe’s response will be watched carefully not just by the US where fears are growing of a Trump victory in the November presidential elections but also by China, India, Japan and Europe’s other important partners which have invested heavily in Britain as a “gateway” to Europe.

The EU is a much larger trading bloc than Britain – and will continue to count for more on the world stage

No responsible global power wanted Britain to leave the EU, and today no major country wants the EU to unravel. True, some countries may want to negotiate new trade pacts with Britain – but as the US and India have warned, such discussions will not be their top priority. The EU is a much larger trading bloc than Britain – and will continue to count for more on the world stage.

For Europe’s trading partners, Britain’s absence will be especially felt in EU discussions on trade agreements, whether bilateral free trade accords such as the Transatlantic Trade and Investment Partnership (TTIP) or the wider multilateral trading system. London has taken a strong stance in favour of granting Market Economy Status to China. It has also been among the lead players in the EU’s trade relations with many South Asian countries, including India, Pakistan and Afghanistan.

The departure of Britain as the EU’s prime military power is going to hit hard at a time when Europe is trying to push its security credentials, especially in Asia. A new EU “global strategy” which cannot rely on and use Britain’s wide network of global partners will appear less impressive.

In the end, however, once the market turmoil is over and the reality of Brexit sinks in, it is the blow to the EU’s reputation as an agent for change and transformation which will resonate most strongly across the world.

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