By Jonny Lupsha, Wondrium Staff Writer
Britain’s decision to exit the European Union came with consequences. “Brexit,” as it’s popularly known, has crippled international trade within the United Kingdom. Britain has lost its spot on Germany’s list of top 10 import partners.
Out of the top 10 nations from which Germany imports goods, Britain was fifth just five years ago. Since the announcement and troubled development of Britain’s exit from the European Union (EU), it has fallen to ninth and is on its way to 11th. Small British companies are facing the worst outcomes, having lost their biggest export market.
Brexit was a controversial decision, the impacts of which have been felt worldwide. In his video series International Economic Institutions: Globalism vs. Nationalism, Dr. Ramon P. DeGennaro, CBA Professor in Banking and Finance at The University of Tennessee, Knoxville, explained its intricacies.
The State of the European Union
“The European Union today is an economic powerhouse encompassing almost 30 nations—and more than 500 million residents—in an area about half the size of the continental United States,” Dr. DeGennaro said. “It produces more than 22% of the world’s output, with about $16.5 trillion in nominal gross domestic product, according to the International Monetary Fund.
“If you do the math, that means that the average resident of the European Union is three times richer than the average resident on planet Earth.”
The EU not only implemented free trade among its nations, but it also created a single market, by standardizing the laws that govern commerce in the political and economic union. The EU did this to guarantee freedom of movement of goods, services, capital, and people.
One side effect of this is the large bureaucracy managing the nation bloc.
“At the helm is the European Council, established in 1975 and consisting of the heads of state of member countries; and the European Parliament, formed in 1979,” Dr. DeGennaro said. “The European Council describes itself as defining the general political direction and priorities of the EU, while the European Parliament is the lawmaking body, and maintains legislative, supervisory, and budgetary responsibilities.”
There’s also the European Commission, which manages day-to-day activities; the Council of the European Union, which describes itself as ‘the voice of EU member governments’ and implements laws; a court equivalent to the U.S. Supreme Court; and a central bank that’s similar to the U.S. Federal Reserve.
Britain Goes It Alone
EU member nations can trade without tariffs and even travel between nations without a passport, so what happened? It’s complicated.
“Some supporters of remaining in the EU boiled down the arguments of the leave forces to one thing: immigration,” Dr. DeGennaro said. “On the other side of the argument, pro-Brexit forces boiled down the arguments of the remain forces to one thing, too: national sovereignty.
“Single issues make great sound bites, but exiting the European Union has implications that simply can’t be boiled down to one thing.”
One clear issue is power being taken from a federal government and elevated to the European Council and European Parliament. It’s estimated that as much as 17% of Great Britain’s laws come from the EU rather than Parliament and British voters. Additionally, there is clear conflict among the EU.
“Relations with Italy grew tense after the EU said that depositors should consider their money lost if a banking crisis occurred,” Dr. DeGennaro said. “Furthermore, refugees strain relations between member nations—and between member nations and the EU. Austria threatened to close the Brenner Pass to block refugees, and other countries refused to follow EU directives.
“Greece became angry after the EU sought to impose limits on government spending.”
Whether Brexit was a good idea or a bad idea remains to be seen. However, as Dr. DeGennaro noted, the EU is the most ambitious and successful example of international cooperation in human history so far.