Does Brexit Represent an Existential Risk to the European Union – or Even the Global Economy?

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“No” is the simple answer, according to the Financial Times in an article this week.

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So, does it matter?

Not from a purely economic point of view, no.

Sure, it has huge implications for the Brits, and for any company buying from or selling into those troubled isles – not least of which the Irish, for whom it could be even more painful than for the U.K. itself. The U.K. being such a large trading partner for them, the imposition of tariffs and/or other forms of barriers would have profound implications for trade between Northern Ireland and the Republic of Ireland.

But in terms of a hard Brexit’s implications for Brazil, Singapore, Australia, etc., they would barely notice from the point of view of impact on GDP.

But the ramifications go further than just economic fallout.

The European Union was started as an economic cooperation, but its original aims were always much more.

As the Financial Times states, at the heart of the E.U.’s mission is an ambition to unite the countries of Europe in such a way as to prevent a recurrence of the disastrous wars and social upheavals of the 20th century. Beyond that, the aim is to advance Europe’s commercial, diplomatic and security interests around the world, help to set global regulatory standards and act as an anchor of a rules-based international order.

Europe has been a leader, or least a close follower to the U.S., in globalization and developing a rules-based global trading system. Whatever some backward-looking, misty-eyed, colonial-era-aspiring politicians may say, Brexit is a rejection of ever greater European and global integration.

The British public, which voted for Brexit, largely rejected globalization and yearned for a rose-tinted view of Britain’s past (which probably never really existed except in our imagination).

Britain is not alone in expressing such views.

Indeed, a significant plank of President Donald Trump’s appeal is similarly isolationist, as is the new administration’s in Brazil. No other country in Europe has voiced the same desire to leave the E.U., but Britain’s decision has caused a fundamental rethink on the speed and direction of European integration, despite French President Emmanuel Macron’s continued enthusiasm for the European super-state. Voices of dissent are rising and more widespread.

The true casualty of a hard Brexit, apart from the obvious damage to the U.K. economy, will be the European dream of ever-closer unity.

Historians may well look back on 2019 as the year that dream hit a wall and a return to economic pragmatism prevailed among European policymakers, as opposed to the ever-closer union favored by Brussels.

Some would argue that is no bad thing. There is much wrong with the E.U., particularly its unaccountability and arrogant imposition of policies seen by many as favoring the few over the many.

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Be that as it may, as the shockwaves of a hard, no deal Brexit reverberate around Europe, it may be more than just the Brits who come to regret that referendum on June 26, 2016.

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