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30Jun16

What Does Brexit Mean for UK and EU?

The outcome of June 23 referendum not only took British Prime Minister David Cameron and many other Britons by surprise, but also sent shock waves through Europe and the rest of the world. Although this is only the very beginning of a pretty long process, because corresponding negotiations are expected to take two to three years before the UK and EU formally part ways, Great Britain' s exit from the EU is beyond doubt.

Brexit's foremost impacts will be on the UK's own internal and external conditions. Before the referendum, Cameron had claimed he wouldn't resign even if it resulted in his country's exit from the EU. As the leader of the "remain" camp, Cameron undoubtedly had not anticipated, or simply was unwilling to believe the Brexit clamor would ever succeed. But he had to offer to resign as soon as the result came out.

The British financial market took a blow, too. On June 24, amid dramatic turbulence in stocks and foreign exchanges markets, the pound depreciated by 10 percent, reaching a 31-year low. Many have speculated that the UK would have difficulty retaining its status as world financial center.

According to the majority of economists, Brexit's influences on the British economy will be particularly prominent in the middle and long term. After losing its identity as an EU member, the UK will have to renegotiate its relationship with the unified EU market, as trade agreements the EU has reached with other countries and organizations will no longer apply to the UK. There also will be a huge question mark over whether the UK can win the same degree of benefits through trade and investment agreements it signs independently with other countries.

Brexit will also rekindle troubles with the UK's own unity. Scotland's 2014 referendum on independence went abortive, but the likelihood of holding a new referendum is very high. Although many residents of Scotland don't want to remain in the UK, it is evident from the Friday referendum that most of them want to stay in the EU. In the mean time, the Irish Sinn Fein Party has said it would hold a new referendum on Northern Ireland independence and unification of Ireland.

In foreign relations, Breixt will bring about the biggest changes in the UK's external environment since the end of the Cold War. The thorniest and most imperative task is to re-design and re-plan its economic relationship with the EU, the world's biggest unified market — and the largest market for British exports. The UK can go without a European identity, but British products and services can't go without European consumers. Besides, the Anglo-American "special relationship", to which the UK has attached equal importance, will also face challenges. With European integration gaining momentum and the EU growing stronger, the US found it important to exert influence on EU development via the UK, the latter was also willing to play a "bridge" between the two parties. Yet the UK's importance to Washington will drop in the wake of Brexit.

Brexit will make the UK the first member country to leave the EU, which will have a tremendous impact on the latter. First, the EU's international status and influence will be weakened. There have been three main pillars supporting the EU's status as one significant polar of world economy - a GDP that by and large equals that of the US; the world's second most important currency - the euro; and strong impacts on world affairs, especially world economic affairs. Obviously the EU's strength and impacts are closely related to the integration of its members. Its influences will be seriously compromised without the close alliance and cooperation among member countries.

Although it often has frictions with the EU, the UK, as the second-largest economic entity in the EU, a nuclear power, and permanent member of the United Nations Security Council, has been known as part of the EU troika along with France and Germany. Its role is irreplaceable, particularly in EU diplomacy and defense policies. Which is why as the UK engaged in heated debates over whether or not to leave the EU, French and German leaders had openly, loudly called on British voters to vote for remaining. With Brexit, the EU, as an important international actor, will inevitably see its role and influences abate.

Second, Brexit will deal a heavy blow to European integration. The process of European integration, which started in the wake of World War II, made impressive headway in the past few decades, with members increasing from six to 28, and the degree of integration rising constantly. Due to the European debt crisis, the increasing threat of terrorism, and the unexpected refugee crisis, however, conflicts and divergences have been on the rise among EU members. The resurgence of extremism and populism has severely undermined the EU's internal cohesion, creating new troubles for European integration. Brexit will further inspire euro-skepticism and anti-EU feelings in other member countries, and encourage centrifugal forces. Meanwhile, it is too early to tell whether it will result in a domino effect on the European continent.

It is worth attention how the EU will respond to Brexit. German chancellor Angela Merkel has already invited French President François Hollande, Italian Prime Minister Matteo Renzi, and European Council Chairman Donald Tusk for a discussion about the matter. Brexit will inevitably be a main topic at the upcoming EU summit, where Cameron will join leaders of the other 27 EU countries. Major EU powers such as France and Germany certainly will not let Brexit put an end to European integration.

In the final analysis, the EU needs to bring itself closer to the masses, and respond positively to such public concerns as employment and security. That is the only way for the EU to retain support from member countries and sustain its vitality.

Feng Zhongping is Vice president of China Institutes for Contemporary International Relations.

[Source: By Feng Zhongping, China US Focus, Hong Kong, 30Jun16]
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