Brexit: What Happens Next?

Yesterday, the United Kingdom voted by a margin of 52% to 48% to leave the European Union (EU), ending a four-decade long membership with the EU. Immediately, global financial markets reacted negatively to the news of Britain’s decision. In the 24 hours following the result being announced, the pound lost value against every currency worldwide, including losing nearly 10% of its value against the Euro, a record loss for a single day of trade. The decision also quickly had political ramifications for both of Britain’s main political parties. Prime Minister David Cameron announced he would resign by October as a result of the decision. Meanwhile, the opposition Labour party leader Jeremy Corbyn faces a no confidence motion following criticism for a lacklustre effort to campaign for the Remain vote.

Though the referendum result supported Leave, that is only the first step in a years-long process of EU withdrawl. In order for any process to begin, British parliament must first invoke Article 50 of the Treaty of European Union, formally notifying the EU of its intention of withdrawing from the European Union. Once this article is invoked, a two-year negotiation process between Britain and the EU begins. At the end of the two years, Britain leaves the EU with newly negotiated trade conditions offered to it. If Britain finds these unacceptable, it may extend the negotiating period if a majority of EU nations is willing to extend negotiations. If not, Britain could potentially leave the EU with unfavourable trade conditions. During the two years, EU regulations still apply to Britain, however Britain will have no say in European parliament.

The referendum results highlight a deeply divided UK. The Leave vote came primarily from regional areas and small towns, particularly within England and Wales. Large metropolitan areas, meanwhile, had the majority of the Remain vote. The Leave vote was the majority overall in England and Wales, while Northern Ireland and Scotland had a majority Remain vote. In addition, there was also a marked generational divide on the referendum vote. On the one hand, three-quarters of adults aged between 18 and 25 voted Remain. Conversely, a majority of voters over the age of 50 voted to Leave the EU. There is also a further divide between the level of education attained and voting preference. Analysis has shown those with a college education were more likely to vote Remain, compared to those who did not have a college education, who leaned towards Leave.

As well as leaving the European Union, Brexit may yet also result in the break-up of the United Kingdom as a whole. Immediately following the decision, Scotland’s First Minister Nicola Sturgeon argued that the decision to leave the EU was against the will of the Scottish people and that a new referendum on Scottish independence is necessary. Northern Ireland, which also voted in a majority for Remain, may also call for reunification with the Republic of Ireland, a EU member state. Sinn Fein, the oldest political party in Ireland, has called for a referendum on the issue along similar lines to those argued by Nicola Sturgeon of Scotland’s Scottish National Party.

These figures reflect a more widespread trend throughout Western nations. In the West, the divide between metropolitan and rural, tertiary educated and non-tertiary educated and generations has become more and more pronounced in recent years. This has manifested itself in a variety of ways, from widespread Euroskepticism and resurgent populism throughout Europe to the rise of political figures such as Nigel Farage and Jeremy Corbyn in the UK and Donald Trump and Bernie Sanders in the United States. Britain’s decision to leave the European Union is the latest example of a more widespread discontent with the current state of politics and highlights the fragmentation and slow disintegration of the EU in general.

From an Australian perspective, Brexit will result in a short-term impact on global financial markets, including our own. Looking further into the future, its impact is more uncertain. In a previous piece I wrote on the topic, I highlighted how Brexit may affect our relations with Britain as well as the European Union. Now that Brexit has been realised, and more so in light of the resignation of David Cameron, the notion of a free-trade and movement zone within the Anglosphere is worth re-examining. Leave campaigners, particularly Boris Johnson, who could succeed David Cameron as the next Prime Minister, have argued for renewed ties with ‘Anglosphere’ nations such as Australia, New Zealand, the United States and Canada. There is a potential for an Anglosphere free-trade zone to occur, similar to the Eurozone, especially if Britain views the leave agreement offered by the EU to be unsatisfactory.

Already in the days and hours since Brexit, there has been considerable political and economic ramifications for Britain. Though things will inevitably settle considerably within days and weeks, the longer-term future carries considerable uncertainty for Britain and the European Union. It is difficult to determine at this early stage whether the decision will be a net benefit or hindrance for Britain in the long run, though it will almost certainly not be the ruinous event for Britain that some columnists have argued it will be.


What are the chances of an Australian Donald Trump?

Throughout the Western world, traditional politics is being shaken up in ways not seen for several decades. The current US Presidential race is a prime example of this, with Donald Trump taking the presumptive Republican nomination and self-described ‘democratic socialist’ Bernie Sanders contending with Hillary Clinton in the Democratic primaries. Both Trump and Sanders have run on platforms which challenge conventional positions on free trade, immigration and foreign policy interventionism within both the Republican and Democratic parties. In Europe, mainstream political parties and institutions are also being challenged. Populist candidates and parties from both the left and right of the political spectrum are winning more of the vote than they have for decades. This is reflected both in the rise of new political parties, as well as several nations, including the United Kingdom and Greece holding referendums on whether to remain within the European Union or to leave.

Considering this trend, it’s worth examining the possibility of a similar populist movement in Australia, including the likelihood of an anti-establishment candidate becoming the Australian Prime Minister. It is tempting to assume that Australia will soon follow a similar path, with an outsider candidate in the mould of Donald Trump, Bernie Sanders, Jeremy Corbyn or Marine Le Pen becoming a significant political force in Australia. I argue, however, that a significant, organised populist movement is unlikely to arise in Australia in the near future.

One reason why a populist candidate is unlikely to rise in Australian politics, at least in the near future, is Australia’s economic stability relative to the United States and Europe. Australia is fortunate to have experienced a record 25 years of continued economic growth. Unlike the United States and Europe, Australia managed to stave off recession in 2008 at the height of the global financial crisis. Unemployment for the most part has remained relatively low. The recession and subsequent economic instability for a large proportion of people in these parts of the world are a major driver of the ongoing push toward populist movements.

Closely related to this is the issue of immigration. High levels of immigration, especially of unskilled migrants, have been a major catalyst for populist movements in Europe and the United States. Particularly for the working classes, these demographics feel that policies of mass immigration have left them behind economically and isolated them in society. As a result, they have turned to candidates such as Donald Trump, Nigel Farage of the United Kingdom’s UKIP (United Kingdom Independence Party) and Marine Le Pen of France’s Front Nationale. Australia, in contrast to the United States and Europe, has tight immigration rules which are targeted to bring in people with skills which are needed in Australia. This system is one that some political parties in Europe, such as the United Kingdom’s UKIP party, wish to emulate. This, in addition to Australia’s tough policies on asylum seekers arriving by boat, shared by both the Liberal and Labor parties, have helped to alleviate Australians’ worries on these issues in comparison to Americans and Europeans.

It is important to note that Australia is not entirely free of populist and anti-establishment politics. The election of several senators from micro parties, usually based on one or a small number of issues during the 2013 election, as well as the continual rise of the Greens on the political left show are evidence of a growing populist element within Australian politics. However, unlike in Europe or the United States, the overall movement is disorganised and disparate, ultimately leading it to have relatively little influence over the governance of the nation. This is particularly true of Australia’s far-right, in stark contrast to the surging popularity of equivalent parties throughout Europe. A change in conditions, such as a recession could prove to be a catalyst in the future for an equivalent of a Donald Trump to arise in Australia. The overall global economic outlook in the near future is not overly positive and Australia is likely to be affected to some degree. Despite this, I am sceptical, at least in the near future, that a broad populist or anti-establishment movement will take hold in Australia to the extent of the United States or Europe.

The European Union, Brexit and implications for Australia

In Europe, the European Union, commonly referred to as the EU, is being challenged and opposed by many European nations, both within and outside of it. Financial troubles and increasing levels of migration in recent years have strained European nations’ commitment to the Union. Some of these nations feel that the EU has too much influence over their nations, particularly on issues such as trade, economics and immigration. Immigration is a particularly contentious issue for these nations. Currently, all member nations of the EU allow for visa-free movement for citizens within the EU bloc of nations, known as the Schengen Zone. Additionally, the EU parliament in Brussels plays a role in where migrants to the EU end up. By way of EU law, migrants to Europe can be allocated to countries other than the ones they arrive in. The current migration crisis involving Syrian refugees fleeing the Assad regime and persecution from ISIS has only exacerbated these concerns among many EU nations. EU member nations in Central and Eastern Europe in particular have pushed back hard against EU law, as they have to date been responsible for integrating the majority of refugee arrivals. In many instances, mass protests have occurred against the EU’s open border policies toward refugees, with protestors demanding that borders be controllers and migration stemmed.

Britain, one of the most influential nations within the EU is currently debating ‘Brexit’, Britain’s removal from the European Union. Currently, Britain is just about evenly split between those who want to remain and those who want to leave, with the option of exiting the EU being slightly more favoured. As one of the largest economies within the EU, Britain leaving the EU would have considerable impact economically throughout Europe. Many of the smaller economies in the European Union, particularly those in Central and Eastern Europe benefit from simplified access to the British economy. These nations also benefit from the funds Britain contributes to the EU, which is then reinvested in these smaller nations for things such as infrastructure development. For those in favour of Brexit, including prominent British Conservative Party members such as London Mayor Boris Johnson and prominent Eurosceptic Daniel Hannan, leaving the EU is a means of regaining control of their country from the excessive bureaucracy of Brussels. From their perspective, leaving the European Union would lead to greater economic growth, border control and control over foreign policy, among other things. Those who believe in keeping Britain in the EU, on the other hand, argue that exiting the EU would harm Britain’s long-term economic prospects and leave Britain more isolated in an ever-more globalised world. British Prime Minister David Cameron, a firm supporter of the Remain campaign, has argued that leaving the EU would be harmful to the British economy. He argued that too many British industries rely on open trade with the EU to justify Brexit, and that doing so would cost jobs, devalue the pound and stall the economy more broadly.

Although Australia is far away from Britain, Brexit could have some implications here. If Britain were to leave the EU, it would be required to renegotiate trade treaties the world over to compensate, including with Australia. Much of Australia’s trade with Britain is predicated on deals the UK has in place with the EU. Were this to change, Australia would not only have to renegotiate trade with the UK, but also with the European Union, despite only recently agreeing to a free trade deal with the EU. Were Britain to leave the EU, they would likely seek to increase engagement with Australia. Australia, alongside New Zealand and Canada has long been referred to by British Eurosceptics as the Anglosphere, a collection of English-speaking nations within the Commonwealth with similar cultures and market economies. An agreement with these nations, including free trade, military alliances and visa-free migration, would likely be sought by Britain in the case of their exit from the EU.

The referendum on Brexit is still over three months away. Whichever way Britain votes, it will have a considerable effect on the country, Europe more broadly and even on Australia to an extent. Considering that Australia goes to the polls only a matter of months, or even potentially weeks after the vote, Australia’s economic partnership with Britain may soon be notably altered. Either way, Britain’s EU referendum is a vote which Australia should keep an eye on.