June 23rd is a day of momentous importance both for the United Kingdom and for the rest of Europe. And as this is the case, the outcome of the referendum on Britain’s continued membership of the European Union is of global significance.
Let’s go back in time.
It was Winston Churchill who, in his speech at Zurich University in September 1946, after the devastating wars of his generation, emerged as one of the most vocal advocates of European integration.
“If Europe were once united in the sharing of its common inheritance, there would be no limit to the happiness, to the prosperity and glory which its three or four hundred million people would enjoy. Yet it is from Europe that have sprung that series of frightful nationalistic quarrels, originated by the Teutonic nations, which we have seen, even in this twentieth century and in our lifetime, wrench the peace and mar the prospects of all mankind.”
And his conclusion was that “we must build a kind of United States of Europe.”
Churchill was speaking in the ruins of a truly devastated and destroyed Europe, with Hitler defeated but Stalin victorious—and would soon thereafter deliver his equally forceful speech in Fulton on the Iron Curtain about to descend on our continent.
Seven decades later, it is difficult to avoid the conclusion that virtually all the challenges that Winston Churchill talked about in those dramatic immediate postwar years have been mastered—and have been mastered thanks to the success of European and trans-Atlantic integration and cooperation.
The West European economies made a remarkable recovery after the war as an obvious result of these very efforts. Germany was successfully reintegrated, and France and Germany went from enemies to partners. The contrast with the years after the First World War was dramatic.
And the Soviet Union was contained also by a U.S. presence in Europe greatly facilitated by the perception that the Europeans had decided to get their act together. Eventually, a quarter of a century ago, the Soviet empire collapsed under the weight of its own failures, and the nations behind that Iron Curtain that Churchill had spoken about could, as they said, “return to Europe” and secure their peace and prosperity in the framework of European integration.
And for all its problems, the European Union is still the largest integrated economy of the world, and by far the preeminent trading force in the global economy.
I would argue that very little of this would have been achieved if the different processes of integration which have the European Union at its core, and its support from across the Atlantic, had not been there.
This is a fundamental fact that I’d much too often forgotten.
Of course, Churchill never really saw Britain as part of the United States of Europe he argued for.
For him, the Empire and the Commonwealth was still there. He talked about a world of the British Commonwealth, the United States and a United Europe.
But even he gradually had to face the fact that the days of the British Empire were over. And the United Kingdom soon found itself in the situation which Dean Acheson in 1962 famously described as “having lost an empire but not yet found a role.”
For statesmen in the United Kingdom looking forward, the obvious answer to this situation was to enter European integration, and to try to shape it according to their values and interests.
Harold Macmillan first applied for membership. Edward Heath successfully negotiated and achieved it. Harold Wilson defended and secured it in the 1975 referendum. Margaret Thatcher was instrumental in giving it new energy with the Single European Act in 1987 and its aim of completing a Single Market by 1992. Tony Blair spoke eloquently about its task, beyond securing peace in Europe, as being a power on the global stage.
And now David Cameron, after having secured a deal of important reforms of the European Union, is staking his political reputation on a victory for “Remain” on June 23, arguing vigorously for the importance of membership also for the security of Europe.
It should be obvious that the United Kingdom has been eminently successful in shaping the agenda of the European Union during the last few decades.
Driving enlargement. Putting the single market in center. Enforcing budget discipline. Arguing for a common foreign and security policy. Pushing for free trade agreements around the world.
But that is, of course, only a part of the story.
It has been said that any analysis of Britain’s relationship with Europe is a subject for psycho-therapists as much as for political scientists.
It is, in the words of Chris Patten, “a subject that has divided parties, consumed the most promising political careers in flames, enfeebled and even destroyed governments, helped to vulgarise and demean parts of our media, distorted the debate about Britain’s world role and purpose, and corroded our ability to pursue our national interest”.
“The subject of Europe”, he claimed, “continues to provoke a collective nervous breakdown in the political class.”
Were Britain to decide on June 23rd to leave the EU, it would be the first time in a thousand years that it would have decided to demote itself to a lower league, since there is no doubt this will be a consequence.
Today’s Britain is a lesser world power than was Winston Churchill’s or Harold Macmillan’s. But today’s European Union is far more of a world power in terms of trade, economy and diplomacy than anything of those days, and the United Kingdom exercises a global role not least through the Union.
But for all of this we cannot exclude that there will be a vote to leave the EU.
As for the immediate consequences in the politics of the United Kingdom, these are likely to be substantial. There would be turmoil.
But the primary problem is the prolonged procedure of divorce that will follow.
The UK government will in all probability notify the European Union of the outcome of the referendum without delay, and invoke Article 50 of the Treaties. This foresees a two year period of negotiations on the technicalities of the divorce, during which the UK remains a member, although hardly one with much influence, with the possibility of extending this period by a unanimous vote.
Untangling the web that binds the UK together with the 27 other member states will be complicated enough, but defining the nature of the relationship that will have to follow promises to be even more complex.
And there is virtually no one who believes that all this can be done in just two years—and there are serious doubts whether there will be the unanimous consent in the summer of 2018 to extend this period further.
It will be critical for the entire process that the UK decides what kind of alternative arrangement it would like to see.
And here the drift of the debate in the UK among those favouring “Leave” is to wish to leave the Single Market as well. In spite of this being a signature achievement not least of Margaret Thatcher, being part of the Single Market without being a member of the EU would in effect be a satellite relationship of the same nature as Norway, Iceland and Liechtenstein now have. They have no say over the decisions on the rules governing the Single Market, and have to respect them anyhow, including the free movement of labour, and make a sizeable contribution to the Union’s budget.
But leaving the Single Market, as well as leaving all the 53 free trade agreements that the EU has all over the world, promises to be both difficult and costly.
An arrangement of a large number of bilateral deals, as the one Switzerland has, or one similar to Albania, which has been referred to by one of the leading “Leave” campaigners, would hardly be satisfactory either.
It should be noted that these alternative arrangements in other European countries all are the consequences of the leaders of the respective countries failing to achieve what they considered the best option for their countries.
In Norway, a referendum on membership of the EU was lost in 1994, giving no alternative but to fall back on the European Economic Area. And in Switzerland, a referendum on membership of the European Economic Area was very narrowly lost in 1992, giving that country no alternative but to fall back on laborious work with complicated bilateral deals.
And Albania, needless to say, hardly sees its present position as its final destination in terms of European integration.
So the alternative arrangements available for European countries are all alternatives that are seen as only second best by the countries concerned. They were never the first choice for their countries.
Absent such arrangement, the fall-back option would be trade in goods according to WTO rules, with the tariffs this implies. This would certainly be possible, but market access for the important service sector, including the financial one, would certainly be in question. And the service sector is arguably far more important for the UK economy, in the short and long term, than is the manufacturing sector.
As for the freedom of movement for individuals inside the EU, much will of course change if the UK where the leave the Single Market with its free movement for goods, services, capital and people.
Here, again, the UK will have to define what it wants. It should be aware that all the restrictions it will want to impose on EU citizens and entities in the UK will of course be mirrored by the same restrictions on UK citizens and entities across the EU. Work and residency permits will probably be introduced in the UK, and then also for the more than two million UK nationals now living or working in various EU countries.
To deal with all these issues will take time. First for the UK to decide want it wants. Then to negotiate the divorce. Then to negotiate an alternative arrangement. And then for the UK—it should not be forgotten—to enact replacement legislation for all that will be lost when leaving the EU.
Hardly any observer believes that all of these issues can be sorted out in just two years. A recent report by a Select Committee of the House of Lords hinted at the possibility of a decade-long period of uncertainty. That the economic cost of such a long period would be substantial is obvious.
To this should of course be added the need to negotiate separate bilateral trade agreements replacing the 53 that the UK now is part of. That the UK in these negotiations would have the same leverage in order to strike good deals as the EU has had is most unlikely.
Much would of course happen during the years when all of this plays out. But once Article 50 had been invoked, there would be no turning back. Some speculate that the final result could be the subject of a new referendum in the UK—but then we are in all probability well beyond 2020, and the likelihood that the UK will then get itself together to re-apply for membership is highly academic.
And it is of course not excluded that the EU, by then, will have taken steps that would make the step towards membership more demanding and difficult.
The only thing that is therefore certain if there is a “Leave” vote on June 23rd is that there will be major uncertainty for a number of years, perhaps even for as long as a decade. That there will be a substantial economic cost to this uncertainty is beyond doubt. Just one example: the fact that the UK has been the premier destination for foreign investment in the EU has also been because it is part of the Single Market.
To this should of course be added all the wider geopolitical consequences of a UK decision to leave.
Britain would have rejected the role it so successfully had for nearly half a century, and entered a period of uncertainty. And a more fractured Europe will also be a less secure Europe.
Carl Bildt is the former Prime Minister and Foreign Minister of Sweden, and a Senior Policy Advisor to Covington. He has written this article in a personal capacity, and it reflects his own views.