On June 23, Brits head to the voting booths to decide whether they want Britain to remain a part of the European Union. The Cipher Brief spoke with Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics who formerly worked with the Danish Ministry of Defense, about what would happen if Britain decides to leave the EU.
The Cipher Brief: If Britain votes to leave the EU, what will be the implications for national security and intelligence sharing?
Jacob Kirkegaard: If you mean intelligence sharing between the United States and the UK, there would not be any immediate impact, because a lot of this is done in the auspices of NATO and the historical Five Eyes relationship, in which both the UK and the U.S. are members. And there’s no movement toward the UK quitting NATO, for instance. Therefore, the impact would be relatively limited in the short to medium term.
I think in the longer term, there would be an effect, and it would quite likely be negative, because it would mean that the UK would in all probability drop out of all the existing and expanding European or EU institutions that focus on gathering intelligence, counterterrorism, etc. This would mean that the UK would basically be left with relying on national resources, which are certain to be smaller. As such, I would argue that in the longer run, intelligence sharing between the United States and the UK would probably be less relevant for the United States, because – quite frankly – I think the UK would have relatively less to offer.
With regards to impact on the EU, there’s no doubt that the UK inside the EU is among the most competent and best performers. So the UK leaving would certainly be a blow to the overall European ability to gather intelligence. But at the same time, the UK leaving the EU would almost certainly force the rest of the EU to spend more resources on this issue. Given the current high levels of terrorist threats in pretty much all of the European countries, I have no doubt that they would provide this extra money.
So the UK leaving would be a blow certainly to overall European short- and medium-term intelligence capabilities. But in the longer run, this is quite likely be countered by the rest of the EU, which would be compelled – for their own national security – to replicate any kind of capability the UK may have had that they were dependent on. So in the long run, it’s probably a wash. But it doesn’t change the fact that overall, from a national security and intelligence sharing point of view, keeping the UK in the EU is in both parties’ overall interests.
TCB: What about cyber?
JK: The implications would be quite far-reaching, because it would mean that all of the rules of the digital internal market, cyber security, etc. that the EU is in the process of adopting would all of a sudden be without UK political, regulatory, supervisory, and NGO input. It would also mean that European standards would not necessarily be compatible with UK ones, which is another way of saying there could be significant non-tariff trade barriers on digital trade between the UK and the rest of the EU – all of which could ultimately be quite economically damaging for UK firms. Many of these issues could be included in a Transatlantic Trade and Investment Partnership (TTIP) free trade agreement, and if the UK were to leave the EU and therefore not be a part of TTIP, there may be greater convergence between the U.S. and the rest of the EU on cyber issues than between the U.S. the UK. So this is a very serious issue economically but also more broadly politically for the UK.
TCB: Turning to economics, would a Brexit be bad for the British economy overall?
JK: I take the strong view that this is a debate about whether this is bad for the UK economy or very very bad for the UK economy. There’s simply no doubt that the shock the UK economy would be subject to from leaving would be very traumatic and very very negative. This is premised on several things.
First of all, the EU is Britain’s largest trading partner – it accounts for about 50 percent of British trade – and trade barriers would go up (in the case of monetary barriers, potentially quite significantly). The directly effected industry would be financial services. Currently, financial institutions located in the UK get what’s called a European passport, which basically means they can operate and offer their services throughout the entire EU. That would end, so that firms could no longer service the entire European market by being located in London.
Secondly, there’s no doubt that the situation today, where the City of London is the biggest financial services center for euro-denominated financial transactions, would also end. It would be ended by regulation that basically insists that such transactions take place inside the euro area or at least inside the EU. So the net result for the financial services industry in the UK would be a very significant loss in my opinion.
More broadly, this second issue is that by no longer being a part of the EU, Britain loses a lot of its attraction as a foreign direct investment destination. You have a lot of U.S. and Asian firms that are currently choosing to locate in the UK because they like the business climate, the language, and other things; but they locate there not just to service the UK market but also to service the European market. So, if Britain decides to leave the EU, foreign direct investment into the UK will decline quite significantly. That will take away jobs and economic growth opportunities.
Thirdly, the high levels of net inward migration that we have seen in the UK in the last decade or decade and a half would almost certainly be brought to an end by what is likely to be a new government in the event of a Brexit. That would mean that the UK economy would be significantly adversely effected, because it has benefited a lot from the high levels of inward migration from predominantly skilled workers from other European countries.
Finally, I’ll make a broader political point about the relationship between the rest of the EU and the UK: It would not be very amicable in the case of a Brexit. The conditions under which the exit would be negotiated would be very confrontational, because the other European countries all have a party at home that advocates leaving the EU. So if Britain actually goes ahead and leaves, a new precedent would be set that a member state can actually leave the EU. So far, no country has even done this. All the other governments, therefore, would essentially be faced with an additional political threat that maybe some of their own opposition parties would like to go in the same direction. The only way – or the easiest way – for them to make that option as unattractive as possible is to make life as hard as possible for the UK to leave, so that everyone else around the EU can see that if you leave, it’s a very unpleasant process. I have no doubt that the European countries will do just that, and, therefore, you’re going to end up with what will be a very controversial, drawn out, and economically damaging process, with very high levels of economic uncertainty for many years.
TCB: I want to jump back to something you just said about migration. Do you think that if the EU does vote to leave, it is likely that migration to the EU would decrease? Would the patterns of migration change?
JK: For the EU overall, migration patterns might change but not by much. Ironically, illegal immigration to the UK would probably go up, because currently, it is actually the French government that protects the British border. It is the French government that – to a large extent – patrols and guards, and therefore denies, illegal immigrants access to boats to sail to the UK. I don’t think there’s any doubt that if the UK were to leave, the French government would stop doing this, thereby potentially increasing the odds that illegal immigrants in Europe could actually make it to the UK.
Secondly, if you look at the recent inflow of migration to Europe, most of those people actually want to go to Germany, Sweden, or other places, not necessarily the UK. So the draw of Europe as a migration destination for many people in Africa and the Middle East would remain very high, irrespective of whether the UK were to leave. Therefore, I don’t think overall migration to Europe would decline very much.
There would be some changes to intra-European migration. A lot of the Eastern European workers who are now living and working in the UK would probably have to go back to their home countries. But rather than go home, they may choose to go to other countries, like Germany. So a Brexit would have a bigger impact on internal European migration, rather than people coming to Europe from the outside.
TCB: Are there any other implications for a Brexit?
JK: There’s one issue that’s worth mentioning. If the UK leaves the EU, it is almost certainly going to be following a very narrow vote to leave. That would mean it is highly likely that Scotland would have voted to stay. It is also almost certain that Northern Ireland would have voted to stay but that England, which of course is by far the biggest part of the population, would vote to leave. This means that on a long-term time horizon – say 10 years – I am personally doubtful that the UK itself would survive. I think within 10 years after a Brexit, Scotland would have another referendum about independence and that referendum would quite likely be won by the Scottish Independence Party. So Scotland would leave the UK and rejoin the European Union as an independent country. I think it is also quite possible that there would be another renewed drive to reunify Ireland, because one of the effects of a Brexit could be that there is going to be a border again – a physical border with customs and personnel control – between Northern Ireland and Ireland. This would undo one of the founding pillars of the 1998 Good Friday peace agreement. Either of these developments could have far-reaching implications for law enforcement issues inside the UK.
