What the potential "Brexit" means for Ireland and the Global Economy

The United Kingdom is slated to have a referendum by the end of 2017 on whether it is to remain a member of the European Union or leave, however negotiations are underway by the Conservative government to see if a new agreement can be reached. The United Kingdom can risk facing major repercussions both domestically and internationally if they were to leave. Internally, it can raise the risk of political instability both within the Conservative party and the viability of the political union between England and Scotland, Wales, and Northern Ireland, and externally, the concern lies in the future relationship between the U.K. and the European Union as well as potential future trading agreements.

Britain is currently negotiating with the European Union on issues such as future integration, benefits, sovereignty, and the standing of the Eurozone. Britain would like to be able to opt out of future political integration with other European countries and would like to restrict the access of work benefits to EU migrants until they have been a resident for four years. In addition, Britain would like national parliaments to have the ability to block EU legislation and allow member states to veto unwanted directives. Britain also would like the EU to recognize that the euro is not the sole currency in the European Union and that countries that are not a part of the Eurozone are not at a disadvantage. In addition, Britain would like safeguards put in place so that they would not have to contribute to future Eurozone bailouts, should they be needed.

Ireland can face heavy consequences should Britain choose to leave the European Union, as Ireland’s largest trading partner is the U.K. If the U.K. were to leave the EU’s single market, that may lead Ireland to imposing EU tariffs, and introducing custom checks and border controls, all of which create obstacles to the ease of trade. Due to close links to the United Kingdom, a “Brexit” could lead to wider economic costs to Ireland as the U.K. has traditionally acted as a buffer for the Irish economy. If the United Kingdom were to leave the European Union, Northern Ireland would not be a part of the European Union, but Ireland would still remain a member country of the European Union. If the “Brexit” were to occur, Northern Ireland’s economy would largely depend on if the British government agrees to match the current agricultural subsidy program that is currently provided under the Common Agricultural Policy of the European Union. A large worry for both Ireland and Northern Ireland is that EU membership helped calm the dispute and provided a neutral ground by creating a mutual context for the dismantling of the border to create an all-Ireland market.

If Britain were to leave the European Union, they would be free to use state aid or introduce their own regulations and non-tariff barriers to give British companies a more competitive edge for the global economy. In addition, the U.K. would be able to open its markets and increase trade with other countries, which may potentially reduce the amount of market share that Ireland would retain. If the United Kingdom were to leave, the EU may pursue a more protectionist policy raising costs and may put Ireland at a disadvantage, as the U.K. had a more pro-free market influence in the European Union. If Britain leaves the European Union, this may prompt other countries to leave the European Union, causing the loss of cohesion needed to address other challenges that the continent faces—such as the migration crisis—and making the continent more vulnerable to economic shocks and jeopardizing the economic recovery.The British referendum on whether or not to remain a member is a large unknown for the European economy and can have far reaching consequences if Britain was to vote to leave the European Union.