What is Brexit?

Brexit is like a long-drawn-out divorce…

A divorce may seem like a clear-cut, final decision between two people, but the aftermath can drag on for a long time. It often involves a messy process of untangling personal and financial responsibilities. Brexit has played out in a similar way. The United Kingdom’s decision to leave the European Union in 2016 was just the beginning — Since then, there have been lengthy and complicated negotiations about the future of their relationship.

To understand why the United Kingdom would want to leave the European Union, it may help to start with the Union itself. What is it? The EU is an economic and political union of 27 European countries (not including the UK) that allows for members to participate in free trade, easily cross borders, and negotiate political agreements as one bloc. The EU we know today rose out of earlier versions, the first of which formed after World War II, driven by the idea that solid economic cooperation could foster growth, strengthen political ties, and prevent the continent from descending into war again.

The European Economic Community (EEC) formed in 1957 with six countries (Belgium, Germany, France, Italy, Luxembourg, and the Netherlands) to promote and simplify trade. By 1993, the EEC had grown to include 22 other countries, and its name was changed to the European Union (EU). The focus on trade and a single market has since expanded to include regulations on border security, immigration, diplomacy, and even health care. In exchange for the access to a shared common market, open borders, subsidies, and other benefits, EU member countries agree to abide by a set of regulations that are governed by the European Parliament, the Council of the European Union, and the European Commission.

Brexit is unprecedented in many ways, as it makes the UK the first country to end its EU membership. But it’s not the first time that the UK voted on whether to stick around. In a 1975 referendum, 67% of the country voted to stay in the European Economic Community (an EU predecessor). In the 1990s, when the EU we know today formed and further integrated its member states, opponents within the UK tried but failed to defeat its ratification. Which is to say, the UK’s relationship to the EU has been complicated and polarizing from the start. This resistance may help explain why the UK never adopted the euro, the EU’s common currency.

The global financial crisis exacerbated existing doubts about the EU, along with a growing nationalist sentiment, in particular among conservative politicians. In 2013, then-Prime Minister David Cameron promised to hold a referendum on whether to leave the EU or stay, if his Conservative Party won elections. In the lead up to the 2016 referendum, then London Mayor Boris Johnson, a Brexit supporter, led an ad campaign claiming that the UK sent the EU £350M per week and suggesting the money could be used to fund the country’s National Health Service instead. (Johnson’s claim has since been debunked.) In another campaign stunt, Brexit Party leader Nigel Farage stood in front of a billboard of migrants with the slogan, “Breaking Point: The EU has failed us all.”

While the Brexit campaign ultimately succeeded — Roughly 17.4 million people voted to leave the EU — it’s important to note that the 2016 referendum passed by a pretty narrow margin. Speaking to the country’s persistent divide, 52% of voters supported leaving the EU and 48% voted to remain. After the referendum, Cameron, who supported staying in the EU, resigned.

The United Kingdom’s decision to leave the EU launched a multi-year negotiation process, which continues to this day (at least, as of Sept. 2020). Brexit is often likened to a messy divorce because it has prompted decisions on an endless array of consequential issues, including how the UK’s departure may change its trade and economic relationships with the EU, affect its border policy, and how it may negotiate economic and political agreements going forward.

One major source of debate is how the changes might affect Northern Ireland, which is a part of the UK but shares a border with the Republic of Ireland, which is a member of the EU. The Brexit vote heightened longstanding tensions between the two regions. During the referendum, a majority of voters in Northern Ireland supported staying in the EU. The question of whether the UK’s withdrawal plan should include an exception for Northern Island has been a thorny question all around, leading to a deadlocked Parliament on multiple occasions.

After the June 2016 referendum, the EU and UK government (under Prime Minister Theresa May) negotiated a withdrawal plan outlining the finer details of the country’s departure, to be approved by Parliament. The original plan was for the UK to formally withdraw from the EU on March 29, 2019, but that date was postponed as Parliament locked into a stalemate over the deal and rejected May’s proposal multiple times. May ultimately resigned in June 2019.

May’s replacement, Boris Johnson (mentioned above), negotiated a new agreement with the EU in October 2019, but also met resistance from Parliament in approving the deal. Two months later, in December 2019, Johnson’s Conservative Party won 365 out of 650 seats in the UK House of Commons, and the new majority allowed Johnson’s Brexit deal to pass.

The UK formally withdrew from the EU on January 31, 2020, but Brexit is still far from a done deal. The two parties need to negotiate what the future of their relationship will look like, by the end of 2020. (As of October 2020, the parties had entered their ninth round of negotiations.) During this transition period, the UK is expected to continue following EU rules and remain in the single market and customs union. The withdrawal agreement allows for a one or two-year extension, though UK Prime Minister Boris Johnson has opposed the idea.

Leaving the EU was a contentious idea from the start. The debates have only multiplied as leaders in both the UK government and the EU try to hash out what the future of their relationship should look like in finer detail. These negotiations are important because they’ll likely have a profound impact on international trade, political and economic ties, and migration, among other areas.

Broadly speaking, there are two main kinds of exits in question. The primary difference has to do with whether the UK will stay in the EU’s single market, or not.

In the hard exit option, the UK would leave the EU without a negotiated agreement, also referred to as a “no deal Brexit.” The UK would no longer trade freely with the rest of the EU, meaning tariffs and quotas would likely be reinstated with EU countries. In a soft exit, the UK would maintain some ties and responsibilities to the EU, such as remaining a part of the EU customs union or staying in the single market in exchange for following EU rules.

Another big source of disagreement has been over how Brexit should affect Northern Ireland — Which is part of the UK but shares a border and a long history of tensions with the Republic of Ireland (an EU member). Northern Ireland largely voted to remain in the EU during the referendum, after which the EU proposed a provision (aka “the backstop”) that would allow the region to stay in the EU customs union. At the time, Prime Minister Theresa May and Northern Ireland’s Democratic Unionist Party opposed the provision. The new withdrawal agreement, negotiated under May’s successor, Boris Johnson, allows for Northern Ireland to remain in the UK customs territory while also staying in the EU customs union — Effectively creating a new customs border in the Irish Sea.

Other major issues that have surfaced during Brexit negotiations include immigration, security, and a host of other regulatory issues. There’s also the “divorce bill” — A financial settlement agreement in which the UK will pay its outstanding debt to the EU, totaling £32.8 billion (or $42.4 billion) according to the latest estimate from the UK Office for Budget Responsibility. The outcomes could have far-reaching impacts not just for people and companies in the UK and EU, but also those around the world. As of September 2020, the UK and EU were still negotiating what the future of their relationship will look like. It remains unclear whether the two sides will reach an agreement by the end of 2020, as planned, or what might happen if there’s no agreement by then.

It’s important to remember that the UK was a part of the EU for more than 40 years, during which time the member countries’ economies have become closely intertwined. Untangling these complex relationships has proven difficult to say the least, in part because so many different parts of the economy and European society could be affected by the change.

The future of the UK’s relationship to the EU could depend in part on the terms of the trade deal that emerges from the ongoing Brexit negotiations, if any. One possibility is that the UK may return to an independent trade policy, which could mean renegotiating trade deals not just with the EU but other nations around the world. That also means UK imports and exports would be subject to customs, border inspections, quotas, tariffs, and other restrictions that could potentially limit or slow trade between the UK and EU member states. For example, some estimates say delays at customs checkpoints could create a line 17-miles long at the Port of Dover, which could result in spoiled foods or medicines, and disrupt major industry supply chains. This could have big implications for the UK economy — Consider what would happen to the roughly two-thirds of UK agricultural exports that go to the EU, or how farmers who benefit from EU subsidies would fare without them.

As a member of the EU, the UK also relies on a set of shared regulations and standards that govern a wide range of industries and issues large and small — From environmental protection and food safety to workers’ rights, and even pet border crossings. And because the EU negotiates treaties as a bloc, the UK’s departure likely means that it no longer gets to participate in hundreds of agreements that have been brokered by the EU, which may have major implications for the UK and EU’s economies, politics, and security.

All of this means Brexit may affect a wide range of people and companies in the UK that may otherwise benefit from the EU single market and governance system. In reaction to the Brexit fallout, many companies have already started preparing by stockpiling their inventory, amending their contracts, and moving assets abroad. Meanwhile, UK citizens living and working in other EU countries, and vice versa, may be subject to new rules governing their stay, such as visas, permanent residency, and citizenship restrictions, and other travel requirements.

The ripple effects of Brexit are likely to be felt around the world, as any impact on the UK and EU economies may also affect the global economy. This includes the United States, which is a diplomatic ally and major trading partner to both the UK and other countries within the EU.

Because of these close ties to Europe, economic instability spurred by Brexit may have real consequences for US companies doing business with the UK, and vice versa. In 2018, President Trump’s administration notified Congress that it intends to forge a new free trade agreement with the UK after Brexit. But it remains to be seen what that agreement would look like and whether Congress will pass laws that put the agreement into action. Members of Congress have also expressed concerns about how Brexit may affect the peace process in Northern Ireland.