By Eric Szandzik
Many prognostications have been made regarding the impact that Brexit will have on Great Britain. Rarely is the future of the European Union examined and the potential consequences Brexit will have to world security. If political trends within Great Britain hold firm, one can expect a clean break between the European Union and Great Britain. The various consequences for Great Britain will be detailed for many years to come, many will debate whether it was a net loss or gain for that scepter'd isle.
Upon close examination, it can be determined that the European Union will undoubtedly suffer a net loss from Brexit. To mitigate this net loss, leaders within the European Union are already scrambling to improve the situation. The two primary elements that will need bolstering will be: a potential less-than-Free Trade agreement between the EU and Great Britain and declining workforce numbers. A very likely solution will be to accelerate the adoption of Turkey within the European Union. This will mitigate the impact of Brexit, but will produce dire consequences for world security.
Since 1985, one primary requirement to join the EU has been the freedom of movement for citizens between nation-states, known as the Schengen Zone. This policy created a collective workforce that would foster the transfer of working men and women between various European nation-states. With the removal of Great Britain from this collective workforce, the European Union will lose an important segment of their working population. This predicament is compounded by the fact that Europe has a severely aging population. In the next sixty-five years, the percent of the European Union's population over eighty years old will move from 5.3% to 12.3%. The percent of those over the age of sixty-five years old will move from 18.9% to 28.7%.[i]
This consequential demographic reality is primarily the result of lower birth rates among EU natives. Of the European Union's six most populous countries (Germany, France, Italy, Spain, Poland, and Romania)[ii] the average birth rate is 9.58 births per one thousand people.[iii] The workforce of the European Union will continue to shrink at alarming levels, forcing political leaders to search for pools of workers that will supplement such losses.
Turkey has been negotiating an entry into the European Union for many years. Such efforts have already resulted in favorable trade negotiations, but full adoption has not yet entered the final stages. With the impending loss of Great Britain's workforce migration, it is likely that European Union leaders will expedite the approval process for Turkey. This move would not only grant the EU instant access to workforce migration within Turkey, but it would also brighten future prospects in terms of population growth and sustainability. The people of Turkey produce 16 births per one thousand people, a 67% increase from the EU's six most populous nations.
It is also possible that the European Union could suffer from diminished trade with Great Britain. Markus Kerber, the CEO of the Federation of German Industries, the "Voice of German Industry," has warned that if Great Britain does not accept free migration across their borders, they should not expect a free trade agreement.[iv] While there were many arguments posed for Brexit, the control of European migration, was prominent among the supporters.
Great Britain also has many economic incentives to completely withdraw from the European Union. Burdensome regulations are placed upon the UK economy due to their adoption of the EU single market. In 2014, such regulations were estimated at $42.4 billion. If the leaders of Great Britain decide against a complete withdrawal, and instead adopt the requirements of the European Economic Area, 94.3% of these regulatory costs would remain. This would be an unlikely decision, given that the benefits such regulatory costs are intended to produce are "vastly over-stated".[v] A requirement of joining the European Economic Area also demands fulfillment of the Schengen agreement, and the free migration of workforce populations, which would be politically difficult for Great Britain's leaders to advocate.[vi]
Should a free trade agreement be contingent upon freedom of migration, EU member states can expect impending tariffs and increased economic roadblocks on goods originating from Great Britain. Projections reside around a 5% tariff on goods,[vii] and $11.5 billion for total potential tariffs on goods transferred from Great Britain to the European Union.[viii] This number is quite severe given that total exports from Great Britain to Germany, France, and Italy amount to $67.7 billion.[ix]
Exports from Great Britain to the EU have already been shrinking in recent years. In 2000, 60% of exports went to EU countries; fifteen years later this number shrank to 47%.[x] Currently, the #1 export destination for Great Britain is the United States, with China at #6.vii Should the EU produce an economic environment that is more burdensome for the United Kingdom exports, this non-EU related trade is likely to increase.
A reduction in trade from Great Britain will provide further incentive for the European Union to go beyond a free trade agreement with Turkey, and aim for complete economic integration. Reductions in trade with Great Britain can be supplanted by this new partnership with Turkey.
The largest share of European Union imports from Great Britain reside within the category of transportation at $72.5 billion, Turkey currently provides $6.5 billion within that same category. The most transported item between the three trading partners is aircraft parts which composes $64.7 billion of the United Kingdom exports to the EU. A reduction in this volume could be supplanted by the same items provided by Turkey, which currently resides around $51 million in aircraft parts exported to the EU. While the UK currently supplies around $5.9 billion in automobiles to the EU, Turkey also transfers $2.7 billion of the same product.
The United Kingdom and Turkey also export a great deal of machines and metals into the European Union ($5.3 billion and $3.7 billion, $903 million and $355 million respectively). Of their machines, the UK exports $818 million in gas turbines into the European Union, compared to Turkey's $86 million. The UK exports $837 million in aluminum and copper products, while Turkey transfers $271 million in similar items to the European Union. In addition to mitigating the loss of potential imports from Great Britain, full economic integration of Turkey into the EU will also provide Europeans with easier access to Turkish textiles, which are currently imported at around $6.1 billion per year
A reduction in trade will also affect the exports of the European Union into Great Britain. Currently the EU exports $8.8 billion in machines to the UK, with $2.2 billion in gas turbines topping the charts. Around $210 million of the same product is sent to Turkey. The European Union currently exports $1.5 billion in metals to Turkey, but only $880 million in such goods to the United Kingdom. Out of their refined petroleum exports, the European Union currently sends $456 million to the United Kingdom, and $1.4 million to Turkey.
Should Great Britain deny the requirement of free migration from the European continent, a less-than-Free Trade agreement is likely to be adopted. Given current imports and exports between the three trading partners, it is likely that the European Union will seek full adoption of Turkey into their common marketplace. Such a move will streamline regional economic progress between the two marketplaces and supplant the impending loss that is sure to come from their departing northern neighbor.
The adoption of Turkey into the European Union will produce many new threats to world security. Free migration from a country that neighbors Syria, to the far reaches of Spain and the Baltic states will undoubtedly include migrants who pose unique threats to world security. The civil war in Syria, and the spread of ISIS, shows no sign of waning. Many belligerent actors within this theater are eager to enter Europe's economic and social hives. Implementing the Schengen zone within such a volatile region should be avoided at all cost.
In addition to the threat of migrants who aid and support ISIS, the European Union would also be elevating an authoritarian leader into their fold. The president of Turkey, Recep Tayyip Erdogan, has not shown a commitment to Western democratic ideals. He has abandoned the intention of Kemal Ataturk's secular state, and has embraced more radical notions of Sharia Jihadists.
When faced with social unrest, Erdogan has responded in a harsh and tyrannical fashion. Within recent years he has imprisoned thousands of political dissidents which he has deemed threats to the state. Should such actions be rewarded with acceptance into the world's second-largest economy, the situation would undoubtedly become worse. That which is rewarded, is repeated.
Eric James Szandzik earned his Bachelor of Science in Business Management from the Western Governors University. He currently manages accounting, human resources, and market data analysis for non-profit and government organizations in South Lake Tahoe.
[i] Morehouse, Christal. Policy Network: Europe Needs a Talen Offensive. August 13, 2014. Accessed September 24, 2016.
[ii] Statistics Times: List of European countries by Population (2015). March 27, 2015. Accessed September 24, 2016.
[iii] CIA: The World Factbook, Country Comparison: Birth Rate.
[iv] Henley, Jon and Wintour, Patrick. The Guardian: German business leader issues warning over post-Brexit trade with UK. September 29, 2016. Accessed September 24, 2016.
[v] Swidlicki, Pawel. Open Europe: Top 100 EU rules cost Britain £33.3bn. March 16, 2015. Accessed September 24, 2016.
[vi] Stratfor: The Brexit Effect is Starting to Show. August 8, 2016. Accessed September 24, 2016.
[vii] Hardy, Ed. Tutor2u: Reference Library: EU as a Customs Union. Accessed September 24, 2016.
[viii] Press Association, Daily Mail. World Trade Organisation adds new warning on economic cost of Brexit. May 25, 2016. Accessed September 24, 2016.
[ix] MIT: The Observatory of Economic Complexity.
[x] Elliott, Larry. The Guardian: UK Trade Deficit with EU hits new record. May 10, 2016. Accessed September 24, 2016.