Is the British Referendum a Sign of Things to Come for the EU? – "Autonomy from Brussels is an Illusion"

2016 is a crucial year for the future of the European Union. On June 23 the UK will vote on whether to remain in the EU. If the hotly debated Brexit were to occur, it would be a historical milestone, as no member state has ever left the EU before. What will happen if Britain decides to turn its back on Europe? ZEW economist Friedrich Heinemann discusses the potential consequences for the UK as well as for the EU.

By withdrawing from the European Union, the UK would potentially lose access to the European Single Market. What do you foresee for the future of EU–UK relations, were Brexit to occur?

Unimpeded access to the European Single Market is of great economic importance to the UK. Departure from the EU would threaten British exports as well as London's role as a centre of European finance. The UK would become significantly less attractive for Asian and American direct investment, as it would no longer be part of the single market. Clearly, in the case of a British departure, the British government would invariably be forced to negotiate new bilateral trade treaties with the EU to preserve access to the continental market.

Would withdrawal from the EU allow the UK to achieve legal independence from Brussels, as is argued by many Brexit advocates?

This is the great illusion which Brexit supporters are endorsing. In the key area of single market legislation, the aim of achieving independence from Brussels would be achievable only to a very limited extent. As a non-EU country, the UK would still be forced to comply with basic market freedoms, with rules governing state aid, and with competition law. In addition, the EU would be unlikely to grant Britain any special concessions. The UK would have a weak bargaining position in negotiations over trade rules, as barriers to trade pose a much greater threat to the British economy than to continental member states. Furthermore, the EU would certainly want to avoid rewarding Britain's withdrawal to discourage other member states from following suit.

Does this mean that Brexit is not associated with risks for the EU or Germany?

Significant economic uncertainty would be triggered by a British departure from the EU. In the long term, however, the consequences for the EU's economy would be limited. Net contributors to the EU budget, such as Germany, would face a somewhat larger burden as a result of a British departure. The political consequences would be more significant, however. In negotiations over EU law, the UK is generally a strong advocate of liberal market policies. The balance of power in the EU Council and Parliament would more strongly favour countries which are critical of free markets. This would undermine a healthy scepticism toward new proposals for greater centralisation and more regulatory controls. In some cases, British criticism of EU policy is justified. Consider the example of British calls to end longstanding agricultural subsidies which constitute an anachronism. Without Britain, such reform proposals will have an even smaller chance of success.

What impact would a Brexit have on British research?

British universities have excellent ties with their counterparts in other European countries. They are also very successful in obtaining funding from EU research budgets. At the same time, high-quality British research is a great boon to European scientific endeavour. European research would suffer if a Brexit meant less British involvement in the EU's scientific programmes.

A British departure would also have strong symbolic significance. Would a British departure be a first step toward the EU's collapse?

I don't think so. For me, the abolishment of the EU is a simply unimaginable scenario. The EU makes an important contribution to solving complex global problems; it plays a crucial role not only in preserving peace in Europe, but also in ensuring economic prosperity. Despite both justified and unjustified criticisms of Brussels, majorities in most of the important member states still recognise this fact. Policy-makers, academics and media figures need to do more to communicate Europe's achievements, while also promoting a constructive debate about necessary EU reforms.