Helen Y. Cao

Tec Cuernavaca,

Aug 15 2016

Source: New York Times, How Britain Voted in the E.U. Referendum

BREXIT

Agenda

• What is the European Union?

• UK & the EU

• How did it come to BREXIT?

• BREXIT results

• Reactions post BREXIT

Agenda

• What is the European Union?

• UK & the EU

• How did it come to BREXIT?

• BREXIT results

• Reactions post BREXIT

QUIZZ

• What was the reason behind the formation

of the European Union?

A) Create a single market

B) Sustain peace after WWII

C) Free movement of people

QUIZZ• How many people are part of the European

Union, as of 2015?

A) Roughly 400 million

B) Roughly 500 million

C) Roughly 800 million

QUIZZ• Where did the British economy rank among

European Union countries in 2015?

A) First

B) Second, behind Germany

C) Third, behind Germany and France

QUIZZ• Was the BREXIT referendum 2016 the first

British referendum on European

membership?

A) Yes

B) No

Has a vote like this happened before?

Source: NYTimes

The EU consists of 28 countries

Source: BBC

EU has 500 million citizens

Source: europe.eu

EU is the worlds largest economy

Source: WSJ

BREXIT

How does the EU spend its money?

Source: europe.eu

Robert Schuhman: ‘Father of Europe‘

“make war not only unthinkable

but materially impossible”

History of the EUWe are carrying out a great experiment, the fulfillment of the same recurrent

dream that for ten centuries has revisited the peoples of Europe: creating

between them an organization putting an end to war and guaranteeing an

eternal peace...

— Robert Schuman, speaking in Strasbourg, 16 May 1949

The European Union is set up with the aim of ending the frequent and bloody

wars between neighbours, which culminated in the Second World War.

1950, the European Coal and Steel Community begins to unite European

countries economically and politically in order to secure lasting peace.

In this way, none can on its own make the weapons of war to turn against the

other, as in the past. The six are Germany, France, Italy, the Netherlands,

Belgium and Luxembourg.

History of the EU1957 Building on the success of the Coal and Steel Treaty, the six countries

expand cooperation to other economic sectors. They sign the Treaty of Rome,

creating the European Economic Community (EEC), or ‘common market’.

The idea is for people, goods and services to move freely across borders.

1986 – Single European Act aiming at designing a market for good, services,

labor and capital. In 1993 the Single Market is completed.

Overall time more countries join the EU. Starting out from 6 countries, there are

now 28 member states.

1999 – Monetary union resulting in introduction of the Euro in 2002 (further

step in single market for capital)

From economic to political union

What began as a purely economic union has evolved into an organization

spanning policy areas, from climate, environment and health to external

relations and security, justice and migration. A name change from the

European Economic Community (EEC) to the European Union (EU) in

1993 reflected this.

History of the EU

EU is a Nobel Peace Prize Laureate

The Nobel Peace Prize 2012 was awarded

to European Union (EU)

"for over six decades contributed to the

advancement of peace and reconciliation,

democracy and human rights in Europe".

http://www.enpi-info.eu/

Core principles of the EU

In 1993 the Single Market is completed with the 'four freedoms' of:

• Freedom of movement of goods

• Freedom of movement services

• Freedom of movement of people (workers and citizens)

• Freedom of movement of capital

Four freedoms are core of the EU’s founding principles

Goal to boost trade, create jobs, increase competition and thereby lower prices

for consumers.

Agenda

• What is the European Union?

• UK & the EU

• How did it come to BREXIT?

• BREXIT results

• Reactions post BREXIT

UK & the European Union

1973 – The UK joined the European Economic Community (EEC later become the

EU) through its 3rd application

1963 & 1967 – UK’s application to the EEC was veto’s by French President Charles

de Gaulle twice

1975 – Two years after Britain joined the European Economic Community, it held

a referendum on whether it should stay. 67% voted for in.

Source: NYTimes

UK the 2nd largest economy in the EU

UK‘s GDP is 16% of the EU

UK is a net contributor to the EU budget

Source: BBC

Net EU contribution

approx. 0.5% of GDP,

whereas other

countries contribute

approx. 1% of GDP

Agenda

• What is the European Union?

• UK & the EU

• How did it come to BREXIT?

• BREXIT results

• Reactions post BREXIT

Why was a Referendum Called?

Cameron decided to hold a

referendum even though he

opposed it.

Why?

Tory Party & Euroskepticism

"We have not successfully

rolled back the frontiers of

the state in Britain, only to

see them re-imposed at a

European level, with a

European super-state

exercising a new dominance

from Brussels"

Source: 1988 speech in Bruges.

Tory Party

The Tory right wing would see the

European project as a threat to UK

sovereignty and national identity.

Immigration

from post-communist

countries

since the 80s

Raise of the anti-immigrant

UK Independence Party

(UKIP)

Net migration to the UK 2014

Source: NYTimes

2015 Net migration to the UK: 330.000 people, 184.000 from

EU countries, 188.000 from non-EU countries

Why was a Referendum Called?

Cameron decided to hold a

referendum even though he

opposed it.

Why?

2012Referendum?

Source: http://www.theguardian.com

"My backbenchers

are unbelievably

Euroskeptic and

UKIP are breathing

down my neck."

2012Referendum?

"I have to do

this. It is a party

management issue.

I am under a lot of

pressure on this. I

need to recalibrate“

Source: http://www.theguardian.com

2013

Source: http://www.vox.com

Cameron did not expect

to have to follow through

a referendum.

“Cameron proposed BREXIT to save

his own political skin — but ended up

destroying it and screwing over the

country.”

Source: http://www.vox.com/2016/6/28/12033390/brexit-david-cameron-fault

June 23, 2016

Source: New York Times, How Britain Voted in the E.U. Referendum

BREXIT

Agenda

• What is the European Union?

• UK & the EU

• How did it come to BREXIT?

• BREXIT results

• Reactions post BREXIT

BREXIT Results

Trump and BREXIT

A World Divided

• Embrace Globalization | Fear Globalization

• Liberals (inclusive, open and tolerant)

perhaps don’t know their own countries and

societies

Alexander Betts is Professor of Forced Migration and International Affairs

Agenda

• What is the European Union?

• UK & the EU

• How did it come to BREXIT?

• BREXIT results

• Reactions post BREXIT

Immediate reaction post BREXIT

POLITICAL REACTION

• The prime minister Cameron stepped down. Mr. Cameron, who led the

“Remain” campaign, announced on Friday that he had no "precise timetable"

but that he believed his successor — who will manage the process of leaving

the union — should be in place by October.

• Boris Johnson, the former mayor of London who backed leaving the E.U., was

considered a front-runner to succeed Mr. Cameron. But on June 30, Mr.

Johnson announced he would not run for the position of party leader (and

therefore prime minister).

Source: NYTimes

BREXIT

Immediate reaction post BREXITReaction financial market

Source: NYTimes, Reuters

As of today, Aug 15, all 3 indexes are at higher than pre BREXIT level

Immediate reaction post BREXITReaction financial market

Source: NYTimes, Reuters

The British pound

plummeted to lowest

level since 1985.

Investors fled to the

American dollar and the

yen.

Immediate reaction post BREXITReaction financial market

Source: NYTimes

The United Kingdom lost its last remaining

AAA credit rating on June 27, when the

credit rating agency Standard & Poor’s

downgraded the nation to AA, Reuters

reported.

Is the referendum legally binding?

Source: NYTimes

The referendum is not legally binding, though it is difficult to

imagine that the British government would ignore the will of the

voters.

The process of leaving begins only after the British

government invokes a provision of the European Union’s governing

treaty known as Article 50

Once Article 50 is invoked, though, Britain could not change its mind

and stay in the union unless the 27 other members all agreed.

No country has invoked Article 50 before.

What happens next?

Source: BBC

• Theresa May (Torys) new British prime minister July

13, 2016

• May supported the campaign for Britain to stay in the EU but

said she will respect the will of the people and said: "BREXIT

means BREXIT and we're going to make a success of it."

• For the UK to leave the EU it has to invoke an agreement

called Article 50 of the Lisbon Treaty which gives the

two sides two years to agree the terms of the split.

• May has said she will not kick off this process before the end

of 2016. This means that we will not begin to get a clear idea

of what kind of deal the UK will seek from the EU, on trade

and immigration, until next year.

What happens next?

Source: BBC

Theresa May’s new government & 3 Brexiteers

David Davis (conservative MP and Leave campaigner)

Liam Fox (former defence secretary and leave campaigner) - international trade

minister

Boris Johnson – foreign secretary

From triggering Article 50, there are 2 years to reach a deal which needs to be

approved by at least 20 EU countries representing more than 65% of the EU population

Michel Barnier –

chief BREXIT

negotiator appointed

by the European

Commission has made

clear he will not

engage with Britain

until Article 50 is

formally triggered -

nor start work until 1

October.

Potential Outcomes

Source: BBC, Investopedia, HBR

No deal = WTO rules. If no agreement is reached within two years, this is the default.

Notably, these rules cover only trade, not the many other issues the two sides need to

negotiate.

The Norway model. There already is a model in place for European countries that do

not wish to join the EU but want access to the single market.

In other words, using the

Norway model would mean

the UK would accept roughly

the same conditions as those

prior to BREXIT but with an

additional cost: losing a vote in

the EU halls of power.

Potential Outcomes

Source: BBC, Investopedia, HBR

The Swiss model.

Switzerland is currently not a member of the EU or the European

Economic Area (EEA).

It has negotiated a series of bilateral treaties with the EU member states

over decades (using over 100 bilateral treaties).

The Swiss are also subject to some EU policies and contribute to the

EU, but not to the same degree as Norway.

Group WorkTeams 1 & 2 Teams 3 & 4 Teams 5 & 6

Is a referendum a good

way to deal with a decision

like BREXIT?

Please provide pro and cons

Make a anonymous BREXIT

polls on campus.

(min. 20 responses) Discuss

the results. Please ask the

responders why they vote for

or against.

You are a global company

headquartered in Mexico

with operations in the UK and

all 27 countries.

How does the BREXIT result

influence your business?

Each group will present 15-20min in next class (Aug 22)