The 'Brexit' dilemma

Before I write anything on this topic, let me just tell that I am not an expert on this particular scenario that is unfolding in Britain and the European Union (EU). Should Britain exit the European Union? – is what all this is about. There is a referendum to be held on June 23^rd, during which the British people will decide whether or not to stay in the European Union.

Like I said, I haven’t read into the minute details surrounding this question, but as far as I have read on this topic and analyzed some data points, it looks like there is validity on both sides – those who say Britain should exit the EU; and those who say that Britain should stay in the EU.

But when I looked at some of the arguments from both sides, to me it looked like Britain would be better off staying in the EU and making some of the changes to the whole EU policies and format by working from within the system, rather than just opting out of EU altogether.

For example, Britain is rightly concerned that some of the immigration rules of the EU favor EU citizens a little too much over the non-EU citizens, and that Britain would be able to tap into diverse non-EU talent if not for the strict quotas and restrictions of the EU immigration policy. As a very wealthy country, it makes perfect sense today for Britain to have full independence over its immigration policy and the kind of benefits that it would give to the immigrants. But at the same time, over the long run, a single common market cannot be achieved without free movement of labor.  So it would be wise for Britain to influence immigration policies, welfare policies to immigrants and other such policies by staying inside the EU, rather than outside it.

But why stay inside and suffer trying to influence? Good question! And here is one of the reasons – As in any developed economy, Britain will start to become an aging population within the next half century. It will need immigrants. While I understand that Britain would like to have full control over its immigration policies, it should also be noted that EU has 28 member states with more than 500 million people. Over the course of the long run, the free movement of these 500 million people within the EU will bring natural benefits to labor shortages and capital investments. It has to be noted here that out of total British exports, 45% of the goods and services are exported to the European Union. And more than a million Britons already live in the EU countries outside of the UK.

The free movement of people, goods and services across these 28 countries (and possibly more in the future) will create a dynamic economy that will outweigh the control and independence that Britain is trying to seek for itself by exiting the EU. Staying in the EU also brings a common platform of regulations for businesses to move goods across, deliver services and tap into the available labor pool that exists within the massive 500 million people. Here too, some British businesses have preferred to exit the EU because of the historical fact that Britain regulates its businesses much less than the EU. But here again, my view is that Britain can influence and streamline the regulations by staying within the EU, rather than completely opt out of it.

Some British businesses could be living in a fantasy that they could use the arbitrage in regulations, and profit more from it than their EU counterparts. But if they think that they can get away with such a simple strategy, then I am afraid that they are terribly mistaken. In my view, EU countries will still stress that British businesses follow and comply with EU regulations if they want to trade with EU. And in fact, I wouldn’t be surprised if the rules become a little stricter for a non-EU country in that case. But it should also be noted that a majority of the British businesses would like to stay in the EU – and they have openly advocated for it.

All the discussions about implementing a free trade deal with the EU, independent control over its immigration and regulatory policies – all that seem to be things that could be worked out by staying inside the EU – after all, what is good for Britain should also be good for Germany, France, Poland and Slovakia on a macro level - and for many other such countries.

I would be willing to change my opinion if I see more data that supports a Brexit from the EU, but so far what I have seen all point to the wisdom of staying in the EU – by looking at the EU membership benefits over the long run. And not to mention that the potential benefits of an “ever closer union” – both at the monetary front and at the political front – is a dream to be achieved in the future. If and when such a dream is realized to the full extent, it would be unfortunate to see Britain not be a part of that dream.