Brexit Stage Right

David Cameron didn’t even come close to winning the fight. The British prime minister put his all into opposing Jean-Claude Juncker’s appointment as the European Commission’s new president, fearing that Juncker, Luxembourg’s former prime minister and a stalwart of European politics, would only increase the power of the EU’s institutions in Brussels — the opposite of what Cameron, his party, and British voters seem to want.

In leaked comments, Cameron is even said to have warned German Chancellor Angela Merkel that Juncker’s appointment could make a British exit from the EU more likely. Despite this, Juncker took up his post as commission president last Tuesday, after a European Council vote on his appointment last month called by Cameron saw the U.K. defeated 26-to-2. (Only Hungary’s famously anti-Brussels prime minister, Viktor Orban, backed the U.K.)

Nevertheless, others in the EU did not casually dismiss Cameron’s talk of Britain leaving. Downing Street won some concessions in the process, including acknowledgement that the EU’s founding vision of an "ever closer union among the peoples of Europe" might not be for every member state. Many in the EU want to keep Britain attached.

Member states are right to worry about the possibility of a British exit from the European Union, a so-called "Brexit." Last year, Cameron promised voters that if his party wins re-election in 2015, they will hold an in-or-out referendum on the U.K.’s membership in the European Union before 2017. What a Brexit would mean for the EU’s future — and the future of the West more generally — is unclear. If Britain, as Labour Party leader Ed Miliband warned, risks sleepwalking toward an EU exit, then Washington, Brussels, and others in the West seem little less somnolent. A British exit from the union has the potential to fundamentally change not just Britain but also the EU and the basic nature of trans-Atlantic relations. The United States and Europe need to think about what is at stake and what they can do to protect themselves from unpleasant and unexpected shocks should the British leave the EU.

When added to the continent’s myriad other problems, a Brexit would fundamentally change the character of the EU. Without one of its largest, most outward-looking, and economically liberal members, the union could slide toward becoming more inward-looking, less Atlantic-focused, and shaped more by the outlook of smaller states, with its center of power moving eastward. Alternatively, a Brexit could strengthen the already dominant position of Germany as the EU’s leader.

On the other hand, it’s possible that an EU more neatly aligned with the eurozone and rid of its most awkward member could integrate further, moving toward a more federal model that states such as Germany have long pushed for. A "United States of Europe" is not going to happen anytime soon, but is more likely without the U.K. While some other states may contemplate following Britain, any fears that a Brexit will reveal the EU as a house of cards that comes crashing down as soon as the British leave will likely only prove true if a Brexit combines with wider problems in the EU to trigger a crisis in Germany, the EU’s paymaster, driver, and most indispensable member. Britain has contributed much to the EU, but it alone has not held the EU back or caused all of its problems — nor held it together.

A Britain outside the EU will remain a major European power. It would immediately become the EU’s biggest trading partner and ally: Britain’s economy is predicted to overtake that of France by 2020, and sometime in the 2040s Britain’s growing population will overtake that of a declining Germany. Britain will then have a larger economy and population than any member of the EU.

London may attempt to use its new position to change the way Europe’s economy is run, moving arrangements away from a politically driven EU with supranational bodies such as the European Commission and Parliament toward a more traditional state-based system of free trade deals. A U.K. outside the European Union would also want NATO (read: the United States) to remain the main security provider. Whether a Brexit can allow Britain to redraw the regional politics of Europe will depend on how the U.K. copes outside the EU and how the EU copes without it.

A new arrangement with the U.K. could also change the EU’s relations with Norway, Turkey, Iceland, Switzerland, or, even, at a stretch, Ukraine. While these countries are not currently members of the EU, the various relations the EU has with each of them are based on the premise of eventual membership. A Brexit could end such hopes, perhaps even throwing the process into reverse. This could certainly happen if Britain secures some form of special outside relationship with the EU that appeals to these states. However, the EU and U.K. may be unwilling to share any special U.K.-EU model, and those states could reject it, preferring their own individually tailored models instead. The result would add to the already fragmented and complex network of regional political relationships in Europe.

Whether Britain can secure some special deal that meets its demands is debatable. Even as a powerful state, a Britain outside of the European Union will be, essentially, a junior partner in the relationship — a position that will certainly dismay Britons. What U.K.-EU trading or political relationship the EU will agree to depends in large part on what type of EU emerges as the British depart, and what Brussels decides is in its best interests. A more protectionist, inward-looking EU may be in no mood to grant Britain a good deal. Alternatively, an EU that feels more confident and united could expect Britain to fall in line with whatever is offered.

For Washington, a Brexit would change the nature of U.S. relations with Europe entirely. The "Special Relationship" between the United States and the U.K. notwithstanding, U.S.-EU relations are more important if for no reason other than the sheer economic size of the EU, which has a collective GDP of $15.9 trillion compared to Britain’s $2.4 trillion. Even if Britain did secure a U.K.-U.S. free trade deal — something it would almost certainly want if it lost the trade protections that come with being an EU member — that would still be a poor substitute for a much larger, and globally significant, U.S.-EU trade pact. The United States will also continue to need close allies inside an organization with which, despite many differences, it retains closer links than with any other partner in the world. Other allies in the E.U., like Germany and France, would grow in importance for the United States.

One area where the United States will certainly look for new leadership if Britain departs the European Union is on defense. If the exit of one of Europe’s leading international and military powers further complicated EU cooperation on foreign policy, security, and defense, then it could further weaken efforts to strengthen the European side of NATO, whether this be in defense, business cooperation, or in taking a harder line on Russia. This would exacerbate U.S. frustrations about Europe that developments in Ukraine have once again exposed and deepened.

And it is not just the United States that will be concerned about how a Brexit affects the European Union as a whole. Countries such as China, Australia, New Zealand, and Canada view the EU as better off with an outward-looking Britain inside it. But a Brexit will not make them give up on the rest of the EU, a multilateral relationship that is collectively more important than their bilateral relationship with Britain.

There remains a strong possibility that the U.K. will not quit the EU. A referendum may not even happen. That depends on Cameron winning the next U.K. general election (to be held in May 2015) or the rest of the EU attempting a new treaty that would trigger a U.K. law requiring the in-or-out referendum. The rest of the EU is in no hurry to draft such a treaty.

Opinion polling shows the British people, while no Europhiles, are not overwhelmingly sold on voting for the unknowns of a Brexit. This becomes more likely if a referendum were preceded by some form of renegotiated U.K.-EU relationship. The surge in support over the past few years for the U.K. Independence Party (UKIP), which is committed to the U.K.’s withdrawal from the EU, should not be interpreted as being entirely about the EU. Its support is also — and, arguably, more — about opposition to the political status quo and a set of government policies that seem to have favored London’s development at the expense of the rest of the country.

Still, UKIP’s rise captures the unease with which the EU has long been regarded in British political life. Britain’s relations with the EU are likely to remain rocky. And a referendum on staying in the EU will not settle the issue once and for all. The "Europe question" in British politics is not simply about being in or out of the EU; it is about the U.K.’s party politics, changing constitution, identity, economy, globalization, and place in a changing Europe.

The possibility of a Brexit will likely hang over U.K. politics and U.K.-EU relations for a long time to come. It is this complex set of possibilities and implications that Britain, the EU, and the United States need to keep in mind moving forward. For the EU, it is geopolitical thinking that will shape any decision as to whether — to borrow from President Lyndon Johnson — it is better to have Britain inside the EU tent pissing out, or outside the tent pissing in. For Britain, focusing on what is the best or worst exit deal or renegotiated relationship inside the EU overlooks the fact that this is more a question of what is good or bad for the rest of Europe. And that is not a question the British alone can answer.