What Happens to SME Trade if Britain Leaves the European Union (EU)?

What it means for both UK and USA SMEs

UK Prime Minister David Cameron recently announced a popular vote on whether Britain should remain in the European Union. That vote is scheduled to take place Thursday, June 23, 2016. This article covers why the vote is about to be held, who wants the UK to leave the EU and how the outcome of the vote might impact small and big businesses.

Why a vote is held?

Called a referendum, a vote in which individuals of voting age (British, Irish and Commonwealth citizens over 18 who are a resident in the UK, along with UK nationals living abroad who have been on the electoral register in the UK in the past 15 years) vote either "Yes" or "No" to a question.

In this case the question is: Should Britain remain in the European Union (EU)? Whichever side gets more than half of all votes cast, wins.

What is the European Union (EU)?

The EU is made up of 28 member countries that are located primarily in Europe with the accession of Croatia on July 1, 2013 (http://europa.eu/about-eu/countries/member-countries/index_en.htm). The creation of the single market and the corresponding increase in trade and general economic activity transformed the EU into a major trading power. For a snapshot of what the EU is and how it works, visit: http://www.bbc.co.uk/guides/zgjwtyc.

Why is a vote needed?

Shortly after joining the EU in 1975, Britain had a referendum. BBC News says, “The country voted to stay in then but there have been growing calls, from the public and politicians, for another vote because, they argue, the EU has changed a lot over the past 40 years, with many more countries joining and the organisation (sic) extending its control over more aspects of daily lives.

David Cameron initially resisted these calls but in 2013 he changed his mind.” (Source: http://www.bbc.com/news/uk-politics-32810887.)

Prime Minister David Cameron wants Britain to stay in the EU, provided certain changes are made to the rules, including:

•    Lower benefits paid to migrants.
•    Greater protection for states not in the euro zone.

Cameron has also opted out of some key EU decisions, such as the single currency or Euro, and the Schengen Treaty where free movement of persons is guaranteed, which relaxed border controls. Note: Staying in the EU means the Brits don't need to get a visa to go and live in another EU country.

Bottom line: Critics believe Britain is being held back by the EU, gets little in return for the money it pays in and would be better off taking back control of its own borders.

Who benefits from the UK staying in the EU?

That’s a question we all want answered! Britain generally gets a big boost from EU membership by making cross-border trade to other EU countries easier, including with the United States. Further, the flow of immigrants fuels economic growth and helps pay for public services. Many people believe Britain's status in the world would be damaged if it left the UK and that it is more secure as part of the EU.

What do UK businesses think about staying in the EU?

SMEs: Many small- and medium-sized firms would welcome a cut in red tape and what they see as petty regulations. Despite that, the British Chambers of Commerce says 55% of members back staying in a reformed EU.

Big businesses: Big businesses tend to be in favor of Britain staying in the EU because it makes it easier for them to move money, people and products around the world.

Who are the UK’s main export and import partners?

The UK’s main export partners are Germany, the US and the Netherlands, while its main import partners are Germany, China and USA (Source: http://europa.eu/about-eu/countries/member-countries/unitedkingdom/index_en.htm).

What it means for US exporters if the UK leaves the EU

It remains to be seen what will happen to the flow of US exports to the UK if Britain leaves the EU. We will have to wait to see if the UK maintains existing free trade agreements with other countries currently held by the EU, and whether they enter into a new trade deal with the US. One can only speculate at this juncture. 

Would the UK still be party to the Transatlantic Trade and Investment Partnership (TTIP) if it leaves the EU?

The big question not just for UK SMEs but for US SMEs:  Would the UK still be party to the Transatlantic Trade and Investment Partnership (TTIP; https://ustr.gov/ttip) if it leaves the EU?

According to The UK’s EU referendum, “Cheerleaders for TTIP, including [UK Prime Minister] David Cameron, believe it could make American imports cheaper and boost British exports to the US to the tune of £10bn a year. But many on the left, including Labour leader Jeremy Corbyn, fear it will shift more power to multinational corporations, undermine public services, wreck food standards and threaten basic rights. Quitting the EU would mean the UK would not be part of TTIP. It would have [to] negotiate its own trade deal with the US.” (Source: http://www.bbc.com/news/uk-politics-32810887).

Additional resources:

The UK’s referendum: All you need to know

Leaving EU would cause a serious shock to UK economy – new PwC analysis – CBI

Leaving the EU Implications for the UK economy

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