Given the decibel level of the current U.S. presidential elections, Americans can be forgiven for missing an equally lively debate underway in Britain over whether the country should remain in the European Union (EU) or not. A debate the press and financial markets have dubbed “Brexit” -- short for "British exit."
As dramatic as any Shakespeare play, the sound and fury from Britain in the run-up to the June 23 vote is sure to be deafening. And while Americans can be forgiven for favoring the latest pictures of the Royal Family or the pageantry of the Queen’s 90th birthday, over, say, the arcane details of the referendum to remain in the EU, make no mistake: Britain’s upcoming sovereign decision matters greatly to those in the U.S. Here’s why.
Much is made of America's investment in Asia, but the U.S. has invested more than three times as much in Europe.
First, there are American interests in the EU, a club of 28 sovereign nations. Under British leadership, those nations created a single European market by linking their economies almost a quarter-century ago: America benefits from the openness of this rules-based single market, with its half a billion western consumers. Much is made of America's investment in Asia, but the U.S. has invested more than three times as much in Europe, paying dividends in both jobs and economic returns.
Britain helps maintain the market’s openness, defend its reliable rules-based nature and ensure international investors are welcome. As such, the lion’s share of American investment in Europe goes into Britain, as a gateway to the rest of the single market. If Britain left the EU, then the single market would probably go in different (less open) directions, and American investment in Britain would be isolated from the rest of the European market.
Second, Britain would also change if it left the EU. Besides losing access to the single European market that it helped create, it would have to negotiate its own new access to various markets, including the U.S. This could create years of uncertainty for companies in Britain as well as American firms invested there. The pound's current volatility suggests that the markets are already fearing this outcome.
Britain would also have to restore international borders with its neighbors, like Ireland. Some favoring Brexit see this as a positive sign, but Ireland’s prime minister, Enda Kerry, who just secured a second term, regards Brexit as “a major strategic risk” to Ireland, and not just economically.
Similarly, Scottish nationalists (also recently re-elected) have threatened that, if Britain leaves the EU, they might press Scotland to declare independence. This would create a new international frontier where there has not been one for centuries, effectively leaving a weakened ‘little England.’ The irony is that Scotland benefits hugely from Britain’s EU membership, but a cynical vote for Brexit might allow some Scottish nationalists to call for another referendum on independence, even though they lost one in 2014.
...America’s interests are so clearly at stake.
Lastly, Britain’s EU referendum matters to America because of who favors Brexit internationally. Known for his hardheaded calculations, the Russian President Vladimir Putin has determined that Britain's leaving the EU is in Russia’s interests. That is because Brexit would disrupt the single European market, make the EU less internationalist, and cause economic harm to British and American companies.
Putin has already been stress-testing what used to be known as the West, through the annexation of Crimea, military adventurism on Europe’s eastern frontier, and bombing in Syria the drives refugees into and destabilizes the EU. Backing Brexit fits Putin’s calculation, as it would also undermine Britain, complicate its links with Ireland and leave a rump little England as a weaker NATO ally for the U.S.
As such, Putin has aimed at America and its interests. It is therefore quite appropriate for Americans to take an interest in this referendum — as President Obama and former U.S. secretaries of State and Treasury from both parties recently did -- because America’s interests are so clearly at stake.