While much of the worry in the United States about the future of the European Union has focused on Greece, Spain, and Italy and their many problems, one consideration that hasn't gotten enough attention is the probability that the United Kingdom might leave the bloc.
Recent events have made that once-remote possibility now much more likely. The US should prepare for the eventuality that its closest ally will soon be looking for new options in foreign relations.
This is important. As London has passed more and more powers to Brussels over the years, Washington has found it harder and harder to deal directly with. An attempt by the Heritage Foundation to garner British support for a global free trade area of the world's freest economies foundered because trade is an EU 'competency' (the US has had to look to the Pacific economies instead). Even security policy is increasingly subject to EU ambitions in that area, with the UK agreeing to provide aircraft carriers that currently have no planes. Britain has been caught in a European straitjacket.
The reason for the increasing likelihood of what some are terming a 'Brixit'(short for British exit, like Grexit for Greek exit) is quite simple. It is becoming more and more apparent that the only viable solution for the debt problems of the southern EU nations is some form of closer integration, in the form of a political or fiscal union or (as has been suggested recently) a banking union of the Eurozone members.
It is now widely accepted on the Continent that monetary union without these other policies was a huge mistake, producing massive economic disparities within the currency union – as Eurosceptics warned it would back in the 1990s. As so many times before, the solution now being proposed for problems caused by European integration is… more European integration.
Yet the idea of Britain being involved in closer European integration is anathema to the British people. It is unlikely that any of the major proposals, like fiscal or political union, would be approved. Even a Eurozone Banking Union, as Open Europe's Mats Persson has pointed out, would essentially lead to the British financial services industry being burdened with all the costs but enjoying none of the benefits of EU membership. No part of this is attractive to the average Briton.
Therefore, no matter how much headway the idea of closer integration gains in Eurozone capitals from Berlin to Athens, it is still likely to be rejected in London. This will leave Prime Minister David Cameron with only one option – withdrawal from much of the institutional superstructure that the EU has built up over the past decades. It is possible that all Britain will seek to retain is membership in the European Economic Area – the free trade area which non-EU members Iceland and Norway enjoy with the EU.
This would leave Britain free again to pursue its own trade relations. This is where the US has an opportunity. British entry into an expanded North American Free Trade Area could provide huge benefits to all parties involved, including restoring Anglo-Canadian trade relations to their proper level. Therefore, it would be worthwhile for the US House Energy and Commerce Committee to commission a study of the costs and benefits of UK membership in NAFTA.
Finally, once outside the EU, Britain could once again play a major role in the development of the British Commonwealth, which includes many important developing nations. American partnership in these efforts could go a long way to securing important diplomatic and trade benefits for the US.
If the Eurozone continues on its current path, there will be significant costs for the US. But the potential release of America's most important ally from the straitjacket of European supranationalism could be the silver lining on these gathering clouds.