EUROPE is in shock as Britain votes to pull out of the European Union in what is now termed the ‘Brexit’.
Britain is important to the EU because it is its second largest economy, and the world’s fifth largest. Thus her exit is raising fears that a domino effect could follow with other countries leaving the union. Questions are now being asked if the EU will survive.
There is evidence indicating that right wing ‘nationalists’ in other countries are now pushing for an exit from the EU. One could argue that this is rather premature given Britain and the EU have not yet seen the full extent of the Brexit outcome.
Three million Britons have petitioned the government to revoke the decision and parliament had yet to address the outcome of the referendum.
More importantly for the United Kingdom, Brexit is already raising questions of independence for Scotland and the reunification of Ireland. So Britain’s exit could lead to other important developments that could re-shape her own and Europe’s future.
While the pro-Europeans are in tears; the Eurosceptics who have longed seen the arrangement as repressive and wanted their country to choose its own destiny are enjoying their victory.
In Europe, as in Britain, more and more people are demanding that their own governments take a tougher stance against immigration. Britain’s exit is the Eurosceptics’s finest hour and their call for protecting national borders is echoing across Europe.
The Brexit is creating a ripple effect around the world. Already stock markets have been pummeled and the pound sterling has seen its worst drop in a very long time. For us in the Pacific, the result seems likely to hit our shores sooner rather than later.
In 2007, the EU concluded an interim partnership with PNG and Fiji, paving the way for eventual formal implementation.
The EU is currently negotiating a comprehensive economic partnership agreement with all 14 island states in the south Pacific. The comprehensive agreement will cover trade in goods and services, development cooperation, food health and safety, agriculture, sustainable development and competition.
The Brexit looks as though the EU might put a temporary halt to this negotiation. Britain, for its part, is going to have to negotiate an exit strategy with the EU which seems likely to have effects in this part of the world including a renegotiation of the terms of the economic partnership agreement.
The interim agreement provided PNG with duty free access into the British and European markets; a renegotiation could potentially turn this around and affect PNG’s economy – especially its foreign reserves which are already under pressure.
This would spell disaster for PNG given its current economic condition where problems in the foreign reserves have forced the government to pursue extraordinary borrowing measures.
The decision by Britain to hold a referendum to decide its future in the EU has brought to the forefront the important question of whether the Pacific could emulate a similar economic union.
There is merit for such a set-up to facilitate trade and labour mobility – and it is an issue that has recently gained recognition.
There is also a need to establish a common security policy to address terrorism, illegal fishing, transnational crime, human smuggling and border protection. Most Pacific Island nations have just a tiny military to protect their borders or exclusive economic zones.
The Melanesian Spearhead Group also needs a common voice to address West Papua’s push for independence from Indonesia.
Unlike Europe, the Pacific countries have limited resources to be able to stand up individually to negotiate trade and security issues. Through a collective arrangement, the more powerful Pacific island countries like PNG might, in time, be able to support economically depressed countries of the region.
The Pacific islands nations could explore introducing a common currency. However, as we have seen with the Greek crisis, such an option is not presently viable in a region which is prone to global market shocks.
Nevertheless, having a common currency could ease payments for trade in raw materials and reduce transaction costs to boost tourism.