Post by Oz-T on Jun 15, 2016 10:42:41 GMT
BREXIT: How it would affect tourists
By now you have probably heard about Britain’s referendum to decide whether it will remain in the European Union. An exit will be decided by voters on 23 June and while this will have significant impact on the UK, what does it mean for travellers? Let’s explore this further.
What is the European Union (EU)?
The EU is a political and economic union of 28 countries. It began as a group of six countries after World War 2 as a means of integrating Europe and reducing the effect of nationalist extremism. From these beginnings it grew into a powerful trading bloc with enormous influence on European politics, currency and citizenship.
Britain joined the EU in 1973, although it did not adopt all later integration developments. For example, the UK (with Ireland) were the only EU countries to permanently opt out of the Schengen Agreement that provides free passage between member states. That’s why you can now travel across many European borders without passport checks, but entry into UK/Ireland requires immigration controls. Another important ‘opt out’ was the UK’s decision to not join the Eurozone currency union – that’s why you need to convert to UK pounds when you travel there.
Economically, the EU acts as a single market so capital, goods and services are allowed to move freely from one EC country to another, just like people can. That’s why you see trucks criss-crossing around Europe and money flowing everywhere. Importantly, a person can buy a home in another EC country and seek work there. Or they can study in one country, work in another and retire somewhere else. Some non-EU countries allow the same rules, although they don’t adopt the EU’s customs union so they can charge their own tariffs and import quotas – Switzerland is a good example.
The politics of the EU can be a bit confusing to many of us members of the Travel Forum. There are seven political bodies that govern the EU:
The European Council meets four times a year to provide overview direction
European Commission comprises the executive arm – it submits proposals to the Council and Parliament (i.e. legislation starts with the Council)
Council of the European Union comprises government ministers from each EU country. It acts a bit like a senate and shares law-making duties with the European Parliament
European Parliament shares law-making duties with the European Union. It’s a bit like a House of Representatives and comprises members directly elected by the citizens.
Court of Justice provides legal application of laws
Court of Auditors polices the EU budget
European Central Bank is located in Frankfurt and it primarily manages the Euro currency with central bank powers
Most of these institutions are based in Brussels, Belgium.
The European Parliament comprises over 700 members who are elected by local constituencies. This is proportional to the population so the larger countries get more members. An elected member of the European Parliament serves for five years and has the initials MEP after their name. The parliament makes laws that each member country has to abide by.
So why the desire to leave the EU?
Autonomy and cost are common reasons why many Britons are questioning the EU’s benefit to the UK. The costs of EU membership are high – last year Britain paid £13 billion to be a member but only received £4.5 billion back as spending. That’s expensive. If the trade and other benefits don’t make up the shortfall, questions do need to be asked. More than half of Britain’s exports are sold to EU countries so EU membership does give the UK a seat at the negotiation table and there should be some benefit to be a part of a large trade bloc. But by itself, Britain could negotiate its own trade deals. And why not? Canada negotiated its way through trade and tariff reform even though it’s part of the NAFTA arrangements with the larger USA. It is difficult to determine the economic effect of Brexit – it has been estimated that UK GDP could fall by over 2% at worst, or rise by nearly 2% at best. The question is whether the EC would agree to a free trade arrangement with Britain or punish them for leaving. So call it a known unknown.
The autonomy argument is a strong one. Britons feel that they have transferred too much power from their own parliament to the EC. That feeds into patriotism and national pride.
Immigration is a touchy subject in Britain. EC membership means that any EC citizen can freely travel to Britain without a visa or work permit. And it goes the other way too: Brits can work and live in any EC country. But it’s very one-sided – more people flood to the UK, especially from southern and eastern Europe. That feeds into housing and infrastructure problems. Advocates of Brexit argue that Britain would merely seize full control of its immigration policies so they could easily allow immigration if they wanted to, but not be forced into it. The sudden lapse in EC border controls resulting in the vast arrivals of Middle-Eastern people, especially into Germany, has alarmed Britain. And that feeds into security concerns.
The Referendum
A vote to exit the EC has to be voted by the UK parliament so it could technically decide to stay in the EC. However, blocking the will of the voters isn’t a good idea for most politicians.
Currently, the Brexit case is slightly ahead in the polls, exceeding the “remain in the EC” case. And the average voter is terribly confused.
The Markets
As the clock ticks away towards 23 June global markets are watching and getting nervous. Stockmarkets are getting the wobbles and the pound has fallen on currency markets. Business dislikes uncertainty and the UK opinion polls are adding to this. It doesn’t help when the President of the European Council announces that a vote to exit could be starting the process of destroying both the EU and Western political civilisation. No wonder markets are spooked. I would have thought that the EU is doing far more to wreck the EU than this Brexit issue. If the Brits do vote for an exit, shares will probably continue falling along with the pound. But that’s the short term uncertainty kicking in. Longer term, things should stabilise as people realise that the world has not ended.
The Tourist
As I see it, the greatest impact on tourism is the exchange rate to the UK pound. It has fallen quite a bit in the last few weeks and it would be no surprise to see it fall further if the referendum vote is to exit the EU. Since the end of May, the pound has fallen against the US$ by almost 7%, nearly 6% against the Canadian dollar, 7% against the A$ and 8% against the NZ$. That will make any holiday or tour to the UK much cheaper. There have been falls in the Euro too, but not as much as the pound.
But expect some volatility over the next week, and better travel deals if Brexit gets a tick.
