British voters will head to the polls June 23 to decide whether the United Kingdom will continue to be a part of the European Union. If Britain withdraws from the bloc, it would hurt economies on the Continent as much as it would its own. Exports would fall among some of Britain's main trade partners, including Ireland, which sends about 14 percent of its exports to Britain, and the Netherlands and Belgium, which send about 9 percent each. Without a trade agreement in place, Britain's exports to the European Union would also be subject to tariffs, as would EU exports to Britain. London would be forced to pay the "most favored nation" rates set by the World Trade Organization, which range from 4.1 percent on liquefied natural gas to 32 percent on wine. Services trade could be further complicated by the fact that EU members have erected different non-tariff barriers, such as domestic regulations, in the services sector.
Meanwhile, political uncertainty stemming from a Brexit vote would hurt economies across Europe, as would a decline in trade should London and Brussels fail to reach a new trade agreement. Central banks worldwide, including those of the United States, India and Japan, have issued warnings about what a prolonged period of uncertainty in Europe could do to global financial markets. Southern Europe might even receive a double dose of pain. Spain is scheduled to hold general elections on June 26 that will likely lead to a fragmented parliament, while Italian Prime Minister Matteo Renzi has linked the future of his administration to a constitutional referendum in October. When coupled with the uncertainty that would follow a Brexit, such political instability in the eurozone's third- and fourth-largest economies could raise questions about the economic health of Southern Europe as a whole, leading to turbulence in international debt markets.
Meanwhile, Euroskeptic parties across the bloc would interpret a Brexit vote as support for their own proposals to leave the European Union. If Britain offers proof that it can endure after quitting the European Union, the bloc's opponents would begin to hold it up as an example to follow. Euroskeptic parties stand to make the most gains in countries with large economies such as France and Italy, where citizens are particularly skeptical of the Continental bloc and optimistic of their countries' future success independent of the European Union or eurozone.
