Eitan Urkowitz: This is Eitan at the Peterson Institute for International Economics. The Scottish government recently announced that they're going to be holding a second referendum to end their membership with the United Kingdom. Joining me is Jacob Kirkegaard, senior fellow at the Institute, to discuss the ramifications and implications this has for the rest of Europe. Thank you for joining me, Jacob.
Jacob Funk Kirkegaard: My pleasure.
Eitan Urkowitz: So why is Scotland considering such a move?
Jacob Funk Kirkegaard: Well, I mean it's a direct relation to the type of Brexit that Theresa May has pursued. There was a referendum already obviously on Scottish independence back in 2014, which the Nationalist, the Scottish government now, lost by about 10 percentage points. It was 45-55. But since then, of course, we've had the Brexit vote. And what happened in the Brexit referendum was that a vast majority, close to two-thirds, of Scots voted to stay in the EU, but obviously now faced the risk of being taken out of the EU together with the rest of the UK.
And what the Scottish government said in response to that was that, well, if you, the British government, takes us, the UK, out of the internal market which is another way of saying pursues a hard Brexit. That changes the circumstances and we are open to another referendum.
Eitan Urkowitz: So would Scotland need to reapply for membership from the EU if they leave the UK?
Jacob Funk Kirkegaard: Well if they leave the UK, it depends on at what point in time. But since it is inconceivable that they could leave the UK before the UK leaves the EU under the assumption that that happens in early 2019, yes, they would have to reapply. And then the question is this is to some extent a political question. What is the goodwill that the Scottish people have in other EU countries? Because if they have a lot of goodwill, then they can probably be de facto fast track for EU membership. And obviously, in many ways, they fulfill many of the criteria.
But ironically in many ways, it would be very difficult for Scotland to become an independent member of the EU if they hadn't settled their divorce with the UK first.
Eitan Urkowitz: So now moving back to Britain and the EU. So how does this affect the negotiations between those two entities?
Jacob Funk Kirkegaard: Well, a lot of it is about timing. And obviously this is a potential additional source of uncertainty. And there's no doubt that if in the course of these negotiations support for independence in Scotland increases, well, it obviously weakens Theresa May's negotiating hand. So right now, we have announcements from the Scottish government saying, well, they're thinking about doing this referendum in the fall of 2018, which would actually be before Brexit happens. And basically, therefore, happen in the middle of what could be very controversial negotiations.
That is obviously not something that the UK government and Theresa May wants. They don't want to talk about having such a referendum until after Brexit has already happened. Also because they think that once they're out, the obstacles of potentially getting back in again might be a deterrent for leaving the UK. But timing and how it affects, therefore, the negotiations is absolutely crucial.
Eitan Urkowitz: Okay. So there are other members in the United Kingdom as well such as Northern Ireland and Ireland. What are the implications for those two countries?
Jacob Funk Kirkegaard: Well I mean I think you know you recently had an election in Northern Ireland. And there you have for the first time since 1921 that you didn't have a so-called unionist or pro-UK majority in the Regional Assembly. That is a pretty big deal. And it certainly suggests that if this path down towards a hard Brexit, a complete severing of economic ties with the EU continues.
You could get to a situation where the traditional sort of sectarian divide between Protestants and Catholics that were determining that Northern Ireland was part of UK becomes less important. And that perhaps is more of an economic case for a unified Ireland. And certainly if you ask Sinn Féin and some of the Irish-oriented parties, they take great comfort in that because they think that the time in which you could have a referendum on this in Northern Ireland is now a lot sooner than what was perhaps imagined just a few years ago. On the other hand, for the last component of the UK which is Wales, I don't actually think it has, not yet at least, any significant implications.
Eitan Urkowitz: Thank you, Jacob.
Jacob Funk Kirkegaard: My pleasure.