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Current time:0:00Total duration:9:34

Video transcript

given all of the recent talk about the United Kingdom deciding to leave the European Union often referred to as brexit short for British exit from the European Union I thought it would be interesting to do a primer on well what exactly is the European Union this is going to be a high-level primer the actual topic can get quite complex quite fast but to understand what the European Union even is I will draw a little line here to represent a spectrum a spectrum of I guess you'd say national organizations or organizations of nations so at this end right over here I'll draw this is a trade bloc this is when a group of nations get together and say and usually say hey let's have free trade between our countries let's make it if we make something in one country we want to sell in the next that there's no tarasana and it might include things like it's easy to move money between one country and other and sometimes we believe include it's easy to move people between one country to another and a good example of a trade bloc especially from a North American point of view is NAFTA north american free trade agreement this is the United States Mexico and Canada having a free trade agreement you make something in one of those countries you want to sell on the other one you don't have to have any any you won't have any terrace it makes it reasonably easy to transport goods from one country to another and there's even some provisions around investments and the movement of people and why would a country want to do this well there's a there's many economic arguments and theories that it increases it increases the prosperity of all of the parties now some folks will disagree with that and they might say on average it might but they're definitely going to be some losers in different countries depending on which industries go where but that's the rationale for why free trade agreements exist that it would increase the economic growth of all involved and it will make them all be able to participate in a larger economic shared market now at this end of the spectrum I'm going to talk about when states get really close to each other to really form a meta State to really form a country made up of those states and I will call this a federation and maybe the most famous Federation from an American point of view would be the United States United States of America it is made up of 50 states it literally stands for United States of America but those 50 states have become so integrated that they act as one country they act as one nation they act as one people each of those states do they are semi-autonomous they do have their own governor their own legislature their own courts their own laws but they do also there's also a federal government there is a federal army federal courts there is a president there is there is a federal legislature and so they are so integrated as to be one country now in between you'll sometimes your words like confederation or Confederacy con fed Kahn Federation and this is a more of a loose term there's not a strict this is a confederation or that is not a confederation but it's it's generally viewed as a as looser than a federation that the states or the countries that are members of a confederation can opt in or opt out that they might be integrated in some ways and not integrated in other ways so when we think about the European Union which involves which involve which for sure involves aspects of a trade bloc it has free trade it involves free trade between its members it talks about the movement of people so free movement but it goes further than a traditional trade bloc it goes further than something like NAFTA it has in Russells and it has rotating leadership it has it has regulations and laws that often apply to things like free trade and free movement but it can also apply to things outside of that there's even some integration between militaries or I guess at minimum you could say cooperation each of the members have their own military and they are independent states in their own right but there is more integration than you would see in something like NAFTA so the European Union I would put it someplace in this spectrum right over here and depending on whom you talk to you will get different opinions and different people will debate some people say well it's more about trade and having a large shared common market and maybe being able to have a little bit more clout on the world even from a foreign policy point of view while some people will say well no it's it seems to be moving in this direction where it's becoming a tighter confederation of some kind albeit with still a lot of independence from each of the Member States and the people who think it's more on the right-hand side they'll point things like well it's got its own flag it's got an anthem you have some military more than cooperation you even have some integration the trend seems to be moving from left to right it's not only is it about trade it's also about currency and that's where I'm going to introduce this other concept called the euro zone which is often confused with the European Union and that's because there's a lot of overlap between the two the euro zone is the subset of the European Union that uses the same currency and then that currency is called the euro this is about currency and this is about the euro and so once again this would move it a little bit more to the right not only do you have free trade and free movement of people and and you have some regulations and of course the member states have representation in determining what those regulations are but you also have most of the European Union has a shared currency which of course facilitates things like free trade and free movement but this is more than what you see in NAFTA Mexico the United States and Canada do not have a shared currency but this is what this map shows us is both the total the European Union but it also shows that it's not exactly the same thing as the euro zone everything we see in blue and this pink color combined that is the European Union the difference between the blue and the pink is that the blue are European members that also use the euro as their currency so they are members of the eurozone so Spain and France and Germany and Italy and and the Republic of Ireland they are members of both the European Union and the eurozone while countries like the United Kingdom and Denmark and Sweden and Poland and I could keep going on and on they do not currently have the euro as their currency they have their own currencies they have their own central banks the the UK which is where we started this conversation they have the British Pound Sterling now in terms of whether or how or whether they're going to move to the euro it's different from country to country countries like countries like the UK and Denmark have official opt outs they never had any intention and they have opted out of going to the euro countries like Sweden it's not as official but it doesn't look like they they have any intention of going to the Euro while other countries it's just a matter of time before they do go to the euro and it's more of them meeting certain economic and fiscal thresholds so that they can enter into the euro zone and once again why would you want to become part of the euro zone well if you're a country with a smaller economy or a smaller currency or less stable currency you say well I could become part of a larger economic zone I'm already part of a free trade and all of that but with the currency it makes it even it makes it even a stronger thing why would you not want to do it when you say well I have a strong enough currency and I don't want to give monetary policy to folks in Frankfurt and once again I good people can argue very good arguments on either side of that now when you look at this map here you might also notice that Kosovo and Montenegro are colored in in this little pink color and this is interesting because they are not members of the European Union but they have decided to use the euro as their official currency anyway so they're not even official members of the eurozone but they still use the euro and so that's why they get their own special color here so if we go back to brexit if we go back to the United Kingdom leaving what are the implications here well the first clear implication is that their currency is not going to change in the future of their currency is is not going to change they were never planning they don't use a euro and they were never planning on going to the euro and so they are using the pound sterling and they will continue to use the pound sterling so that kind of a no-brainer and the brexit doesn't impact that same same currency they're using they're using the pound regardless of which way the brexit vote went what the brexit vote does by taking them out of the European Union is it puts these things in question things like free trade and free movement and what regulations they will adopt or not adopt and it doesn't mean that there won't be free trade and there won't be free movement or that the regulations will change dramatically and it also doesn't mean that that's not going to happen what it means is it's all going to call it's all going to be called into question these are now going to have to be separate negotiations between the United Kingdom and the rest of the European Union