The EU and Britain: Brexit Woes

Britain will need greener pastures in terms of trade, after Brexit.

The main topic for months in Europe has been Brexit. Both sides fear the future. Britain is at a turning point, no doubt, but the EU is not in a better situation.  Options for the UK are not numerous.

Although one may say that the best option is to retain access to the single market in the EU, the main reason for leaving the EU was to have more domestic control; so, it is unlikely that the UK would agree to the same conditions which now apply. Similar agreements like the European Economic Area Agreement that have Norway, Iceland, and Lichtenstein, but with some changes in favour of the UK, such as removing the freedom of movement, the EU Single Market laws and the supremacy of the European Court of Justice, may be more favourable for the UK. However, the question is whether the EU would accept such conditions. Such Agreements would benefit the UK more than the EU.

UK’s Trade Partners (till 2016)

The UK can always accept the WTO rules of trade by which all WTO members must have the equivalent trade deals, with the same favourable terms. This means that is not possible to discriminate one member against another. Since the EU currently has such deals with the largest trading partners outside of the EU, the UK would be in a good position to continue these deals, and to set its own tariffs. Thus, the UK would reap high revenues from its tariffs, or would lower them in order to decrease prices of the imported goods. However, the exit from the EU single market would mean the impact of the EU’s tariffs on certain industries in the UK; but manufacturers in the EU would experience similar effects. So, the concern is as much the UK’s as the EU’s. Are there greener pastures?

Britain can also, in addition to WTO agreements, sign Comprehensive Economic and Trade Agreement with Canada, as the EU, but must adapt it for itself. The CETA is perhaps the most favourable Agreement. It offers almost zero tariffs on goods, which is the most important for the UK, and it provides mutual recognition for professionals who provide services and the guarantee of the most favoured nation’s position on services.

With Trump supporting Britons in their decision and expecting a one-on-one US-UK deal, there may be some good news ahead. But again, there are questions that reign our minds. Why would Britain rely on the US, if the EU is closer and may be a more reliable trade partner? This, in the face of the Anglo-American alliance that has been the backbone of British foreign policy for many years, does make sense. Britain may not give up an American alliance that easy.

The EU and the UK have complicated matters to a very large extent. Not just workers, but refugees and businesses in general, must suffer the transition period. There also have been talks about an interim deal between the UK and the EU, before the final terms were agreed. This would certainly prevent a shock to the UK’s economy, but it looks like they plan to get out of the EU as soon as possible, at all costs. Whichever option the UK chooses, it would face significant acclimation to new conditions. The uncertainty of the UK’s future this time is too large. Whether Brexit was the wrong decision or a good milestone on the new road for the UK, is still to be observed.

 

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