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European Union (EU) is a monetary and trade body comprising of 28 member countries. The purpose of this body is to ensure that it has a competitive edge in the global marketplace (Cappelen et al., 621). It is also involved in balancing the needs of both its political members and independent fiscals. Despite its transformation since the establishment of the concept of European trade area in 1951, the Treaty of Lisbon in 2009 highlighted the supremacy of the body (Emmanouilidis & Stratulat, n.p). The treaty granted EU the legal authority to sign and negotiate about international treaties. It thus had the powers for aspects such as border control and immigration.
The EU eliminates barriers to entry along the borders of its members and thus there is a free flow of goods and people unless in instances where there is need for crime and drugs checks. Members also benefit from environmental protection, development strategies, energy provision and research. Aspects such as public contracts in a country are made open to bidders from countries within the body. The body also standardizes taxes and products manufactured in one of the member countries are sold to other members without duties and tariffs. Practitioners of services such as banking, law, medicine, law, and insurance among others are also permitted to operate in any member country.
The United Kingdom, on June 23, 2016, voted to leave the European Union through a referendum known as Brexit (New York Times, par.8). The section below focuses the impact that Brexit will have on the United Kingdom.
Effect of Brexit on Britain’s economy
Research indicates that Brexit will have profound consequences in various sectors of Britain’s economy. Trade, labor access and subsidies play an essential role in Britain’s agricultural sector. According to FT Reporters (par. 4), with Brexit, this sector will be affected by insufficient labor, as 90% of workers come from central and eastern Europe. Farmers also depended on the tariff access to agricultural inputs under EU. Two-thirds of the agricultural products are exported to the EU and thus will be interrupted and will have a negative impact on the economy.
The manufacturing sector, which contributes to 10% of Britain’s economy according to Dhingra et al. (p.3), will also be affected. This sector depends on the EU’s negotiations on trade on how to sell their products. It also depends on global talent to improve its products, which was available through free flow of people under EU. With Brexit, the EU’s effect on determining their products’ effective cost and free flow of talents will be halted; consequently affecting the economy.
Services that account for four-fifths of Britain’s economy will also be constrained by the barriers that will be impacted by Brexit (Begg & Mushövel, n.p.). This sector depends on staff mobility, transfer of clients and data across the borders, which were effective under EU. With Brexit, free-trade agreements will be ineffective. Affecting services will have a negative impact on Britain’s economy.
The financial services sector makes up for 7 percent of Britain’s economy (FT Reporters, par. 13). After Brexit, this sector will lose significantly, as it will try to adjust from the single market rules. With free flow of people affected, the sector will also experience challenges in the labor force. Despite the prospect that it may stabilize after several years, this interruption will adversely affect Britain’s economy.
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The education sector is another area that will be affected. Britain’s universities generate approximately £11bn through export in a year and thus are expected to change after Brexit (FT Reporters, par. 15). They depend on funding from EU for research. EU also contributed to the sector’s labor force and international students. Following Brexit, these benefits under EU will be cut and thus the sector will be unable to sustain its contribution to the economy.
Effect of Brexit on Britain’s ability to do business in Europe
Brexit translates to the fact that the trade agreements that it had under EU will be terminated. Therefore, it will need to reach new trade agreement with trade partners or even the EU. In this case, the ability of Britain to conduct business in Europe will be affected. It will tend to appear weak in the new trade deals. In the two-year deadline that Britain was allocated by EU to establish itself after Brexit, it has to carry out the task under pressure. This may make it submit to some aspects under the new trade deals that portray that its ability to do business with other countries in Europe will be affected. For instance, higher tariffs are expected to be imposed on its good under a new trade deal with EU (Dhingra et al., p.1).
Effect of Brexit on Britain’s ability to do business in the U.S
Brexit will also have an impact on the ability of Britain to conduct business with the United States. Murad (par.1) explains that Britain and the United States have strong trade ties especially through U.S companies that operate in Europe. There are also citizens of the U.S who work in Europe.
Brexit tends to dampen the growth of the business activities between the countries. The uncertainty regarding the fate of the U.S citizens in Britain after Brexit is also contributing to the tension between business relations between the two countries. Companies from the United States may also be reluctant to invest in Britain over this uncertainty. This change in business relationships between Britain and the United States portrays that Brexit tends to take Britain off the leading platform of the financial world.
- Begg, Iain, and Fabian Mushövel. “The economic impact of Brexit: jobs, growth and the public finances.” (2016).
- Cappelen, Aadne, et al. “The impact of EU regional support on growth and convergence in the European Union.” JCMS: Journal of Common Market Studies 41.4 (2003): 621-644.
- Dhingra, Swati, et al. “The consequences of Brexit for UK trade and living standards.” (2016).
- Emmanouilidis, Janis A., and Corina Stratulat. “Implementing Lisbon: narrowing the EU’s democratic deficit.” EPC Policy Brief, Brussels: European Policy Centre (2010).
- FT Reporters. “How Brexit will Affect Sectors of the UK Economy.” Financial Times, 23 June 2017, www.ft.com/content/602f3674-573a-11e7-9fed-c19e2700005f. Accessed on 8 Feb. 2018.
- Murad, Andrea. “Six ways Brexit could affect the US.” ICAS, 29 March 2017, www.icas.com/ca-today-news/six-ways-brexit-could-affect-the-us. Accessed on 8 Feb. 2018.
- New York Times. “How ‘Brexit’ Could Change Business in Britain.” 17 September 2017, www.nytimes.com/interactive/2016/business/international/brexit-uk-what-happens-business.html. Accessed on 8 Feb. 2018.
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