Brexit and Trade: The Impact on The UK and The EU
There are some clear impacts of Brexit on the way trade used to happen between the UK and the EU and the UK and the world. In the following blog, you will get to know how Brexit and trade are interrelated, how it was introduced in the UK and the impacts of Brexit on UK Trade & EU Trade.
WHAT IS BREXIT?
Brexit means the split of the United Kingdom from the European Union. The term Brexit was first coined by former lawyer Peter Wilding who put the two words, Britain and Exit, together and wrote about it in May 2012.
Former Prime Minister of the United Kingdom, David Cameron, fulfilled his manifesto pledge and brought a referendum in 2016 on continuing membership with the European Union. The leave votes were in the majority and David Cameron resigned. He was then succeeded by Theresa May, who became the 2nd woman Prime Minister of the United Kingdom.
After voting in favor to leave the bloc, the UK finally moved out of the European Union on 31st January 2020, and became the only country to leave the bloc formally.
THE PROCESS OF WITHDRAWAL
The resignation of David Cameron paved the way for a new government. Theresa May, as the new Prime Minister, then formally notified the European Union about the exit.
The new government of Theresa May started the process of leaving the EU on March 29 2017, by asking permission from the parliament to invoke article 50.
The UK negotiated to leave the EU customs union and single market in the withdrawal agreement. However they could not get ratification from the British Parliament as the Labor party MPs wanted to maintain a customs union. Issues were also raised about Irish Borders .
After failing three times to get the withdrawal agreement from the parliament, Theresa May resigned and was succeeded by Boris Johnson. Boris Johnson who sought some changes, and after a third Brexit delay, the withdrawal got approved by the UK on 23 January and by the EU on 30 January. It then came into force on 31 January 2020.
The UK and EU underwent a transition period to adapt to the new policies, so that cross border trade is not hampered.
What if there had been a no-deal exit?
Europe has been the most crucial source of foreign investment for Britain. It is also its largest export market.
Leaving the EU without any trade agreement could have led to some tragic situations for trade and business, creating confusion about the rules regarding the movement of goods across the English Channel. Thus the two parties had to work on the deal of withdrawal before the deadline of 31 December 2020.
The withdrawal agreement proposed by the British government made it clear that the UK would not need the permanent single market membership. It would end ECJ jurisdiction, seek a new trade agreement, end free movement of people and maintain the Common Travel Area with Ireland.
The movement of goods by British companies to member countries of the EU was free from taxes and tariffs when Britain was a member. To make sure that the business in Britain did not crash due to the exit, it was necessary for Britain and the EU to agree on a deal before the deadline.
If the two sides had failed to come up with a mutual deal, tariffs would be imposed, driving up the prices of cars and farmers would have had to face problems in selling their meat to other European Union countries.
A no-deal exit could have led to a collapse in trade, causing a long line of trucks on either side of the borders and creating a gridlock at the ports.
The new agreement made it possible for Britain to avoid extra taxes and tariffs on transporting goods, although there will be increased checks and traders will be required to provide new customs documents.
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The compromise on fishing.
Although fishing is a tiny part of the economies of both the UK and the EU, it holds a high relevance politically. Gaining control of territorial waters of the UK was one of the primary purposes of the British Campaign.
In the recent past, the British fishing industry saw a decline in the number of people employed. This was affected by the rules made by the European Union on sharing access to fisheries.
The new agreement sought to cut 25% of EU boat fishing rights and transfer them to the UK. This process will occur in phases from 2021 to 2026.
In the first phase, 15% of the EU fishing quota will be reduced. This will be followed by a 2.5% decrease in the next years until 2026.
After the end of the adjustment period in 2026, there will be annual talks on distributing fishing rights between the UK and the EU and an arbitration system will be set to resolve fishing disputes.
The Northern Ireland border
Northern Ireland is the only land border that the UK shares with the European Union. To ease the flow of trade, a deal made in late 2019 which gave Northern Ireland a special trade status. It will continue to follow some rules of the European Union. It has added extra checks on the border. The new paperwork has posed an extra burden on the traders. Deterred by paperwork, many British companies have limited their products to Northern Ireland only.
Potential UK benefits from Brexit
The exit of the UK from the EU is obviously going to need the British government to build up new trade relations. After Brexit, the UK is not a member of the EU. This it can work on establishing its trade policy and negotiate business deals with other countries.
This will open doors to more foreign investment in the UK. The British government is already in talks with the US, Australia, and New Zealand who do not currently have free trade policy with the European Union.
Summary
The long-awaited split has finally settled. The UK is no longer on the list of member countries of the European Union. UK people are no longer allowed free movement across the borders of the EU. The UK have now created a new immigration policy based on the points system. They have also indicated some tradeable characteristics for people wanting to settle in the United Kingdom.
Brexit has resulted in new trade relations of the UK with the world. Recently the British government has shown interest in joining the Trans-Pacific Partnership (TPP11, or formally, the Comprehensive and Progressive Agreement for TPP: CPTPP) for better trade opportunities.
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