It’s hardly been out of the news since the vote to leave the EU was announced over 18 months ago. Now, the UK is just one year away from exiting the common market trading bloc that it has been a part of since 1973 (when the EU was the European Economic Community). How are the exit negotiations shaping up, and what are the likely consequences of Brexit, as we currently understand it?
Is the official leaving date actually March 29 2019?
Yes, but with caveats. On March 19 this year Britain and the EU agreed the terms for an official ‘transition period’ which has been created to allow what has been termed an ‘orderly withdrawal’. Effectively this means that the UK will still have to play by the EU’s rules until December 31 2020, but during this time can proceed with global trade negotiations that will come into force in 2021.
The transition period terms are relatively straightforward, however the continuing issue of the Irish border is a sticking point within them. In brief, they are:
- EU citizens arriving in the UK between March 19 2019 and December 31 2020 will have the same rights as those who arrive prior. The same will apply to UK expats on the continent
- The UK can create its own trade deals during the transition period
- The UK will still have to abide by existing EU trade deals with other countries
- The UK will effectively remain part of the Common Fisheries Policy, yet without a direct say in its rules, until the end of 2020
- Northern Ireland will effectively stay in parts of the single market and the customs union until the border issue with the Republic of Ireland can be solved.
What has to be negotiated on a global level?
Essentially a huge number of treaties with countries spanning the globe, the trading rules for which have been agreed with the EU as a trading bloc rather than individual countries such as the UK. The country hasn’t been in this position since joining the (then) EEC back in 1973, so from the big trade deals with partners such as the USA, through to agreeing tariffs on the import of cereals from minor partners, the UK has to make new agreements.
According to a report in the Financial Times in May 2017, the UK has to renegotiate at least 759 treaties with approximately 168 countries thanks to Brexit. The FT article states that at worst many of the deals will simple replace “EU” with “UK” in the treaty, and at best the UK might get a better deal, but there are no guarantees. In some cases there are treaties that the UK will simply not bother trying to replace where a workaround is available. There is a lot of is administration but there isn’t a lot of is time.
Kent Business School’s Dr Carmen Stoian;
“Leaving the EU inevitably means forgoing some of these gains (of being part of the EU) as a result of the increased barriers to trade and investment that are likely to occur in all possible scenarios. Whilst free trade with non-EU partners is likely to generate some economic growth, the UK’s geographical location, historical, economic, political and business links with the continent makes the EU the UK’s most logical and natural business partner. So no wonder that impact studies are finding that long-term economic growth will be affected negatively by Brexit, in all scenarios.”
As well as trade and tariffs, the UK will repeal all EU laws currently governing the country and, over a period of time, have to replace these with home-grown laws. According to the government’s own white paper there is “no single figure” for the number of EU laws that are enacted in the UK, however the BBC cites 12,000 EU regulations, 7,900 statutory instruments passed by Parliament to implement EU legislation and 186 acts of Parliament that incorporate EU influence. This is just the tip of the iceberg, and until the UK formally leaves the EU new laws still apply and will subsequently have to be unpicked and replaced.
The economy
In the run-up to the referendum, and ever since, there has been an ongoing and often savage row over the economic impact of Brexit on the UK economy. Who can forget the Leave camp’s big red bus that seemed to promise £350m per week, saved from the EU, to be pumped into the NHS?
Of course the actual outcome is near-impossible to predict with any degree of accuracy as quite simply, we don’t know what will happen. EU countries are unlikely to want to make it easy for the UK to create deals within the common market than already exist, so realistically Great Britain has to look further afield and hope that it can retain and even increase tariff-free trade agreements. Moreover, EU countries are scrambling to attract tech, manufacturing and financial companies away from their traditional hubs in the UK through a host of financial incentives.
In recent weeks Anglo-Dutch giant, Unilever announced that it was going to move its headquarters from London to Rotterdam. Dr Carmen Stoian wrote;
“…the move is driven by both push and pull factors, amongst which political factors cannot be neglected. Since the British vote in the EU referendum in June 2016, governments, local authorities and business networks in various European countries have worked hard to improve the investment climate in their markets in order to attract multinationals headquartered in London that may be wary of Brexit.”
Aside from the £40bn (if not more) ‘divorce bill’, the UK will no longer receive EU grants and rebates, however as one of the ten countries that pays in more than it receives, we will be better off. For example, the UK received £4.6bn in 2014/15 from the EU, but contributed £8.8bn in the same period. But for UK businesses, the majority of which were pro-EU, the uncertainty of the future has caused many to be pessimistic about their own and wider economic growth. When the UK leaves it will become a member of the World Trade Organisation of its own right which should protect the country from unfair or discriminatory tariffs, but the ultimate shape of the trade agreements may take years to come out in the wash.
International Trade Secretary, Liam Fox, is optimistic;
“We have a £17bn surplus in services with the European Union, the European Union has a £102bn surplus with the UK, so it would be very damaging to businesses in Europe not to come to a deal. Therefore I think that the economic well-being of the people of Europe, of the businesses of Europe will ultimately take precedence in these negotiations over the politics of every closer union.”
Moving forward
The relationship between the UK and EU will undoubtedly continue to be very strong; after all, the EU is Britain’s biggest trading partner. With negotiations very much ongoing there will be a lot more clarity as to the situation in the coming 12 months.
Both sides are fighting hard to protect their own interests whilst balancing the rights of the people who will be most affected and the businesses that rely on a ‘good’ deal being struck. It’s of no interest to either side to be too hard on the other, but equally in any break-up there is going to be a level of animosity and neither wants to lose out.
The big issues surrounding the customs union, Irish border, fishing policy and migration will continue to be debated – hard and difficult decisions need to be made and agreed over the next year. What is likely, however, is that come March 19 2019 there will still be a very long way to go until the picture for the UK-EU relationship is clear.
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