Article 50, the EU’s exit clause, requires that a country formally leave the EU within two years of signaling its intention to do so. Instead of performing an autopsy on the referendum, the focus must shift toward negotiating an exit that minimizes the harm done to the UK and to the EU.
The ramifications of Brexit extend far beyond trade relations—most notably to immigration policy and regulatory measures. These topics, and others, require lengthy articles to themselves, so I will focus only on the potential trade implications of Britain’s departure.
In leaving the EU, Britain is withdrawing from the group’s unified market. Member nations trade freely with each other within the “single market”—no tariffs or quotas are imposed on the import of any good from one EU nation to another. This borderless trade brings huge benefits to consumers and exporters in the bloc.
British consumers, for example, benefitted by being able to select from a variety of competitively priced goods produced across Europe. On the other side of the trade, a car manufacturer in Germany can sell without impediment to the entire European market—not just to local consumers.
EU leaders are understandably reluctant to afford Britain entirely free access to the European market. If Britain is relatively unscathed by its decision to leave, similar movements in other European countries—Italeave, Departugal, and Oustria to list a few of the awkward portmanteaus—may gain steam. The EU does not want Britain’s exit to pose an existential threat to the entire union.
It does not help Britain’s case that certain leaders of the “Leave” campaign are displaying an utter lack of diplomatic tact. Nigel Farage’s remarkably disrespectful comments to the European parliament—he claimed none of its members had done a day’s work in their lives, among other statements—will not earn the British any goodwill.
Although the leaders of the “Leave” movement may claim that the EU depends on Britain much more than Britain does on the EU, such assertions are plainly false. One statistic makes this painfully evident for the British: the UK sells 50% of its goods to the European union, while the European Union only sells 6% of its to the UK.
In addition, Britain will by itself have nowhere near the clout of the entire European Union when engaging in trade negotiations with other countries. American president Barack Obama made particular note of this in the weeks preceding the referendum.
Even with all this considered, the EU should do its best to impose minimal tariffs on goods being produced by British exporters. First, as highlighted earlier, consumers benefit when they have greater choice and are not forced to pay premiums on imported goods.
Second, tariffs are nearly always reciprocal. If the EU decides to tax UK exporters, the UK will inevitably tax EU ones. Although not a critical market for EU manufacturers, the UK is important. Exporters across the EU would be dealt a serious blow if they were to lose the British market, and trade groups in Germany and France are already lobbying their governments not to impose tariffs on the UK.
Britain would probably have been better off if the Remain campaign triumphed in the referendum. Alas, that was not the case. The country no longer holds the favorable trade position it once did. But this is not a time for the European Union to retaliate with harsh trade deals. A free market in goods will continue to bring enormous rewards to consumers and producers on both sides of the Channel.
A version of this article appeared in the South China Morning Post's Young Post on Thursday, September 29. http://yp.scmp.com/over-to-you/columns/article/104495/its-high-time-sensible-policies-brexit
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