Brexit Prevailing Country

Question: Discuss about the Brexit for Prevailing Country. Answer: There is a mixed feeling prevailing in the country regarding the Brexit. Some people are voting for Brexit, as they think exiting from the European Union will boost up the British economy as the freedom from the European Union will provide the British economy a lot of new chances outside Europe. Others are voting against Brexit, as they think this exit will limit their available options in the open market scenario, resulting in a net loss for the economy. The whole article is divided into several categories, namely, "the broad economy, jobs, trade, immigration, status in Europe, and position in the world." All these categories contain the arguments that have been placed so far regarding Brexit. Economists over the country have attempted to quantify the outcomes of Brexit. Some of them have argued that Brexit will cause the economy to suffer permanent losses due to weak trade structure and minor investment from the European Union. National Institute of Economic and Social Research (20 04) suggested Brexit will bring in a permanent loss in UK's GDP by 2.25 percent because of the reduction in Foreign Direct Investment (FDI). Jonathan Portes, an economist, raised an argument to that stating, the world economy has changed remarkably in last ten years (Allen et al. 2015). The economists from Centre for Economic Performance (CEP) suggested that there would be a fall in income around 6.3 % to 9.5 % of the current GDP. The optimists have calculated the loss around 2.2 percent of the GDP. The authors suggested that Brexit will give a burden to the economy of Britain imposing a substantial cost. According to CBI, a business group staying in the European Union will provide a benefit of 4-5% of the GDP (Thomson 2016). Figure: Impact on level of GDP. Source: International monetary Fund report. The figure above shows the forecast of International Monetary Fund on UKs economy. It is showing the difference from the base in percent for two possible scenarios. The people who are indifferent in making a choice over Brexit yet, stressed that the consequences could go either way. They said, the country's GDP will reduce by 2.2percent if the center fails to strike a deal with the European Union, but if it does succeed, Britain can gain 1.6 percent of the GDP by the year 2030. According to the economists like Roger Bootle, without a fundamental reform, staying in the European Union is not worthy enough. In the year 2012, UK paid a net worth of 9.6bn into the European Union. The CER states that even if UK is a net contributor to the European Union, but the later's regional and agricultural funding are something the country will miss. According to an optimist, Tim Congdon, UK is losing around 11.5% of its GDP per year due to being a part of the European Union. Although some people are saying Brexit will cost UK three million jobs from the trade industry, others are arguing stating the fact that those jobs are directly related to trade (Wallace, P ollack and Young 2015). Hence, an unchanged scenario in trade market will ensure the jobs to be as it is. People against Brexit fears, without the European Union the trade market will shrink for the UK, as the countries who are in trade relation with UK are mostly from the European Union. But economists like Bootle said this is hardly going to change the scenario as the chance of having a bigger world market will follow the Brexit. Even the European Union will try to strike a deal after Brexit, with Britain, as UK has an enormous role in the European Union. The immigration scenario in UK after Brexit is still in a hazy situation. Without a proper replacement of the current rules, the future is unsure. According to some people, Brexit will hurt UK's influence over Europe. But the people voting for Brexit are hoping that UK will regain its influence over the European Union with time (Dhingra, Ottaviano and Sampson 2015). No.2. According to Authors, Our current assessment is that leaving the EU would be likely to impose substantial costs on the UK economy and would be a very risky gamble. (page 2 of 10)- in light of the article and based on your own research, please explain why the authors suggest so. Can you provide a justification for the creation of European Union (hereafter EU) at the first place? According to the Brexit pessimists, Brexit will result in an increase in tariff barriers. This difference in the patterns of arrangement between the European Union and the United Kingdom will be followed by an increasing cost of trade. They suggest, 9.5 percent of the UK's GDP will be the cost of Brexit, which is equivalent to 150 billion. The scenario will be same as the 2008-09 financial crises in the United Kingdom. Britain can have unfettered practical terms of access to the enclosed market of the European Union, like the countries Switzerland and Norway do. But this has the potential of a loss of 2.2 percent per annum of their economic output, which is equal to 35 billion. Trade with the rest of the Europe has risen from 30 percent to 50 percent in a span of forty years approximately. The UK government is yet to create a sound plan regarding the European Union and the countries within it. Issues like UKs access to the European market, movement of factors of production and trade barriers are still unattended by Brexit advocates. These may result in a short-run depreciation in the pound against most major economies. Countries, who saw UK as the gateway to the European market will stop Investing in UK after Brexit. Another cost of Brexit is a reduction in the employment rate (Dhingra et al. 2016). According to the pessimists, persons who are involved in trade with other European Union members wil l lose their jobs as terms of trade with the European Union will deteriorate. Reduction in foreign domestic investment is also another cost to the UK economy according to them. This will lead to a substantial loss in the country's GDP. There will be consequences with immigration too (Booth et al. 2015). Britain might lose all the advantages it is getting from the European Union currently. "The dream of splendid isolation may turn out to be a very costly one indeed," it concludes. Figure 1: Exports and Imports of UK in EU era. Source: The National Archives, UK. The figure above shows the total export and import of services to Europe under EU era. The graph states that both export and import increased over time. As an aftermath, The European Union was formed after the Second World War. There was a common belief that those countries which trade with one another become economically interdependent. As a result of this, these countries try to avoid any conflicts which might result in a war. 28 countries united under the European Union with the goals of a political and an economic union. These countries are independent, yet they agree to trade under the agreements, which were made among the countries before. The countries in the European Union were Ireland, Italy, Latvia, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Republic of Estonia, Finland, France, Hungary, Lithuania, Luxembourg, Malta, the Netherlands, Germany, Greece, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom (Minford et al. 2015). Recently the United Kingdom left the European Union. The European Union has created a large single market, which allowed the member nations to m ove goods and services, capital, and people freely. No barriers would exist in the form of borders and political restrictions. All these make the idea of the United States of Europe an intriguing one (Recina and Officer 2016). No.3. The article argues, The general rule is that if a country like Britain were to cherrypick and discriminate against individual EU member states, the EU would at least threaten to retaliate (page 7 of 10). Do you think that Britain, as a non-member of EU, will co-operate with the EU? Explain. The European Union has its migrants in the United Kingdom, as well as, there is a huge number of British people who are working in the member countries of the European Union. In this situation, both the authorities have to cooperate to come up with new solutions, which will make the migration process easier for the people. In reality, Britain has drawn its list of the member nations of the European Union, whose citizens will need a visa to enter the United Kingdom. This will make entering into Britain scenario terrible for the people of the countries which are poor, for example, Bulgaria and Romania (Butler, Dagnis and Snaith 2016). Citizens of these countries will face a long list of forms and regulations to get in to the United Kingdom. On the other hand, people from wealthy nations like France and Germany, which has a better tie with the British government will be able to get a visa for entering into Britain much more quickly. This theory advocates discrimination, which was the ma in avoidable point for the European Union. According to Steven Peers, a professor of EU law at the University of Essex, the European Union has a joint visa list. Britain making a list of its own will hamper the fluency of the process, disrupting the United Kingdom and the European Union's transparent immigration pattern complicated. This will lead to a complex process for the citizens of the United Kingdom applying for visa every time they try to cross the Channel (Lodge 2015). Those people of the United Kingdom who are already living in the other European Union member nations will face integration rules. They might have to qualify for certain attributes, like the requirement to speak the language of the host country, to get a long-term residency status. This will, in turn, make the situations in the borders of the United Kingdom vulnerable. The politically sensitive borders will require more attention and resources (Koutrakos 2016). Figure 2: Percentage of change in growth. Source: OECD quarterly national count. The above figure shows that the fluctuations in percentage change in real GDP growth for UK was much more high than the member countries of the European Union. Trading with the member nations of the European Union will be complicated due to this immigration process, for the United Kingdom. The trading giants will lose interest in investing their resources in Britain's market because of this complexity. Moreover, this might increase the shipping charges and cost of production for the British companies, as the free flow of goods and services, people, and resources will be hampered. If the European Union retaliates with some other strict policies for British people, the later will be a net loser (Piris 2016). This makes the United Kingdom take an interest in keeping a good relationship with the European Union. Hence, it becomes mandatory for the United Kingdom to cooperate with the European Union. This leaves the United Kingdom only the choice of being a non-member of the European Union and have good terms with the European Union (Lang 2014). No.4. Do you think that the global economy might slow down because of Brexit? Explain. Brexit has a huge role in the global economy. The consequences of Brexit can be divided into two parts, short-run and long run. Joining these two parts will bring complexity into the scenario. In the short run, Brexit will bring uncertainty over the terms of trade, employment, relationship with the European Union, etc. This uncertainty will lead to a fall in exchange rate of the United Kingdom's pound, reduction in Foreign Direct Investment, and much more. This will slow down Britain's growth in GDP (Stokstad 2016). Trade will get disrupted. Countries, which were in a trading relationship with the United Kingdom, will face complexities over trade. The United Kingdom had a huge role to play in the European Union's policies. Brexit will have adverse effects on the European Union too. The import-export market will get muddled as the whole Europe will be busy in absorbing the aftershock of Brexit. Small countries, whose GDP depend on trade with the member nations of the European Union will suffer. In the short run, the value of the pound will deteriorate making import difficult for the United Kingdom. This will decrease the demand by British people in the world market. Hence, it can be concluded that Brexit will bring in short run glitches in trade, marketing, financial services, regulation, and productivity in most of the countries' economies which are influenced by the United Kingdom (Kierzenkowski et al. 2016). Figure 3: Exports of EU and Non-EU countries. Source: Oxford Economics. The figure above shows the difference between the EU and Non-EU countries export of goods and services. In the long-run, the United Kingdom will take advantage of the deteriorated value of the pound, increasing export of the country. With time, their economy will achieve equilibrium once again. Countries with big markets influencing the world economy, like China and India has started working on this matter to avoid the aftershocks of Brexit. The reverse effects of Brexit will evaporate gradually over time. The economist, Obstfeld said, This overlay of extra uncertainty, in turn, may open the door to an amplified response of financial markets to negative shocks." According to the International Monetary Fund, Britain losing access to Europes common market and financial markets will face a reduced economic growth by 5.6 percent over the next three years. Some economists like Paul Krugman still believes that eventually the aftershocks of Brexit will phase out from global economy (Dorling 2016). References: Allen, K., Oltermann, P., Borger, J. and Neslen, A. (2015). 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