Proponents argue that the decision to leave the European Union will have immigration, trade, and sovereign benefits and the country will not suffer much. However, the opponents say that BREXIT will reduce trade costs, cause danger to jobs, and affect the financial market, etc. (Hobolt, 2016). The impacts of the United Kingdom's decision will largely depend on the new relationship with the European Union. Being a member of the EU, the United Kingdom has enjoyed many benefits. For instance, the relationship has eliminated tariff barriers and created a single market for all EU members (Booth et al. , 2015).
The United Kingdom has enjoyed these benefits for a long time now and leaving the EU will have a huge impact on the country. This essay will determine whether BREXIT is a good idea by reviewing its impact on the United Kingdom. The impacts of BREXIT are not known. Its impacts can only be determined by estimations and assumptions (Baier et al. , 2008). It is not known how the relationship between the United Kingdom and the European Union will change after the exit. There is therefore lack of clarity over the impacts of BREXIT on trade.
Proponents assume that the UK will have a good relationship with the EU similar to that of Norway (Dhingra, Gianmarco, and Sampson, 2015). Norway has a free trade agreement with the European Union and trade tariffs are minimal although it is not a member of the EU. Therefore, although the United Kingdom will face some non-tariff barriers such as anti-dumping duties, BREXIT will still enjoy some benefits if it is successful in negotiating new trade agreements Norway (Dhingra, Gianmarco, and Sampson, 2015). However, critics argue that there is a possibility, although minimal, that the country will not be able to negotiate a trade agreement with the EU (Dustmann and Frattini, 2014).
If this happens, the trade between the two parties will be governed by rules implemented by the World Trade Organization. UK will incur more trade costs since the WTO has not made any progress in minimizing non-tariff barriers. Also, in recent years, the trade costs between EU countries have reduced by about 40% more than between OECD countries (Dhingra, Gianmarco, and Sampson, 2015).
And as such, the United Kingdom will not benefit from any forthcoming declines in trade costs. Proponents of BREXIT also argue that Britain’ s connection to the EU is preventing the country from focusing on trade opportunities on emerging markets (Dhingra, Gianmarco, and Sampson, 2015). For instance, the UK has not signed trade agreements with potential countries such as China and India. Exiting from the EU will offer an opportunity for the country to diversify its international links (Dhingra, Gianmarco, and Sampson, 2015). Being the leading beneficiary of foreign direct investment, the decision to exit the European Union will minimize the attractiveness of the United Kingdom as an entryway to Europe (Scaub, 2016).
In 2013, the European Union made up about 46% of foreign direct investment in the United Kingdom which will be influenced by BREXIT. The UK will have to struggle to attract new investment to compensate EU share. Furthermore, not only will the UK’ s decision affect investments it will negatively impact European companies that have invested in the country (Dhingra et al. , 2016).
The cost associated with adjustment for these companies could be very high. However, proponents contend that the UK has many benefits that will not be affected by the decision to exit the EU such as language and deep capital markets. The country will not face problems when looking for new investments due to its economic attractiveness (Dhingra et al. , 2016).
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