Thursday , February 21 2019

New trade arrangements will safeguard UK’s economy


The British people chose to vote in June 2016 to disentangle their country from the EU. They did not simply vote to withdraw from the European Union but to change the way their country works. But even after more than six months of that historic referendum, people are not sure about what the future holds for them.
The most important question is what kind of relationship will be there with EU when UK is out of the block. Of course Brexit will give UK the control of its border and control of its laws. But things will be difficult for British companies if UK will have to leave tariff-free single market. PM Theresa May wants the best possible deal for British companies to be able to trade within the EU and European companies to operate and trade in the UK.
In her first interview of the New Year, UK Prime Minister Theresa May signalled regaining control of immigration and lawmaking are her Brexit priorities even if that means quitting Europe’s single market. She made it clear that leaving EU would be about “getting the right relationship, not about keeping bits of membership.”
Her statement suggests that with time running out before her own March 31 deadline to file for divorce, May is willing to gamble Britain’s trading relationship with its biggest market in return for greater sovereignty. Being part of the EU requires the UK to allow free movement of labor and to accept the jurisdiction of the European Court of Justice.
But EU has repeatedly warned that she will not be allowed to ‘cherry pick’. If May wants the membership of the tariff-free single market, she will have to agree on maintaining free movement of goods, services, capital and labor. May’s hope will be that they will still be willing to strike a free trade deal with the UK to safeguard their own economies.
May pledged to use the Brexit vote to drive a change in the relationship between people and the government. She said that the state should be willing to step in to solve “burning injustices.”
Britain’s PM has said she plans to trigger the formal EU exit process by the end of March, and much of the economic impact will depend on how the divorce plays out and how households react.
Although the UK economy seems to have weathered the initial shock of the Brexit vote, the value of the pound remains near a 30-year low. But there is divided opinion over the long-term effects of leaving the EU.
It is important to understand what will be the economic loss the EU divorce will incur on Britain. The exports of goods and services constitute more than a third of Britain’s economy. And so Brexit could cost the country around 7.5 percent in real income between now and 2030. On other hand, the British market absorbs almost 8 percent of German exports, over 7 percent of French exports, over 5 percent of Italian exports and almost 10 percent of exports from the Netherlands. And the governments of these countries hardly want to lose this business.
And if UK wants to mitigate the economic impact post EU divorce, the government will have to quickly make new trade arrangements with the rest of the
world and EU.

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