It would be unnecessary to comment on the shock dealt to financial markets around the world by the Brexit. No one was expecting it. And despite the efforts of “Remain” campaigners – some are hoping for another referendum – the hands of time are unlikely to run backward; Britain will be leaving the EU for good.
Article 50, the EU’s exit clause, requires that a country formally leave the EU within two years of signalling its intention to do so.
The ramifications of Brexit extend far beyond trade relations – most notably to immigration policy and regulatory measures. These topicsrequire their own articles, so I will focus only on the possible trade implications of Britain’s departure.
In leaving the EU, Britain is withdrawing from the group’s market. Member nations trade freely with each other within the “single market” – no tariffs (taxes on goods) are imposed on the import of any product from one EU nation to another. This brings benefits to consumers and exporters within the EU.
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 their cars to the European market – not just to local consumers.
EU leaders are reluctant to give Britain entirely free access to the European market. If Britain is left relatively unscathed by its decision to leave, similar movements in other European countries may gain momentum. The EU does not want Britain’s exit to pose a threat to the entire union’s existence.
It does not help Britain’s case that certain leaders of the “Leave” campaign are displaying an utter lack of tact. Former UK Independence Party (UKIP) leader Nigel Farage’s 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 claims are false. One statistic makes this evident for the British: Britain sells 50 per cent of its goods to the EU, while the EU only sells six per cent of its products to Britain.
In addition, Britain will have nowhere near the influence of the entire European Union during trade negotiations with other countries. American President Barack Obama reminded British voters aboutthis in the weeks before the referendum.
All things considered, the EU should do its best to place as few tariffs as possible on goods being produced by British exporters. First, consumers benefit when they have greater choice and are not forced to pay high prices for imported goods.
Second, tariffs are nearly always reciprocal. If the EU decides to tax British exporters, Britain will tax EU goods. Although not a critical market for EU manufacturers, Britain is important. Exporters across the EU would be dealt a blow if they were to lose the British market, and trade groups in Germany and France are already asking their governments not to impose tariffs on the UK.
Britain would probably have been better off if the Remain campaign won the referendum. The country no longer holds the favourable 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.