Brexit, Not All Bad

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Background

The aim of EU was to avoid another devastating war in Europe by making its countries economically interdependent. Laws are designed to allow free movement of goods, services, money and people within EU member states.

Despite the undoubted idealism of its founders and the good intentions of so many leaders, the EU has proved a failure on so many fronts. EU regulation has overridden UK’s sovereignty. The trade agreements have limited UK’s growth potential with the rest of the world. EU immigration policies have benefited non-Brinton Europeans more than Britons. Far from providing security in an uncertain world, the EU’s policies have become a source of instability and insecurity.

Politics

Only 3.6% of the European Commission members are British, and the European Commission is unelected, which has the monopoly of proposing all EU legislation which it does in secret. It also has the power to issue regulations which are automatically binding in all member states.

The British Parliament will only be able to opt out of EU laws if the British government is able to get 55% of the other EU nations’ parliaments to join it in cancelling the law. EU laws are automatically incorporated into British laws without the consent of British Parliament.

Economics

Falling EU Economy

Figure 1: EU GDP to Global GDPdata.png

The share of EU economy has been falling, and it stands at 23.7% of global GDP today, and it is projected to decline even further.(See Figure 1) Plus, UK is now exporting less to the EU than they did 10 years ago. 51.4% of UK’s current exports are to EU, while only 5% of UK’s business exports are to EU. The EU promotes the trade in goods over services – it was not built for Britain, which is a world leader in services, especially financial services. The UK’s exports to the rest of the world are growing twice as fast as the UK’s exports to the EU.(See Figure 2) Britain is the only EU state that sells more outside the union than to other members.

data2

Growing Global Market

The decline of the portion of EU GDP to global GDP indicates more market growth opportunities outside of Europe. The UK’s three fastest growing export markets are outside the EU(Chile, China and the United Arab Emirates) (See Chart 1), and leaving EU will provide UK with the freedom to to negotiate its own free trade deals.

Chart 1: Top 10 countries ranked by UK export growth, 2013 versus 2012

2013 value (£m) 2013 rank % of total UK exports 2012 value (£m) % change year-on-year
Chile 1,168 40 0.4 677 72.5
China 12,400 7 4.1 10,538 17.7
United Arab Emirates 6,228 10 2.0 5,364 16.1
Hungary 1,254 37 0.4 1,111 12.9
India 5,261 14 1.7 4,666 12.8
Poland 3,896 22 1.3 3,458 12.7
Turkey 4,102 20 1.3 3,684 11.3
Saudi Arabia 3,398 24 1.1 3,087 10.1
Qatar 1,529 33 0.5 1,393 9.8
Irish Republic 19,024 5 6.2 17,532 8.5

Although EU has been actively negotiating trade deals with major economies like Japan, India and the United Arab Emirates, but they have all either been suspended or are barely moving. For example, EU has been negotiating free trade deals with India, the biggest emerging market, for more than 8 years, but it is going nowhere, because there are so many interest groups in EU, and it is nearly impossible to reach an agreement. However, Iceland, not a member of EU, has successfully reached a free trade deal with China two years ago. Without doubt, a bigger and stronger country like UK will  have no difficulty in having better deals with the rest of the world.

As the 5th largest economy in the world, UK has some power and influence so that it will not necessarily lose all of benefits from EU. Some countries, like New Zealand, have already stated interest in maintaining a trade agreement with the UK even if it leaves the EU.

Immediate Cost Saving

Leaving the EU would result in an immediate cost saving, as the country would no longer contribute to the EU budget. This money, approximately 340 million euros per week, can be used to increase the education budget and also invest in scientific research technology development. Most importantly, this money can be used to reduce the government deficit.

Immigration

UK has lost its control on boarders because of EU’s immigration policy. Basically, everyone with an EU passport can enter UK, no matter you are a criminal or a terrorist. However, for non-EU residents, UK has placed a number limit on the people allowed working in the UK from outside the EU. This number is usually reached within 6 months every year. This is interpreted as an discrimination against people outside the EU. This policy is also bad for the development of UK, as talents from EU cannot work there once the cap is reached.

Conclusion

Although the mass media are claiming that leaving EU will do no good to both UK and EU, it is not necessarily true. After leaving EU, UK will regain the control of its policies as well as its boarders, and more importantly, UK will have the opportunity to have freer trade deals with other countries.

For EU, it is time for them to implement reforms to the bloc. The idea of making the whole Europe to function like one single country is always a utopia. With different development stages and cultural backgrounds, member countries are difficult to reach an agreement. The EU should a bloc of countries that trade together freely, other than the second United States.

 

Resources:

http://time.com/4207785/these-5-facts-explain-the-debate-over-brexit/

http://www.telegraph.co.uk/finance/comment/11968813/Three-reasons-why-Britain-needs-Brexit.html 

http://www.bbc.co.uk/guides/zgjwtyc 

http://www.telegraph.co.uk/finance/economics/11967049/Brexit-is-a-life-or-death-matter-for-Britains-farmers.html

http://www.independent.co.uk/news/uk/politics/eu-referendum-michael-goves-full-statement-on-why-he-is-backing-brexit-a6886221.html

http://www.telegraph.co.uk/news/newstopics/eureferendum/12175398/EU-Referendum-everything-you-need-to-know-about-British-sovereignty.html

https://uk.finance.yahoo.com/news/2020-eu-members-adopt-euro-170015496.html

http://www.telegraph.co.uk/finance/economics/10935617/After-2020-all-EU-members-will-have-to-adopt-the-euro.html

https://www.gov.uk/government/speeches/pms-statement-following-european-council-meeting-19-february-2016

https://www.youtube.com/watch?v=ZbEZNhFY9TA

http://www.economist.com/blogs/graphicdetail/2016/02/graphics-britain-s-referendum-eu-membership

https://www.youtube.com/watch?v=7IWOjb86-EM

http://www.ft.com/intl/cms/s/3/6df1db7a-e159-11e5-8d9b-e88a2a889797.html#axzz44Mdpnmer

http://www.telegraph.co.uk/news/2016/04/01/french-more-keen-on-brexit-than-british-says-major-poll/

http://www.economist.com/news/britain/21695958-hostility-large-scale-european-union-migration-could-decide-referendum-let-them-not-come

http://leave.eu/

 

 

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5 Responses to Brexit, Not All Bad

  1. Zhejing SUN says:

    It is true that the idea of making the whole Europe to function like one single country is always a utopia. According to the article, EU GDP to Global GDP shrank from 30.7% to 23.7%, around 23% in a decade. Furthermore, the free trade agreements are processed slowly between EU and other countries due to the discrepant interests pursued by different countries in EU.

    On the other hand, UK is more flexible and efficient in negotiating with other countries on free trade agreement. UK is enjoying the “freedom” of being not a part of EU in terms of free trade, politics, immigration issues raised in EU. However, each coin has two sides. Whether EU could be benefit from free trade agreement with big export countries such as China, Japan etc and balance each member’s benefits to generate aggregated benefit for the whole union is still an open question.

  2. weiwei17ma says:

    Well, this is quite an interesting blog. Brexit is a heated debate topic these days. And I am very interested to learn from your blog that the aim of EU was to avoid another devastating war in Europe by making its countries economically interdependent. I do believe political issue is one important consideration for Britain, but I am not so sure whether it’s the core reason for Brexit. I found the data in the blog very inspiring. It showed benefits, including short-term cost saving, of Brexit. But I am wondering whether the process of negotiation will be easy for Britain to obtain such a good deal.

  3. chenzhuoran says:

    Good to read a pro-Brexit article. From what I’ve read from all sources, it seems that the force of proposing Brexit mainly comes from inside Britain, while the rest of the world, including some Briton such as Mr. Cameron, are trying to keep Britain in EU. I find this situation interesting, and it itself suggests that Brexit is a negative sum game–except other EU countries might lost more given the fact that most of they import from Britain more than they export to? Not really. I just read a article on FT saying that many foreign investors have delayed their potential investments in Britain because of the risk of Brexit, and financial institutions are cutting their new hires. Moreover, a group of European economists forecast that Brexit would cost 2% of British GDP in the next two years.

    Personally speaking, I don’t think Brexit is the good choice for British people because I believe Britain can remain a better presence in the world with its fellow European countries rather than flying solo. It is true that Europe is less and less centric in global economics and politics, but that’s pretty much not EU’s fault. In the face of rising China and still strong America, more than ever should Europe stay united and a EU without Britain and a Britain out of EU would both be worse-off.

  4. pancr7 says:

    There is a heated debate on whether Britain should leave EU these years. You stand the points that leaving EU will benefit Britain by preventing falling economy, building connections with other countries easier, reducing immediate cost and controlling immigration policy. I agree with your points to some extent. However, I read something from website, saying that there are some disadvantages for Brexit. The first one is it may lead to economic in stability, for example the unemployment rate will increase. The second one is it may increase the political risk. Senators in Scotland all vote for staying in EU. Maybe conflicts will happen. The last not but least, the currency of Britain will depreciate if Britain leaves EU. Therefore, we can see that leaving EU is a double-edged sword. Maybe it is too early to decide whether it is wise or not. I guess time will tell us.

  5. maxehart says:

    This is a very interesting blog about a topic that has been in the news consistently. Brexit has the potential to greatly effect the EU and the global economy. I enjoyed reading about some of the positives that would arise for the UK if it were to leave the EU, because I feel as though the negatives have been heavily promoted. While the UK is a part of the EU, it is not part of the Euro Zone as it has maintained its own currency instead of adopting the Euro. This decision is backed up by the idea of Optimum Currency Areas because the UK’s economy does not match that of the other countries. The country is not as tightly knit to the union and therefore, its exit would be easier than that of the others.

    Also, multiple trade issues have been arising for the UK that make Brexit more enticing. As explained in another blog post, the UK steel industry is being attacked by Chinese steel. There is not much that Britain can do about it, however, due to the fact that they cannot enforce their own tariffs immediately. They must first reach an agreement with the whole EU, which can take a very long time. This could be detrimental to UK steel and could be even worse for other industries down the line. This is just one example of an issue that has arisen due to membership in the EU. The UK is a developed country that maintains a strong and stable economy. It would be able to stand on its own if it were to leave the UK and it might even help the country. It is a very interesting argument that is not clear cut either way.

    Max Hart
    mhart@brandeis.edu

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