Globalization Paper on Brexit
First, there is no doubt that the economic state of the U.K. will be affected greatly for leaving the E.U., with respect to trade and currency. Trade will be affected because in the E.U. there is a provision known as the European Free Trade Area, which allows the members of the E.U. to trade with each other without having to pay tariffs. Some reasoning behind wanting to leave the E.U. was that they wouldn't have to pay into the membership, and would therefore have more money in which they could cut taxes. However, with them leaving they may now have to pay fees and additional taxes for trading with E.U. members. Sean Milmo states, "The U.K. governments objective in the Brexit negotiations is likely to be an agreement that allows the country access to the E.U.'s single market without tariff and above all non-tariff barriers." This would prevent U.K. corporations from having to pay tariffs which would greatly cut into profits for corporations and create barriers to entry for small businesses.
Now, another drastic impact on the economy will be that of currency. The U.K. leaving the E.U. creates political and economic instability, which would decrease the values of the pound and the Euro. The pounds decrease would be the result of enormous amounts of debt that the U.K. has, as well as its unstable stock market. Many investors in the stock market may pull their investments due to the instability in the nation, which would result in a recession. Many economists predict that the U.K. will fall into recession due to its high debt, political instability, and decrease in value of currency. Another currency that will be affected by the U.K. leaving the E.U. will be the Euro. The U.K. leaving hasn't just created economic and political instability in their own country, but the entire E.U. This may in turn decrease the value of the Euro compared to the American Dollar. However, it will see an increase in value in comparison to the pound.
Next, one may ask how these two issues can affect one another? They will affect one another because; with decreasing value of currency the U.K. won't be in a position to import as many goods. This is because they simply can't afford to, their value of currency is decreasing with respect to the Euro and the Dollar. Therefore, they will be purchasing less from other countries, which then effects trade. Instead of a country that is mainly concerned with imports they will be more export driven. Being more export driven will result in more manufacturing jobs and less service jobs.
Second, the political effect of the U.K. leaving the E.U. is a troublesome issue. Shortly after Brexit, Conservative Prime Minister of the U.K. David Cameron resigned, and Theresa May took his place. Under the provisions of Article 50 it takes two years for the U.K. to leave the E.U. and no longer be applicable to the E.U.'s treaties. Now that the U.K. will be leaving the E.U., there is a good chance of Scotland leaving the U.K. The last referendum in 2014 was a close vote in which Scotland decided to stay with the U.K. However, now that the U.K. is leaving the E.U. it creates economic, political, and social instabilities. Scotland has already disapproved of the decision to leave the E.U. as its export economy is greatly impacted by free trade within the E.U. As Alisa Henderson states, "over half of individual polls in England show 'Leave' majorities (2/5 in Wales). By contrast, Scotland and Northern Ireland are firmly in the 'Remain' camp." This shows that there are major differences in opinion within the U.K. on whether to stay or leave the E.U. Another troubling issue is that the main opposing party to the Conservative party, the Labour party, is having major problems within their own party. Jeremy Corbyn who was elected less than two years ago has encountered lack of support from his party, due to his lack of leadership. To call the U.K.'s current political situation poor would be an understatement.
In conclusion, Brexit has been a huge disaster with regards to the economic and political state of the U.K. It has led to uncertainty, instability, and unforeseen consequences. The economies of the U.K., the E.U., and even the U.S. will be affected, some for the better but mostly for the worse. Only time will tell what exactly will happen after the U.K. is disbanded from the E.U., but things are looking bleak.
Henderson, Ailsa, Charlie Jeffery, Robert Liñeira, Roger Scully, Daniel Wincott, and Richard Wyn Jones. "England, Englishness and Brexit." The Political Quarterly 87.2 (2016): 187-99. Web. 11 Oct. 2016.
Milmo, Sean. "Brexit Sparks Uncertainties." Pharmaceutical Technology Europe 28.8 (2016): 8. Web. 11 Oct. 2016.
Ricketts, Rita. "Brexit: A Long March." New Zealand International Review 41.5 (2016): 2-6. Web. 11 Oct. 2016.