January 31, 2020

Happy BREXIT Day - Now For The Hard Part

Tonight Great Britain will leave the European Union.

Then comes the hard part.

Britain has until the end of this year to make a new trade deal with Europe, with the U.S., and with other countries.

But it does not have much negotiation power. Nearly 50% of Britain's exports go to the EU where 27 national parliaments will have to sign off any new deal. No deal means that Britain would lose a big chunk of that trade. In the U.S. Congress must also agree to a new trade deal with Britain. Lots of lobbyists will ask for open access to Britain's markets.

Those deals will make Brexit much less favorable than envisioned. One often heard argument for Brexit was that Great Britain would regain exclusive fishing rights within its economic zone. But some EU countries will likely ask for additional fishing rights in British waters in exchange for something Britain urgently needs.

The U.S. will want access to the British markets for its agricultural and healthcare industries. That will conflict with Britain's own farmers, food regulations and its much liked National Health Service.

Britain will have to negotiate two very large and complicated deals under severe time pressure. The EU might offer to extend the deadline under some conditions but Boris Johnson has promised not to ask for it. Comprehensive trade deals normally take several years to make. Negotiations about access for Britain's financial service industry to the EU market will be extremely complicated.

There was a time where Britain ruled the seas and where headlines like "Fog in Channel; Continent Cut Off" were not only funny but somewhat justified. But neither is still the case.

It is Britain that needs the deals not the other countries. The choices the Tory government will make throughout the negotiations are unlikely to be in favor of the average British citizen.

The economic damage all this will cause will not be felt at once but will most likely creep in through no or low growth, increased unemployment and higher prices.

There are also the national issues. Northern Ireland will economically be integrated with Ireland and may over time consider leaving Great Britain. The Scottish people had preferred to stay within the EU. They may again try to secede.

Five to ten years from now Great Britain will likely be much less great than it is today.

The EU can do well without Britain. The country was never really committed to the union and often played a negative role.

But the EU will also need to change its urge to centralize and regulate everything. If it continues on its path other countries may want to follow the British example despite the damage it will cause to them.

Posted by b on January 31, 2020 at 18:19 UTC | Permalink

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