Brexit and its impact in United kingdom, Europe and the World (Essay Sample)

BREXIT AND ITS IMPACT ON THE UK, EU, AND GLOBAL ECONOMY
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Introduction  PAGEREF _Toc459057664 \h
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The Background to the European Union  PAGEREF _Toc459057665 \h
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The UK’s Position and Role in the EU  PAGEREF _Toc459057666 \h
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Should the UK leave or Stay in the EU?  PAGEREF _Toc459057667 \h
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Immediate Impacts of the BREXIT  PAGEREF _Toc459057668 \h
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a. Currency Value and stocks  PAGEREF _Toc459057669 \h
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b. Investment in the UK and global market  PAGEREF _Toc459057670 \h
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Impacts of Brexit on the Global Market  PAGEREF _Toc459057671 \h
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Managing the Brexit impacts by Government and the Central Banks  PAGEREF _Toc459057672 \h
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Withdrawal process followed by a country leaving the EU  PAGEREF _Toc459057673 \h
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What the Brexit means for the EU and the UK  PAGEREF _Toc459057674 \h
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Long-run Implication of the Brexit to the EU’s and the Uk’s Economy  PAGEREF _Toc459057675 \h
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Conclusion  PAGEREF _Toc459057676 \h
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BREXIT and its impact on the UK, EU, and Global economy
Introduction
The Brexit generates greater uncertainty regarding the impacts on the UK economy since business transactions within the EU, where the UK is a major trading partner, will need news deals as well as terms. The fate of approximately two million Europeans working in the UK and enjoying benefit rights in the Britain depends on the Brexit outcome (Douglas 2016). This paper investigates the background to the EU and UK’s position and role in the EU, in the light of its vote to leave the EU. Moreover, the paper evaluates an argument of whether the UK should leave or stay in the EU. In addition to analyzing the immediate effects of BREXIT, the research also investigates the measure adopted by the UK’s government and the central bank to manage Brexit effects. Finally, the paper investigates the process followed by members willing to leave the EU and consider the ramifications alongside the long-run implications of Brexit to both the EU and the UK.
The Background to the European Union
The EU comprise of 28 countries with structural advantages that allow free members movement between the different member states. The EU is an Economic as well as a political union. Belgium, France, Netherlands, Luxembourg, Italy, and Germany are the founding countries of the EU. The founding fathers of the EU held the idea of peaceful as well as a prosperous Europe (Cini and Borragán 2016). The EU was formed after the Second World War with an aim of fostering economic cooperation; the idea was promoting trade among member countries enabling the members to become economically interdependent and avoid conflict. Consequently, the European Economic Community (EEC) was formed in 1958, and this increased the economic cooperation between members.
The UK’s Position and Role in the EU
The UK membership in the European Union takes a central position and serves as significant role in the union’s affairs. Apart from participating in considering and voting for EU laws coupled with other measures through its government minister, the UK plays a major role as a trading partner in the EU (Boulanger and Philippidis 2015, p 830). Free mobility of labor, capital, and goods in the EU has made the UK a favorable trading partner in the EU leading to the establishment of the Single Market in the EU. The single market is hugely beneficial to the British economy. For instance, about 50% of the UK’s exports are within the EU. Additionally, the UK position involves constraining excesses of France and Germany who are major partners of the Union. The three parties overrule bad ideas fostered by either partner. Retrospectively, the UK’s membership in the EU is key to the balance of power among the members. Specifically, the UK is a key stakeholder of the liberal free-trade bloc united with countries like Germany, Ireland, Sweden, and the Netherlands. The Brexit would shift the power balance in favor of counties that advance protectionist policies, making the EU less competitive. The central role and position of the UK in the EU has created a debate on whether or the UK should leave the union.
Should the UK leave or Stay in the EU?
The debate over whether the UK should exit or remain in the EU is spiked by the fact that the UK is a major trading partner within the EU. Therefore, the Brexit will cast much uncertainty in the union. This argument holds that the UK should not leave the EU following devastating economic effects the country may incur as well as for the stability in Europe.
Research on the EU operations reveals cumbersome regulations involved in the union. The regulations act as the UK’s constraints in creating trade agreements with other countries and boosting the growth of global trade through reducing tariffs (Douglas 2016). Moreover, the UK enjoys a large trade deficit with other members of the union. It is likely that, the UK will have less trouble in negotiating free trade agreements with other European countries, even when outside the UE (Kierzenkowski et al. 2016). Additionally, in case barriers to trade between the UK and the other members are erected upon exiting, the EU will lose the most export earning than the UK, implying that the UK has little to lose (Ip 2016). Consequently, being a bigger economy and an effective trading negotiator, the UK stands to gain by leaving the EU and establishing its independent trade agreements.
Another major reason why the UK should leave the EU is that its budget contribution to the union is very high. The UK contributes 0.5 % of its GDP annually to the EU. In fact, the UK has been the largest net contributor to EU budget annually since 1973. Small and efficient agricultural sector boost this contribution (Douglas 2016). Additionally, the UK is richer than the other EU’s members, on average, although it has regional economic development disparities. By remaining in the EU, the UK will be contributing more to the union compared to what it gains by its membership (Ip 2016). Currently, the UK budgetary contribution has risen to 0.5% of its GDP. By staying in the EU, it is approximated that between 2014 and 2020 the UK contribution to the EU will amount to £7to 8 billion annually (Kierzenkowski et al. 2016). Since the UK is economically sound; there is need of leaving the EU and consider raising consumers’ income through reducing tariffs as well as quotas on imported agricultural products. The UK will also save on its contribution to the union.
Despite the advantages of leaving the EU, the decision will also involve some demerits. First, the Brexit will increase trading costs because of high tariffs between the UK and the EU (Ip 2016). The Brexit will also increase non-tariff barriers of trade due to different border controls and regulations between the UK and other EU countries. Consumers will experience higher prices for imported goods and service due to high trade barriers. Additionally, UK’s business could have low sale and profit owing to fewer exporting opportunities (Kierzenkowski et al. 2016). The EU reduced barriers to trade between within the EU has been yielding to higher trading activities for Britain’s corporations. For example, reduced trade barriers increased UK trade by 30% in 1973 and by more than 50% in 2008 (Douglas 2016). The Brexit will, therefore, create trade inefficiencies and reduce UK income.
By exiting the EU, the UK could also lose the benefits of a high level of immigrants from Eastern, as well as Western Europe. The UK citizens fear damage of employment prospects as well as lowering of wages by immigrant influx (Ip 2016). However, little research supports this case. There is no denying that the EU immigration boosts the public finance of the UK since immigrants pay higher taxes than the locals and they spend much of what they earn in the country (Kierzenkowski et al. 2016). Additionally, immigrants raise the demand for public services as well as housing leading to the UK’s expansion of the economy. Immigrants also help the UK in managing the cost taking care of the aging population through replacing retiring workers and by raising higher taxes for paying health coupled with pension costs.
Lastly, the UK should stay in the EU to avoid the struggles of negotiating comprehensive global investment agreements. The UK is open to foreign capitals, making it enjoy less leverage in such negotiations (Ip 2016). Although the UK will manage to strike agreements with smaller economies, it will struggle in accessing emerging economies like China as well as India. Additionally, acquiring new agreement will take time and involve more cost (Kierzenkowski et al. 2016).
Considering the discussion above, it is clear that UK leaving the EU could lead to more negative impacts than gains (Douglas 2016). Uncertainty lies on the economic instability this move will create. However, the UK government should plan to ensure stability after the Brexit.
Immediate Impacts of the BREXIT
a. Currency Value and stocks
Uncertainty in the economic cost following the Brexit led to selling-off of Britain assets and a depreciation of the pound. The sterling pound became weaker and depreciated more than other fluctuation rate differentials as...