More Brexit Developments
By Ingemar Pongratz
We have been reading a lot about Brexit and the process in the UK of leaving the European Union. There has been a lot of confusion associated in this process and wishful thinking. Politicians and others that advocated Brexit were counting on a soft Brexit where the UK would retain access to the EU internal market without the need to open the UK market to the EU in response. The UK wants to control immigration also from EU workers.
However free movement of goods and labour is a cornerstone of the EU. It is this not surprising that the EU did not agree in advance to this point. The UK will not retain free access on a unilateral basis. So after the summer the UK informed that they will start the formal process to leave the European Union in April of 2017. In addition, the UK government has made it clear that they will not open the UK labour market to EU workers and EU products. This will mean that the EU will do the same which means that we are to expect a hard Brexit.
From April 2017 the EU and UK have 24 months to reach an agreement on what Brexit means and in addition they need to agree how to trade after April 2019. So two, not one, agreements need to be drafted and approved.
But what does hard Brexit actually mean. Well first of all EU and UK trade will face export and import tariffs. The UK is a member of the World Trade Organization through the EU. Once the UK leaves the EU their membership to the WTO may be terminated as well. Furthermore Scotland has openly declared that they wish to leave the UK if the UK leaves the EU. This could leave to considerable tension within the UK as well and a possible secession vote.
Also the original plan to bypass the UK Parliament has been challenged by the UK legal system. According to the UK court, the UK Parliament has to be asked in advance and agree before the process of leaving the EU can begin. This will no doubt result in more delays and more uncertainty.
And in fact, the costs associated with Brexit are still unknown. Many enterprises, both foreign and domestic have declared that they will leave the UK if the UK leaves the EU. Also the EU Institutions based in the UK such as the European Medicine Agency will be relocated. Taken together, the UK can expect very high costs and the financial markets have already reacted. The UK currency has lost considerable value already.
Surprisingly, the Brexit outcome has strengthened the EU. The costs of leaving the EU are very high so a number of EU skeptics are thinking differently. Many of the negative voices are now speaking reforms instead of leaving the EU which in time will lead to stronger and more cohesive Union.
But is it worth it for the UK? Are all these costs really necessary to stop a few workers from outside the UK? Countries with even higher immigration rate (compared to the UK) such as Sweden and Germany represent very strong and prosperous economies. So high immigration is not automatically connected to lower economical growth.
I guess that is discussion that should take place.
Ingemar Pongratz is founder of Fenix Scientific AB/ Pongratz Consulting. I help enterprises and universities to apply for funding from European sources. If you are interested to contact me please use the contact form (redirects to fenixscientific.se) or send me an email to:
Ingemar.Pongratz (a) pongratzconsulting.com.