1
International Economics (Subject) / International Economics (Lesson)
- Do you research on Brexit (i.e. the United Kingdom leaving the European Union) and answer the following questions. a) What are the possible economic consequences for for Britain (pros cons)? b)Discuss possible effects on international trade and labour mobility. Use the theoretical background from the lecture. a)1. Less free trade with EU. The UK currently has free trade with all 28 European countries, enabling a range of imports and exports. When the UK leaves, it may not be able to negotiate replacement free trade deals with all 27 countries. This could lead to trade diversion and a negative impact on the UK export industry. -However, if the UK leaves, it may be able to lower EU external tariffs. The EU has free trade within member countries but imposes significant external tariffs on goods, such as agriculture. This raises the price of some food imports. If the UK left the EU it may be able to negotiate better free trade deals without the EU’s external tariffs.-Another factor is that the EU’s share of world trade is declining in relative terms due to the growth of emerging economies like China and India. 2. Inward investment The European Union is an important source and target for inward investment. Many European companies have invested in the UK and the UK earns revenue from investment in the EU. If the UK leaves the EU, this investment may be less attractive causing foreign firms to return to within the EU border. 3. Free movement of labour A big political issue is the net migration of mostly Eastern European workers into the UK. This has created stress on housing, infrastructure and population pressures. If the UK left the EU, labour markets will become less flexible. f the UK left, it would have greater freedom to be able to restrict net immigration. However, it would also make it harder for UK nationals to work abroad. There are currently 2 million Britons working in EU 4. Short term costs of leaving Since the referendum, the value of the Pound has fallen 10-15% reflecting markets more pessimistic view about the long-term economic prospects for the UK. A particular economic concern for the UK leaving the EU is a decline in inward investment from the EU.he UK requires capital flows to finance the deficit. 8. Effect on productivity and investment