Brexit A.D.: The EU and the UK - What happens next? (Representatives, unemployment)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Here at the end of September 2016, people in the US are largely transfixed on the race-riots, the terrorists attacks, the presidential race, and of course football. Meanwhile, the world's big story of the year is being largely ignored.
Perhaps it seems too far away. Apparently many Americans just don't care about international affairs. Certainly it is a subject that is intellectually too difficult for our mass media and their drive-by, partisan agenda-driven, sound-bite reporting.
Nevertheless, I suspect there a few of you who are interested in this. Probably not very many, but I know I am interested, so for anyone who wants to join me in this discussion, here we go.
Much to the dismay of the establishment sorts in the UK, the EU and around the world, the British voted to Leave the EU on June 23, 2016. Many on the Remain side continue to be in a psychologically classifiable state of denial, and a number of them have been openly trying to sabotage the exit process.
However, it appears the Tories are sincerely committed to leaving and so are some in the Labour party as well. As astonishing as it may seem, the leaders of the British government are apparently dead-set on respecting the will if the voters there and upholding the integrity of the democratic process in the UK. Wow. It certainly does not appear that we have that level of leadership here in the US.
The EU is sending mixed messages. They have been insulted and offended by this vote and the EU government has appointed three negotiating leaders to deal with the UK, all of who appear to be distinctly anti-UK in their attitudes and who do not sound like cooperative types looking to compromise and make things easy. Also, it is important to note that any trade deal with the UK will require either unanimous approval, or for some matters just a supermajority approval of individual 27 countries, depending on the nature of the agreement. These countries have diverse views and interests, to say the least. In all seriousness, it appears that this is probably not going to be possible to get these 27 countries to agree on an agreement that is also agreeable to the UK.
At the same time, there are leaders in many countries who are encouraging a friendly negotiating process and a mutually beneficial agreement, including German Chancellor Angela Merkel, as these people realize that the UK is the second largest economy in Europe and that millions of European jobs are dependent on exports to the UK. Unemployment in the Euro area was 10.1% in July, with youth and immigrant unemployment being much higher. However much some people in the EU establishment may want to punish the UK for this show of disrespect, the ramifications of a petulant outburst right now would have very real negative effects on economies throughout the EU and the UK. Considering the severe economic problems that the EU continues to be confronted with, they really cannot afford any self-induced negative shocks just now.
So, what happens next? I am going to post a few things on that below and I hope some of you will too. Maybe we can watch and evaluate these truly world-class international divorce proceedings together. It is sure to be an interesting process and the effects of it will be felt around the world and will ripple through our world economic system for a very long time to come.
In the campaign leading up to the June 23rd Brexit vote, the Remain side, lead by UK Prime Minister David Cameron, used the power of the government to publish forecasts and predictions of economic doom and disaster that, if believed, would certainly have resulted in a rout for the Remain side. However, the Leave side had some charismatic and persuasive leaders on its side as well, including Nigel Farage and Boris Johnson.
For Nigel Farage, who was the primarily instigator of this campaign and whose role in this goes back more than a decade, I believe he will go down in the history books as one of the elite statesmen of our age. Boris Johnson appears to have been more of an opportunistic poser, but he was at the right place at the right time and did play a pivotal role in leading the Leave side to victory. David Cameron resigned as Prime Minister as a result of the loss and now a new Prime Minister, Theresa May, has taken over the leadership of the UK and the Tory party.
Suffice it to say that the scare tactics of "Operation Fear" were not believed by the majority off the voters, who voted to Leave anyway. And the economic results in Britain and the EU since June 23 have born them out, as everything looks pretty normal, with the exception of the week or so immediately after the vote, when the Remainers got their butts handed to them in the financial markets and had to sell out for huge losses.
It is interesting to observe that the primary leaders of the Leave campaign are not leading the policy development or the negotiations with the EU to leave. As has been pointed out repeatedly, Theresa May was aligned with the Remain side during the campaign, albeit apparently not with much enthusiasm. But she and most other Tories certainly do appear to be enthusiastic about leaving now. It is fascinating to watch what appears to me to be a sincere transition to support this decision. I cannot imagine anything like this happening here in the US. Our politicians are just too selfish and too immature, for lack of a better word.
The media and many of the UK/EU 'chuckers' up in the cheap-seats are pushing the UK to trigger "Article 50" immediately, after which the UK will be out of the EU in two years, regardless of the status of negotiations with the EU or anyone else. Doing this before the leadership of the UK is ready - it has been 90 days since Brexit Referendum - would be stupid and foolish in the extreme. Prime Minister May has announced that they will not trigger Article 50 until early in 2017, which seems like a reasonable amount of time for the UK to get their affairs in order to prepare for this epic national transition and transformation exercise.
The triggering of Article 50 seems like it is going to have to be done early in 2017 for another reason, as the next EU parliamentary elections are in May, 2019, so the UK needs to be out before then. Just this last week, EU negotiators publicly requested that the UK needs to stay with this timetable, for this very reason. The EU in increasingly enthusiastic for the UK to wrap this up and go as well.
This week a paper was published by Patrick Minford - a respected British economist - that analyzed the costs and benefits of remaining as a member of the "Single Market" compared to just walking away. Minford was a key advisor to Margaret Thatcher during her time as Prime Minister.
According to his Minford's analysis, walking away and foregoing any attempt to remain as a member of the "Single Market" would be the better option for the UK economically. By the calculations of this model, UK consumer prices would fall 8% and GDP would rise 4%.
The study is 68 pages, but it was the most educational document I have read since this whole exercise began. So if you want really want to improve your understanding of the critical issues in these possible trade arrangements by an order of magnitude in a relative hurry, I would encourage you to read this article.
Here are the opening paragraphs of the Minford Paper:
The Brexit referendum can be understood as a battle between UK
producers and UK consumers (that is, all UK households). This is
because the main effect of the EU is to raise prices through protection
and regulation to benefit groups of producers. Their consumers pay
these higher prices. Moreover producers also benefit at the expense of
consumers by the taxes levied to subsidise unskilled immigration as
well as by the taxes levied to pay directly into the EU budget.
Milford concludes that the EU should 'Trigger Article 50, wait until Easter and then just walk away'. He makes a compelling case. What this would leave Britain with is the WTO rules, which are the same rules that we and most of the rest off the world trade with the EU under.
Is our nation in ruins because we are trading with the EU under WTO rules? As far as I can tell, hardly anyone seems to be bothered by that at all. Then if the UK desires, they can try to negotiate free trade agreements with the EU and other countries on their own timetable, no need to rush, as they would be trading under WTO rules until then with all these other countries as well.
It should be noted that WTO rules require countries to provide equal terms of trade to all countries, unless there is a free trade agreement or that sort of thing. Which are the arrangements that the EU (and the UK) currently have with most other countries in the world currently anyway.
Of course the big producers and the multinationals do not want this, because they enjoy the subsidies they get as a result of being in the "Single Market," which imposes regulations and requirements on all companies, which are estimated to increase prices in the EU area close to 20% over what they would be without these requirements. These include the welfare costs of low cost immigrant labor, which not only displace native British people from their jobs, but they also cost the government about £3,500 per year, which is born primarily by middle-class taxpayers.
But for the consumers, it would be good.
The thing is, if no agreement is reached between the EU and the UK and the clock ticks down and the UK is by law expelled out into the real world, it will go with the WTO trading rules as its starting point. If nothing is done and they all decide to go on vacation from the day Article 50 is triggered until the two years is completed, this is what will happen. So if nothing is done, Minford's proposal will be what happens.
This is by default, the "best alternative to a negotiated agreement".
Last edited by Ibginnie; 09-14-2020 at 11:00 AM..
Reason: copyright violation
The most prosperous country in the last 5-10 years is Ireland. It went from being a bric to a shining star with low corporate taxation. Google, Facebook, Apple and myriad of other companies flocked to build there. What does the EU do... fines Apple $15B because a member country can't be making their own rules.
There are at least 6 countries that are brewing their own exit plans. Germany is going to make our recession look like childs play within a few years. They have the largest exposure to toxic assets, and when Germany goes, so will the EU.
Europe is in for a rough ride, and most probably so will the rest of the world because of it.
The EU basically became fixated on the goal of making Europe as non-European as fast as it could with migration. They still keep demanding the UK to allow free movement people into their nation.
The EU is sending mixed messages. They have been insulted and offended by this vote and the EU government has appointed three negotiating leaders to deal with the UK, all of who appear to be distinctly anti-UK in their attitudes and who do not sound like cooperative types looking to compromise and make things easy. Also, it is important to note that any trade deal with the UK will require either unanimous approval, or for some matters just a supermajority approval of individual 27 countries, depending on the nature of the agreement. These countries have diverse views and interests, to say the least. In all seriousness, it appears that this is probably not going to be possible to get these 27 countries to agree on an agreement that is also agreeable to the UK.
At the same time, there are leaders in many countries who are encouraging a friendly negotiating process and a mutually beneficial agreement, including German Chancellor Angela Merkel, as these people realize that the UK is the second largest economy in Europe and that millions of European jobs are dependent on exports to the UK. Unemployment in the Euro area was 10.1% in July, with youth and immigrant unemployment being much higher. However much some people in the EU establishment may want to punish the UK for this show of disrespect, the ramifications of a petulant outburst right now would have very real negative effects on economies throughout the EU and the UK. Considering the severe economic problems that the EU continues to be confronted with, they really cannot afford any self-induced negative shocks just now.
So, what happens next? I am going to post a few things on that below and I hope some of you will too. Maybe we can watch and evaluate these truly world-class international divorce proceedings together. It is sure to be an interesting process and the effects of it will be felt around the world and will ripple through our world economic system for a very long time to come.
Whilst I personally would like some kind of EU Trade Deal it's not imperative, and as Sir James Dyson who according to Forces exceeds Donald Trump in the wealth staes rightly points out, the EU has a £100 Billion Trade Surplus with the UK.
The UK is the largest market in the world for German Cars indeed one in five or 20% of German Cars sold globally are to the UK and the same applies to a lot of other German industry as well as French Agriculture and the Italians and Spanish who also have healthy trade surpluses with the UK.
Britain could of course trade with Europe without an agreement but that risks heavy penalties on those German Cars and other goods under WTO rules, and it's in the EU's own interest to negotiate a workable trade agreement with the UK.
In terms of passporting rights in relation to the Financial Markets, last month, the EU’s regulator recommended that passporting rights be extended to firms regulated in Australia, Canada, the Cayman Islands, Guernsey, Hong Kong, Japan, Jersey, Switzerland and the United States.
So the UK would obtain financial passporting rights, whilst Euros like Dollars are a Global Reserve Currency and can be cleared anywhere, meaning that the Financial Sector will not only be free to trade but also free from many EU restrictions, although the majority of UK Financial Transactions are with the US and Far East anyway.
If the EU were to try and stop interanational trade it would very quickly find the world devided in to two markets the EU Financial Market and the Rest of the World, with the Euro no longer being a Global Reserve Currency and the US and other financial sectors hitting back with trade restrictions on EU financial services.
Finance is a global market place, the EU does not call the shots, and can you imagine cities such as New York, Tokyo, Hong Kong as well as London not having direct accesst to Financial Services and Trading within the Eurozone, because that was what the EU was proposing in 2015 when the UK won it's Court Case and what it is trying to propose again. Do you really think the rest of the world would be happy with such a situation and in reality other Financial Markets could hit back, stopping direct financial trading with countries within the Eurozone. As always the EU is trying to be petty and protectionist, and stifle global free trade.
To demand that only euro-denominated swaps can be cleared in the eurozone is fine, however such a standard would have to apply to everyone around the world.
That would not only create an anomaly, it would also indicate that Europe may be bringing in a measure of protectionism — which could well prompt a retreat from investors.
Crucially, the euro is a global reserve currency and so can be traded and cleared anywhere, just as the dollar is. A demand to have euro-denominated swaps only cleared in the eurozone would represent a step back from that.
It may also spur tension within Europe. The ECB clearing house policy of four years ago — that London successfully countered — was largely pushed by France, and many German representatives were privately at best lukewarm in their support.
One unknown is whether that raises issues about competition. One could not also rule out American banks and exchanges (especially the CME Group) setting out a legal challenge to a policy that tilts the playing field towards particular European corporations. The CME has been cited in antitrust investigations before — notably into the CDS market.
Only 6% of UK Companies Trade with the EU and most EU countries have significant trade surpluses with the UK, whilst in terms of Trade Agreements in many cases they are not even necessary, for instance the US and EU have no trade agreement in place, the EU and China have no Trade Agreement indeed you don't need a Trade Agreement to Trade.
The Canadians are going to sign a Free Trade Agreement with the EU, which covers most things with the exception of some Agricultural produce but Trade Agreements are not explicitly necessary in order to continue trading. Although I am sure the UK will now be keen to increase Trade with countries outside of the EU, who already account for the majority of trade.
In terms of a US Trade Agreement the Transatlantic Trade and Investment Partnership (TTIP) that looks increasingly unlikely, due partly to the EU's history of restrictions on US goods, indeed the EU has never been fair when it comes to trade with the EU especially in relation to Agricultural produce, with all kinds of restrictions.
We are quite happy to try and forge a workable EU Trading Deal as the Canadians are doing, and it is in the EU's own interest that we do establish a workable deal. However if the EU tries to impose retrictions on Financial Services we need to walk away from negotiations and punitive WTO and other taxes on German Cars, French Agriculture and other EU products, because if you are going to trade fairly then it should be in relation to all goods and services and it is the EU that can not cherry pick.
The UK would also be inclined to tear up a lot of EU Agreements such as the Lancaster House Treaties we currently have with the French in relation to Defence, indeed without the UK and the French, EU Defence is a joke. Indeed we need to replace the treaty with a UK/US Defence Treaty, as the EU are now stating they want their own military command.
Whilst I personally would like some kind of EU Trade Deal it's not imperative, and as Sir James Dyson who according to Forces exceeds Donald Trump in the wealth staes rightly points out, the EU has a £100 Billion Trade Surplus with the UK.
The UK is the largest market in the world for German Cars indeed one in five or 20% of German Cars sold globally are to the UK and the same applies to a lot of other German industry as well as French Agriculture and the Italians and Spanish who also have healthy trade surpluses with the UK.
Britain could of course trade with Europe without an agreement but that risks heavy penalties on those German Cars and other goods under WTO rules, and it's in the EU's own interest to negotiate a workable trade agreement with the UK.
Exactly. The 'Operation Fear' contingent - which is still trying to push their misinformation, even after the decision has been made, appears dedicated to cherry-picking statistics and data in order to try to create fear and uncertainty, much of this data just flat-out wrong, and then presenting it completely out of context.
Your article provides an excellent example that they keep returning to again and again.
Articles such as this one at the UK independent (published yesterday), misleadingly focus on the cost of exports from the UK, with tarriffs added, but do not take into account the cost of exports into the UK, with the tariffs the EU would have to pay.
The average EU tariff is 4.8 per cent and applying this to total UK exports to the EU implies a “cost” of around £4.5bn – which would have to be absorbed as lower competitiveness for UK exports or as lower profits for firms if they chose to reduce prices in response to maintain their competitive edge.
Of course all of these tariffs are covered by the World Trade Organization (WTO) trading rules, which would apply to both the EU and the UK in the event there is no free trade deal negotiated. The WTO's General Agreement on Tariffs and Trade (GATT) also requires that each country applies the same tariffs equally to all of its trading partners. They cannot punitively discriminate against countries just because they are mad at them for some reason.
So while this would cost UK businesses, it would cost EU businesses as well, such as German auto manufacturers, French wine merchants, etc., who sell a lot of their output to the UK. But the Remainer's choose to leave this whole side out of their presentations.
Higher costs means lower demand, which means less jobs. This is the incentive that both sides have to agree to a free trade agreement and why free trade is good, especially between such equally matched economies as the UK and the EU.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
