Brexit in the UK has not only affected the immigration sector but has also made a significant impact in the United Kingdom trade partnership. Being that European Union is the most significant UK trade partner around a half of the United Kingdom trade is operating within the European Union. One of the benefits that UK has experienced from being a member of EU is the reduced trade cost, by making goods and services to be cheaper for UK consumers and allowing the United Kingdom businesses to export more. According to Dhingra et al (2016), some of the consequences that Brexit will bring along is lowering of trade between the United Kingdom and the European Union as a result of nontariff barriers and higher tariff. Additionally, United Kingdom would not experience many benefits from market integration within the European Union with the significant economic advantage of leaving the European Union is a lower net contribution to the budget of the European Union.
The estimated impact of Brexit on the UKs living standards and trade, in this case, is identified with quantitative models which involve an incorporation of various channels through which trade impacts firms, consumers, and employees by mapping from welfare to trade data. Through the quantitative model, the model can take into account the impact of Brexit on the United Kingdom and the rest of the globe. According to the statistics raised by the model, it is optimistically predicted that in the next ten years after Brexit, the intra European trade cost will fall at twenty percent faster rate than the rest of the world. Contrary, the pessimist, states that the European Union trade cost will continue by going up to forty percent faster than the rest of the world.
It is identified that the result of United Kingdom referendum on the membership of European Union will be a significant determinant of the relationship of the country in future. As a result of the referendum, EU membership has led to a reduction of the trade costs between the rest of Europe and the United Kingdom. Notably, even though it is always difficult when it comes to assessing what the economic future is capable of bringing, it is predicted that by having to reduce trade, Brexit would end up lowering the living standards of United Kingdom.
The main question which has created considerable uncertainty is that after Brexit, would the UK gain better trade deals with non-European Union countries? It would not have to make many compromises with the European states. However, it would hence mean missing out on the existing Japanese and United States deals which forecast on improving the higher income. Additionally, it is not clear on whether some significant regulatory benefits come out from Brexit since the United Kingdom is having one of the OECDs least labor markets and regulated products. The large majority when it comes to economic forecasts have made a firm conclusion that Brexit will create a severe damage to the economy of United Kingdom.
Conclusively, some of the economic consequences of coming out of European Union will be dependent on the policies that the United Kingdom will implement after Brexit. However, the UK economy will be affected by lower trade as a result of the integration with EU countries more than the contributions achieved to the budget of the European Union.
Dhingra, S., Ottaviano, G. I., Sampson, T., & Reenen, J. V. (2016). The consequences of Brexit for the UK trade and livingstandards.http://cep.lse.ac.uk/pubs/download/brexit08_book.pdf#page=28
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