This video explores the new agreement between the United Kingdom and the European Union that was reached after a tumultuous four-year period of withdrawal negotiations. Under the new agreement, goods between the United Kingdom and the European Union will continue to flow unfettered by tariffs or quotas however companies will now have to complete extensive, and potentially costly, paperwork. Financial services firms lose their passporting rights, but UK fishermen stand to regain control over some fishing rights. While many are breathing a sigh of relief that a no-deal exit was avoided, the last-minute agreement leaves companies little time to prepare for what will be the new norm. Economists anticipate that the United Kingdom will almost certainly see its economy slow in the short term, although it is anyone’s guess what will happen in the longer term. Many suggest that at least from an economic standpoint, the United Kingdom would have been better off inside the bloc than it will be on the outside. Despite those concerns, there is jubilation among those who prioritized sovereignty over economic concerns, especially when it comes to hot topic issues like immigration.
Notes: As 2020 drew to a close, so too did the United Kingdom’s multi decade membership in the European Union. When the United Kingdom joined what was then the European Community, the country joined forces with other member countries to create a single market for goods. Over the years, the relationship deepened to include a more expansive integration of markets for goods and services, the free movement of people, and harmonization of laws. Speaking as a single voice representing the citizens of 28 countries, the European Union played a powerful voice in global affairs, one that was likely unachievable by any single member country. The United Kingdom however, chafing at the loss of sovereignty membership in the European Union required, strived to keep one foot in the bloc whilst maintaining its independence in other ways, choosing for example, to continue to circulate its own currency rather than adopt the euro. It was this loss of sovereignty that ultimately played an important role in the decision by many UK citizens to vote in 2016, to leave the European Union, a vote that became known as Brexit.
In the lead up to Brexit, many UK citizens expressed concern that decisions made in Brussels were not necessarily in the best interests of the United Kingdom. This sentiment, along with unease over immigration and fishing rights resulted in a sharply divided Britain and the call for a vote on whether the country should remain a part of the economic bloc it had helped to create, or leave, and be in total control of its own destiny. The sharp division in the country was reflected in the very close vote with the outcome, of course, to leave, setting up what became a multi-year negotiation between the United Kingdom and its former partners. As a member of the European Union, the United Kingdom had free access to European markets. UK businesses relied on European markets for a significant share of their revenues and so, post-Brexit wanted to ensure continued access to those markets. Similarly, because many EU companies exported a sizeable share of their products and services to the United Kingdom, it was important that the market remained accessible post-Brexit. With both sides relying on the other, the stage was set for an epic four-year negotiation. Overriding the withdrawal negotiations was the desire by European Union leaders to prevent other countries from also leaving the European Union potentially further weakening the bloc. Accordingly, European Union officials wanted to present a perspective that leaving the bloc was undesirable, while at the same time, UK Prime Minister Boris Johnson, one of Brexit’s biggest cheerleaders, wanted to present a deal to UK citizens validating the value of leaving the trading bloc.
The United Kingdom officially left the bloc in January 2020 but maintained EU status for a further 11 months while the two sides negotiated just their future relationship. For months, negotiators failed to come to terms, and with time running out, the prospect of a no-deal became a very real concern, a situation that most companies wanted to avoid. Finally, just a few days before what would have been a hard Brexit, or an exit without any sort of defined withdrawal agreement, the new deal was announced. Both sides asserted victory. Under the new arrangement, both sides will maintain free access to the other market, however, companies will now have to complete extensive paperwork for customs officials. In addition, new limits on the free flow of people between the United Kingdom and the European Union will be imposed as will new regulations on fishing rights. Perhaps in recognition that there is no blueprint for Brexit, the two sides have agreed to take future disputes to an independent panel. For many companies, the new deal is a welcome end to the uncertainty that has prevailed for the past four years and an understanding that 2021 will be yet another year of adjustment as they learn the new rules for doing business with their former trade bloc partners.
Discussion Questions:
1. Reflect on the notion of regional economic integration. What are the advantages and disadvantages of eliminating barriers to trade and investment among member countries? Can countries at higher levels of regional economic integration maintain their identities as sovereign states?
2. Discuss the rationale for the United Kingdom to join the bloc now known as the European Union. What were the benefits of participation in the European Union? What were the drawbacks? What prompted the United Kingdom to leave the European Union? Will it be better off outside the bloc? Can it achieve the same levels of economic growth as an outsider as it did as a member country?
3. The new agreement between the European Union and United Kingdom was announced as time was running out on the transition period. Consider the implications of a no-deal Brexit. Why did many economists feel that having a deal was important for both sides? How would a hard Brexit have affected companies?
Source: The Washington Post: U.K. and E.U. announce post-Brexit trade deal, smoothing Dec. 31 departure , Photo by Christian Lue on Unsplash