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Discussion

The aim of the paper is to examine long term impact of Brexit using literature review. As contrasted with UK staying with European Union, there would be unavoidably be greater trade cost, with the rest of Europe, that is responsible for half of the trade of UK. FDI, migration, and trade are all channels through which Brexit will be communicated, and they all coincide with the EU's core freedoms of movement of money, people, and goods. The study contains a substantial amount of academic and government research on the long-term impacts of Brexit on the GDP and well-being of the UK and EU economies. It can produce a wide range of results depending on the model parameters and transmission pathways of each query (Pollitt 2022). The trading channel comes after that. It looks at the growth in trade costs between the European Union and the United Kingdom as a result of the reintroduction of tariffs and non-tariff barriers, taking into account how closely the two industries are linked in terms of production.  

EU membership has lowered the cost of trade among EU and UK. More obviously, there is a custom union among members of EU, that implies that tariff barriers has been diminished in the EU, enabling for trades free of cost. However lowering the NTB (non-tariff barriers) in lowering trade cost leading from the continuously endeavour of EU to establish a single market in Europe is equivalent crucial. NTBs involve a varied array of way which increases the trade cost including risk of antidumping, disparity of cross nation in regulations in safety and product standards, Checks of rules of origin, and border control. The lowers in barriers of trade has raised trade among the members of EU and the UK (Dhingra et al. 2018). In 1973, post joining of UK in European Economic Community, around 33 per cent of trade of UK was with European Economic Community. The other members of EU were responsible of 53% of UK imports and more than 40% of the UK exports.

The greater trade profits UK customers by good quality products and services in affordable costs. Similarly, companies and workers take advantage of prospect of new export which results to increased sales and revenues, as well as enable UK to increase expertise in such sectors which has a competitive edge. By this means, elevated trade increases living standards, incomes and outputs in the UK (Gudgin, et al. 2018). These criterion static endeavours of trade has been knowledgeable several decades, however research of trades in near decades has been revealed positive impacts of trade on living standards on well being through different paths including increased innovation and productivity.  

Trade

Increased competition can help trade by reducing surplus profits and increasing efficiency. Access to better intermediate goods, as well as a larger export market, can all help with product development. According to current research, dynamic repercussions have the potential to double or triple the scale of trade's static implications. Unfortunately, because the theory is complex and developing, there is no typical quantitative trading model that captures these dynamic consequences (Brakman, Garretsen and Kohl 2018)

A simple strategy for examining the dynamic consequences of Brexit on commerce is to conduct a reduced-form empirical study on the effects of EU membership. After accounting for several factors of bilateral trade, Driffield and Karoglou (2019) discovered that EU members trade significantly more with other EU members than with non-EU members, including members of the EEA and the European Free Trade Association. According to their estimations, commerce with EU countries will drop by around a quarter if the UK leaves the EU and joins the EFTA.

EU members have same policy of trade and are signify by the European Union in global trade negotiation. The UK following Brexit would become an individual player, liberated to ask for its personal deals with the rest of the globe (Pollard 2021). The UK can utilize this liberty to come across a new trade deals with nations including US, India and China. The trade with European Union nations do not certainly increase following Brexit as trade and diversion decreases. However the extent of such rises is insufficient to compensate for the drop in trade with the European Union. The EU is the bordering neighbour of the UK, as well as largest market globally with regard to Gross Domestic Product. Therefore, it is challenging to compensate the harm from raising its cost of trade with regard to European Union. When bargaining trade deals after Brexit, The UK will not require settling with other nations of EU as it currently does (Hantzsche, Kara and Young 2019). On the contrary, The UK will require taking on the expense of recruiting civil workers to re-establish its positions to involve in trade negotiation. In trade negotiations, the gross domestic product of Britain will have lower negotiation influence than European does, because it is lower than 20 per cent of the gross domestic product of single market of European Union.

A primary reason for foreign direct investment (FDI) to UK is unrestrained availability to the Single Market of EU; therefore less availability would make the UK a less appealing target.   As a result of the Brexit, there will be increase in the inward FDI in European Union. Patel and Reh 2016) argues that Brexit referendum and its aftershocks would impact on UK related FDI. Several researches have determined the fact that the FDI profits productivity of a nation. A FDI’s gravity model among OECD nations has been estimated and found that Brexit will probably result in downside in FDI to the UK. Minford (2019) estimated that this downside will lead to decrease in GDP by around three per cent. Financial services contribute more than forty percent of the FDI’s stock. The reason behind this is that EU enables international banks to sell their service everywhere within the EU. For instance, Swiss banks have set up its branches in London; and the reason behind this is that, Switzerland has a broad range of free trade deals with European Union in only commodities. 

Dynamic Trade Impacts of Brexit

In Brexit referendum, a primary aspect was the longing to minimize immigration.  The EU national, in 1995 to 2015, has been tripled. This is primarily following the succession of Poland in 2004.  In a central tenant of the EU, freedom of movement and a trade off of full availability of single market. On average, migrants of EU are better knowledgeable, less probable to claim welfare advantageous and more probable to work, than workers from British (Bloom et al. 2019). Therefore, they have efficiently given support to the UK nationals’ public services. Moreover, a comprehensive evaluation of the effect of these huge immigrant flows on the labour market from 2004  reveals no considerable drop in wages or jobs for British immigrants for both less or average capable fragments of distribution. The unfavourable impacts of fresh immigrants emerge to be confined to their nearest alternatives (old immigrants). Certainly most macroeconomic evaluation recommends that immigration such as FDI and free trade had been a total advantage for the United Kingdom economy. Therefore, following Brexit, lowering number of immigrants wouldn’t do anything to counterbalance FDI impact and negative trade of Brexit (Portes and Forte 2017).

Euro sceptics frequently emphasis to the potential of improved regulation following Brexit. It is critical to understand that regulation would not be impacted in the soft picture of Brexit. It is due the reason to availability of single market; nations such as Switzerland or Norway have to implement the similar regulations as the rest of EU. UK, after the Brexit can weaken its environmental, employment, social regulations to a certain level. As per OECD nations, although if it was a political scenario, the nation currently has product market regulation as well as some of the most versatile jobs in the emerging globe. If the EU membership’s regulatory cost was as greater as around 0.9% of gross domestic product, it is still lower than 50 per cent as greater as forecasted total cost of hard picture of Brexit (Gamble 2018). It is also applicable in a solely stagnant situation as well as much lower than a round 6% to 9% costs in the situation. There are several regulation costs including planning system in the United Kingdom. However, these issues are mainly local.

The indirect consequences of tariff barriers through the intricate system of manufacturing ties between nations were neglected during the Brexit debate. Despite this, the ramifications are expected to be severe, given the two countries' massive cross-border manufacturing interdependence. Because imported intermediate products have crossed the EU-UK border many times, they have accrued tariffs (Dhingra et al. 2016). Furthermore, a significant share of goods and service exports are only delivered indirectly to target countries via other countries' exports.

Future Trade Agreements

The intricacy and extent of the European economic integration process are demonstrated by the depths of the acquis communautaire, the EU's legislative framework, and, in particular, the rise of the single market. As a result of Brexit, this trend is projected to be reversed, at least in part. The complicated design of EU-UK links expands the number of potential shock transmission paths, which is predicted to have significant consequences for a wide range of European and global businesses (Kierzenkowski et al. 2016). The four primary ways in which economic collapse can affect the economy are trade (in products and services), productivity, FDI, and migration. The impact of Brexit on migration and trade are two of these variables. To conduct their research, they adopt a three-step technique that includes a structural gravity model. The first step is to create a gravity-defying model. In the second stage, they look at the equations that explain the contingent general equilibrium for migration and commerce. This is to account for the indirect and direct effects on third-party countries of changes in migration costs or bilateralism. Finally, they look at a variety of post-Brexit scenarios with different amounts of fragmentation.

In the first scenario, in the absence of a genuine settlement, business relations between the UK and the EU revert to WTO rules, and immigration from both nations loses its privileged protection (the WTO situation) (Bisciari 2019). In a different scenario, the UK and the EU reach an agreement on a bilateralism pact that includes both migration and trade (the FTA situation). It also explores the possibility of the UK joining the EU while maintaining full access to the single market and the "four freedoms" (free movement of people, capital, commodities, and services). Another scenario that served as the basis for the scenario analysis was maintaining the status quo within a gravitational framework for commerce and movement. 

Conclusion

The economic impact of Brexit would rely on the policy the United Kingdom implements after Brexit. However reduced trade because of the lowered incorporation with European Union nations is probable to the cost the economy of UK more than it raised from reduced donation to the European budget. It appears to compel tough border control in opposition to European Union nationals. In spite of the proof to the converse, there is a common principle strengthen by the government that immigration of European Union has had harmful impact on workers. It is crucial for a well-versed argument to persist concerning the expected influence of a hard Brexit on the UK on contrast with substitute policies.

References

Bisciari, P., 2019. A survey of the long-term impact of Brexit on the UK and the EU27 economies.

Bloom, N., Bunn, P., Chen, S., Mizen, P., Smietanka, P. and Thwaites, G., 2019. The impact of Brexit on UK firms (No. w26218). National Bureau of Economic Research.

Brakman, S., Garretsen, H. and Kohl, T., 2018. Consequences of Brexit and options for a ‘Global Britain’. Papers in regional science, 97(1), pp.55-72.

Dhingra, S., Ottaviano, G., Rappoport, V., Sampson, T. and Thomas, C., 2018. UK trade and FDI: A post?Brexit perspective. Papers in Regional Science, 97(1), pp.9-24.

Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact of Brexit on foreign investment in the UK. BREXIT 2016, 24(2), pp.1-10.

Driffield, N. and Karoglou, M., 2019. Brexit and foreign investment in the UK. Journal of the Royal Statistical Society: Series A (Statistics in Society), 182(2), pp.559-582.

Gamble, A., 2018. Taking back control: the political implications of Brexit. Journal of European public policy, 25(8), pp.1215-1232.

Gudgin, G., Coutts, K., Gibson, N. and Buchanan, J., 2018. The macro-economic impact of Brexit: using the CBR macro-economic model of the UK economy (UKMOD). Journal of Self-Governance and Management Economics, 6(2), pp.7-49.

Hantzsche, A., Kara, A. and Young, G., 2019. The economic effects of the UK government's proposed Brexit deal. The World Economy, 42(1), pp.5-20.

Kierzenkowski, R., Pain, N., Rusticelli, E. and Zwart, S., 2016. The economic consequences of Brexit: a taxing decision.

Minford, P., 2019. The effects of Brexit on the UK economy (No. E2019/1). Cardiff Economics Working Papers.

Patel, O. and Reh, C., 2016. Brexit: the consequences for the EU’s political system. UCL Constitution Unit Briefing Paper, 1(5).

Pollard, J.S., 2021. Brexit and the wider UK economy. Geoforum, 125, pp.197-198.

Pollitt, M.G., 2022. The further economic consequences of Brexit: energy. Oxford Review of Economic Policy, 38(1), pp.165-178.

Portes, J. and Forte, G., 2017. The economic impact of Brexit-induced reductions in migration. Oxford Review of Economic Policy, 33(suppl_1), pp.S31-S44. 

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