The United Kingdom has already reached an exit agreement with the European Union. The settlement, also known as Brexit, may help those on the English Channel, but it will certainly hurt the union as its second-largest economy leaves the pack. But not everything will run smoothly for the UK from now on, as they face a long and difficult road.
Neither side got the deal they sought after, but it seems like the EU has come out of this deal better than the UK. The UK was pushing for three things from the Brexit deal.
First, they want to gain freedom from the regularity rules set by the EU. Second, they want to have their own immigration policy based on their own standards. And third, they want to retain favorable trade arrangements with the rest of Europe, which is about half of the UK’s exports.
Meanwhile, on the other side of the table, the EU wanted to retain open trade, but they do not want to continue it at the cost of its regulatory regime, which it believes helps its people. Both the UK and the EU walked away from the Brexit deal, thinking they could fulfill their objectives, but digging further shows that may not be the case.
The most satisfying part of the agreement for both the EU and the UK is that trade will continue tariffs, and there won’t be any quota for goods and some of the services.
This provision will mitigate most of the pain of their separation. The trade between Britain and the rest of Europe is expected to cost around $900 billion every year. That will suit the producers on both sides, and it will allow Britain to keep a lot of the production facilities currently located there.
These production facilities are considered third parties, and they are mostly Japanese firms, and keeping them means they will gain duty-free access to the whole European market.
Also, the Brexit agreement allows Britain the freedom to remove themselves from following the EU’s product and labor rules and their environmental regulations. This freedom actually benefits both sides because it allows the UK to create its own regulations on its own terms.
They can forge new trade deals with other nations like Japan and the United States.
The EU will offer them greater flexibility than what was previously allowed when negotiating trade deals with third parties.
The Brexit deal will allow Britain to restrict immigration from EU countries, which is one of the “effects” of the deal that pro-Brexit supporters wanted. However, this would not entirely solve their general immigration issues as they involve migrants from other countries.
Behind all of these measures, some conditions can reduce the UK’s latitude. According to the agreement, the EU can still end the tariff-free arrangements if they feel that the UK has used unfair trading strategies.
Since tax and regulatory policies are all subject to this judgment, the UK has a lot less freedom to make policy or create frame trade deals than what is shown in the agreement.
This is a disappointment for the UK and its finances, and it will take a long time before the UK can fill this hole.