Last summer Brexit was the break-up heard ‘round the world when the United Kingdom announced their departure from the European Union. While the official exit is not until March 2019, there has been speculation upon speculation of what this will hold for the UK economy as well as the global economy at large. Will their newfound power over their own trade policies strengthen them?
Protectionism vs Free Trade
Protectionism has been a buzzword lately due to a tense and uncertain global climate. Consequently, would the UK be better off enforcing tariffs on imports to encourage Britain-made goods? Or will this reduce the United Kingdom’s significance as a global economic power? It seems as though this would be the argument for Brexit. But, instead of abolishing free-trade within the European Union countries, could this be a stepping stone for free trade with all nations? In turn, reducing tariffs on imports could fire up the global trading economy.
There are two examples of strong economies that allow free trade-Singapore and Hong Kong. These small but mighty countries (like the UK) have high GDP’s and not a lot of bureaucracy standing in the way of trade with other nations. According to Export.gov, Singapore allows 99% of goods to be traded sans tariffs into the country. Hong Kong does not share the same percentage, but only taxes alcohol, tobacco, methyl alcohol and hydrocarbon oil.
Happy Consumer, Happy Economy
When tariffs are slashed or eliminated altogether, this is reflected in the shelf price of whatever goods the customer is buying. Of course, no customer will ever argue against lower prices. This in turn spurs the economy by encouraging spending. If Brits find more money in their pocket, they will be more inclined to spend their savings recreationally. If business is up, then hiring will increase creating jobs. Most of the focus of Brexit has been in regards to the loss of jobs of those currently employed under current EU regulation. Speaking of regulation, less is always more when it comes to business. If some of the business regulations are removed or lessened, it will encourage new businesses to form, thus creating jobs.
There is never a surefire way to know how Brexit will affect the United Kingdom as a whole. There’s many factors including the economy, jobs, trade and its citizens. But, this is an exciting time for the UK to recreate itself on its own terms to meet a new more globalized world. Instead of taking the United Kingdom out of the game, it can resurface as a major player that is stronger than ever.