The Impact Of The Brexit On The Economy

Running head: POST BREXIT INTEGRATION BETWEEN EU AND UK
Post Brexit Integration between EU and UK
Name of the Student
Name of the University
Author note

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POST BREXIT INTEGRATION BETWEEN EU AND UK
Introduction
The United Kingdom (UK) or Britain decided to leave the 27-member union EU through
following a referendum in June 2016, which is known as Brexit (Gov.uk. 2020). It will enable
Britain to come out of the single market and customs the union of the EU. There were various
contradictions associated with the exit of the UK from the EU. It also created turmoil related the
relationship of the UK with the EU post Brexit. However, the date of leaving of the UK from the
EU has not been finalized yet and post Brexit deal between two have not been decided. The
effects of the Brexit will depend on the nature of tie up between two parties the EU and UK.
There is a possibility that the both parties may not agree upon on any term after the transition
period, which is known as no deal Brexit (Dhingra and Sampson 2016). Moreover, the impact of
the Brexit on the economy of UK will vary with respect to the terms being signed between both
parties. Therefore, the level of integration between the EU and UK may generate opportunities
and threats, which will be assessed in this paper. The post Brexit agreements related to free trade
and World Trade Organization (WTO) will also be examined.
Body
There are various options related to the future trade relations between the EU and UK.
The option for integration will be implemented after the completion of the Brexit process and
after UK has left the EU. Both parties will take the decision of the potential relationship through
negotiations during the transitional period from March 2019 to December 2020 (Mulabdic,
Osnago and Ruta 2017). The debatable subject is significant from the economic and political
aspect. Previously the EU and UK were in an intense economic and trade relationship, which
will be affected after the Brexit. The UK and EU were the main trading partners of each other.
However, it is essential to emphasis on broader perspective through institutional, political and

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legal aspect along with economic post Brexit. There exists two distinct paradigms that are
important in this regard such as trade liberalization and market integration. It is crucial to explore
those paradigms to understand the pros and cons associated with the integration between the EU
and UK after Brexit. This paper also taken into consideration the models that plays a major role
on the relationship of the UK and EU post Brexit (Dhingra et al. 2016). These modes are the
WTO model and deep and comprehensive free trade agreement (FTA).
As there are various models available to opt from, probably the most preferred one for the
UK government is the Deep and comprehensive FTA (DCFTA). The legal side analysis of the
DCFTA states that the agreement could be concluded by the EU acting alone as it would come
within the exclusive competence of the EU related to TFEU provisions on the common
commercial policy (Feng et al. 2017). However, it will depend on the intensity of the DCFTA.
There involve two limitations with the implementation of the DCFTA post Brexit, which are the
related dispute settlement provisions and inclusion of investor protection. The main confusion in
this case is whether the agreement will be concluded by the mixed agreement or EU alone.
Though, the foreign direct investment will be covered under the CCP, the indirect investment
will not be covered. The probable investor’s protection of the EU-UK DCFTA will be based on
mixed agreement as the dispute settlement system set up by the EUSFTA will bypass the
domestic court system (Europa.eu 2016).
According to the government of the UK, DCFTA will maintain both the important
paradigms like market integration and trade liberalization. In addition, as per government, it will
manage the gradual divergence of the regulatory framework between the UK and EU (Mulabdic,
Osnago and Ruta 2017). However, a mere FTA will not solve the problems of customs and
regulations in terms of frictionless trade. It can be managed with the help of border controls. It

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will be required for the traders to comply with the rules of origin, which will eventually affect
the investment in the UK. The reasons behind such effect involve difficulties in access to the
entire internal market of the EU for the investments. In order to put border control on the trade,
huge public investment will be required in case of UK and UK-facing Member States. Finally,
the robust dispute settlement mechanism would benefit the DCFTA. It is necessary to mention
that the international agreements are highly ambitious. In order to make this agreements as
relevant as it intends to be, enforcement is required (Dhingra et al. 2018). Thus, it will become a
living instrument on which county can be relied effectively. The success of the dispute
settlement mechanism under the trade agreement between the EU and third countries is not
guaranteed. Previously, there were various cases of trade disputes between two parties under the
FTA brought before the WTO to resolve. However, it will help the UK to come out of the
constrained of institutions and EU rules through the FTA. Additionally, the UK will also gain
maximum control of the trading and economic activity of the country. Therefore, it will remove
the earlier barriers to trade with the 27 member states of the EU. The disruption can be managed
by the UK through high alignment and access, although, free movement may create a politically
difficult obligations.
One of the largest international economic body of the world is World Trade Organization.
The UK and all member countries of the EU are members of the WTO (Baier, Yotov and Zylkin
2019). Therefore, when the UK will exist from the EU, it need to take all the responsibilities
related to trade policy for its country. Moreover, the country will be under the law obligation of
the WTO. Imports into the UK is subject to a wide range of tariff schedules such as schedule of
the EU, GATS schedules of the member or EU states and services schedules. In the sphere of
agriculture support policies (AMS), there are commitments that belongs to the EU. The transition

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of the UK will be relatively smooth as long as the country would not try to modify these
commitments. The main problem will be created by the tariff rate quotas (TRQs), which is
applicable for some particular imports of agricultural products (Belke and Gros 2017). Various
differentiated tariffs comes under such TRQs. The annual volume of imports that is quota
restricted may opt for the lower tariff. Exporting countries may benefit from the TRQs and
divide between major suppliers. Thus, the process of dividing TRQs have already started
between the UK and EU. Moreover, the political problems taken place with the concerned third
countries. Therefore, it is necessary the issue related to the TRQs in the world trade. Though,
initially the adverse effects of the TRQs seems to be minor, It may take shape of huge conflict in
future. Thus, it will increase the chances of trade war between the participating countries in the
world trade.
One such example will help to understand the situation in this regard. A new TRQ was
installed for the Latin America bananas by the banana regime of the EU in 1993, which created a
huge problem in the WTO. There is a legal dimension of the TRQ issue. It is questionable that
whether splitting up of the TRQ will lead to modification of the existing schedules or only make
rectification under WTO law (Mendez-Parra, te Velde and Winters 2016). There exists
multilateral process of negotiation in case of modification the existing schedule, which is
controlled by the Art XXVIII GATT. However, the selection of the rectification route by the UK
may disregard the political reality of decision making under WTO as per legal analysis. There
will be a high possibility of negotiations because of other members of the WTO, as they will
raise question about the splitting option of the TRQs proposed by the EU and UK. The question
can also be raised for the agreement on agriculture in terms of agricultural subsidies. An
Aggregate Measurement of Support (AMS) is agreed by the WTO members through putting a

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cap on Amber Box subsidies. There is a limited possibility of no argument between the EU and
UK in order to divide the AMS between both parties in some way. Hence, it will rise the
necessity of further negotiations. As the UK will try to enhance the level of protection through
modification of services concession and tariff, the involvement of the EU will be inevitable
(Holmes, Rollo and Winters 2016). Therefore, it will require a further renegotiation between the
EU and UK. Though, the Government Procurement Agreement (GPA) is not a mixed agreement,
the UK may join the agreement.
However, the level of market opening offered by the public procurement law of the EU is
not same as the GPA. The difficulties of the Brexit would be lower by transition to full WTO
membership as per legal terms. Furthermore, the wider negotiation may help to avoid the
political difficulty. The trade between the EU and UK have to be concluded on WTO terms, if
they decided to opt for no trade agreement post Brexit. Therefore, the both parties in such
situation will face the economic effects. The reason behind such effects involve the changes in
trading relationship. There will full tariffs on the trade between the EU and UK. In addition, the
complex supply chain will also impacted by the cumulated effects of tariffs. There would border
controls for the regulatory and custom purposes. The chances of the potential implementation of
the trade protection measures will be high. The uncertainties of the regulatory regime of the UK
will be applied in case of the imports from the EU. Thus, these uncertainties will cause the loss
of public procurement liberalization (Bongardt and Torres 2018). The trading relationship
between the UK and EU may also deteriorate in terms of loss of internal market liberalization
related to service industry.
There would be interference due to the law and enforcement judgements. However, from
the perspective of dispute settlement, there would be pressure on the EU and UK to resolve the

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disputes under the WTO. The differences between the enforcement of WTO law and EU internal
market law is considerable. The main difference is private parties are not allowed to get direct
access to dispute settlement under WTO. Though, the dispute settlement under the WTO worked
well previously, although, the settlement in global scale will act as a constraints (Gasiorek,
Holmes and Rollo 2016). The process of dispute settlement will be costly for both Therefore,
there exists various benefits as well as drawbacks of the post Brexit integration between the EU
and UK through WTO and free trade agreement.
Conclusion
UK decided to leave the single market and customs union of the EU. Thus, there may
exists a negation between the two parties during the transition period. Hence, this deal will help
to continue the trading relationship between two parties after the Brexit. However, there is also a
possibility of no trade deal between the EU and UK (Lydgate and Winters 2019). The integration
between these two parties may happen through the freed trade agreement or WTO agreement. In
addition, there exists pros and cons of these integration between the EU and UK. The main
limitations associated with the deep and comprehensive free trade agreement will be dispute
settlement and investors protection. The WTO option would also create trouble in case of dispute
settlement. Though, there was no such issues associated with the dispute settlement of the WTO
previously. The problem will develop due to exposure in global scale. On the contrary, as per
legal terms, the difficulties related to the Brexit may degrade due to the WTO agreement
(Howarth and Quaglia 2017). Moreover, the government of UK may facilitate with the market
integration anf trade liberalization due to the free trade agreement. Therefore, there is both
positive and negative consequences of these integration.

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