Brexit
Introduction
Brexit refers to as an abbreviation used for ” British Exit” which referred that on 23 June 2016, the referendum based on the United Kingdom’s decision had been applied for leaving the EU ( European Union). From the EU the Brexit is the backdown of the UK. The result of the vote roiled international markets and defied expectations, and due to this, the demand of the British pound had been decreased. The Brexit happened in the European Union which in result the trade barriers raised between the United Kingdom and other countries. Due to the Brexit, between the EU and UK, the trade flows has been adversely affected.
Moreover, the trade cost is increased between the United Kingdom and other countries. The countries which are having good trade relations with the United Kingdom faced vulnerabilities due to this Brexit. The countries like Germany, the Netherlands, Belgium, and Western European Countries are affected more.
Body
Brexit has not only put a negative impact on the economy of the United Kingdom but the trade between other countries has also been affected due to this. Moreover, the countries who does exporting and importing of products from the United Kingdom are facing deterioration in terms of trades. Brexit reduces the level of real per income capita of European Union (EU) and the United Kingdom. Not only economic growth is affected, but the economic development of the United Kingdom is also affected. Brexit also put a positive impact on the country, the demand for certain United Kingdom exports has been increased. It reduces the value of the pound in the United Kingdom, and due to this, the price of the certain exports become lower as compared to the American and European competitors. For the economy of Germany, Brexit removes the advantage of the European based single market.
Moreover, it also removes the benefits of the automative business enterprise. The demand for the European Union services and goods has been decreased on the United Kingdom economy. Some trade barriers are found between the United Kingdom and the rest of the world such as Quotas, tariffs, Subsidies, Anti- Dumping based duties, Regulatory Barriers and VERs ( Voluntary Export Restraints). These trade barriers were affecting the global trade between the UK and the other countries and prevented the flow of services and goods to consumers from the producers. The Netherland Bureau has conducted research for CPB ( Economic Policy Analysis) which proves that the Bilateral trade has been reducing between the rest of the world and the United Kingdom which in results the reduction has been found in Gross Domestic Product.
Moreover, due to the higher trade costs between the United Kingdom and the other countries resulted in the less efficient resource allocation has been found. In these countries, the allocation of resource within the industries has been found very less effective. Most of the industries of these countries have been affected because of Betrix. The betrix has put a negative impact on the countries like Germany, Belgium, Netherlands, and Ireland. In all these countries the economy has also been affected. Ireland exports more products to the United Kingdom. The country depends on the United Kindom for its 34% imports and its 14% exports. But after facing the trade disruptions, the trade between Ireland and the United Kingdom has been affected which in results the economic growth and economic development of both these countries have been slowed down. Besides this, Netherlands is the second largest trading partner of the United Kingdom in terms of trade. In the United Kingdom the country has invested more money for importing the essential products from the UK. For a few Dutch investors, the United Kingdom has become the popular destination, and for the United Kingdom investors, the Netherlands is their popular destination. After the vote of Brexit, the demand for the exports of the Dutch Flower has been declined. After the Brexit vote, the Belgium country is also affected more.
Moreover, 9% decline has been found in the exports of the products from Belgium to the United Kingdom. Moreover, due to the Bretix, the country has to pay more tariffs on exporting their products to the UK. Most of the industries of this country face numerous problems due to the lack of resources and raw materials because the United Kingdom exports their essential raw materials and resources to these industries and for getting these products the companies have to pay more tax for getting the advantage of imports of raw materials from the United Kingdom. Germany is also the trading partner of the United Kingdom. Moreover, the Brexit removes the single market benefits for the industry of Germany.
Moreover, the automotive sector has been affected more because of the Bretix. German exports suffer more as compared to their imports. They also have to pay some good amount of tariffs for exporting their products to the United Kingdom. Moreover, Brexit harmed the economic growth of the United Kingdom and other countries.
Some essential International trade theories are as given below:
Comparative Advantage Theory
It has been described in this theory that from global trade a nation gets lots of benefits. With the help of this theory, various countries are getting benefits from the global trade. They are also getting advantage of exporting products from one country to others. Therefore it is essential for the countries to use this particular theory for getting the advantage of international trade.
Theory of International Product Life- Cycle
This theory explains the production location and shifting of various markets. Moreover, trade patterns are influenced by some factors such as competitive structure, market size, resources, technology, and innovation level. Therefore for influencing the trade patterns of United Kingdom and the rest of the world, the countries have to follow these factors because all these factors will not only improve the patterns of trade but also enhance the trade from the United Kingdom to other countries.
New Trade Theory of International Trade
The New Trade Theory is based on external and internal economies of scale. In this theory, the relation and connection between the intra- firm trade and intra industry trade have been briefly discussed. With the help of these trade, the countries like the United Kingdom, Germany and Belgium can take advantage of the economies scale and can enhance their returns.
Country Similarity Theory
According to the Country Similarity theory, the trade has been taken place in those countries where greater differences have been found in their factors endowment. The patterns of the International patterns were classified into two main categories which include manufactures and primary products. In some natural resource-based industries it had been found that the factor endowments and relative production costs determine the trade. The trade occurs between the countries have some similar characteristics. The theory relies on some principles including nations with the geographical locations have larger trade, the patterns of demand in nations with higher per capita income level are similar to those countries which are having levels of similar income.
Factor Endowment Theory
Bertil Ohhn and Heckscher developed this theory for explaining the differences in competitive advantage and commodity price between two countries and nations. The three relationship types have been briefly explained in this theory which includes Technological Complexities, labor- land relationship and Capital-Labour Relationships. Apart from these, it has been explained in the theory that the countries with cheaper labor costs would exports labor intensive based products whereas the countries where capital is abundant, and labor is insufficient will export capital based intensive goods.
Absolute Advantage Theory of International Trade
The Absolute Advantage is a country ability to produce a product or good cost effectively and more efficiently. According to the theory, the wealth of the nations are measured through improvement level which signifies that the wealth of a nation depends upon per capita income level. Moreover, Adam Smith emphasized free trade and productivity for enhancing global efficiency. This theory will help the United Kingdom and the other nations in removing trade barriers. Moreover, if these countries emphasized free trade than there is a chance to enhance the trade between these countries.
Mercantilism Theory
This theory aims at developing trade surplus. Few government interventions implemented the Mercantilism. The theory focused mainly on colonization expansion and on maintaining trade surpluses. It laid emphasis on the colonial powers and for accumulating wealth, the mercantilism policy greatly benefited and assisted some colonial powers.
Conclusions
Based on this project it could be understood that the Batrix has put a negative impact on the economic growth of the countries like the United Kingdom, Belgium, Netherlands and so on. Moreover, the countries are facing difficulties in exporting and importing their products from one place to another place. The economy of these countries has been adversely affected. The trade barriers such as regulatory barriers, VERs, Quotas, and Tariffs have been increased between the United Kingdom and other countries including, Belgium, Netherlands, Ireland, etc. Some international theories are there which can eliminate the trade barriers from these countries.
References