The European Union (EU) economic bloc is one of the largest trading bodies in the world. The bloc comprises 27 member states and its purpose is to foster trade and economic growth among partner countries (Huang and Reilly, 2018, p. 196). The United Kingdom (UK) is among the first nations to have freely chosen to exit this union. This process is mentioned in this paper as Brexit and it refers to UK’s referendum decision to leave the EU (Martill and Staiger, 2018). This paper evaluates the implications of this action on the country’s economy and its relationship with the social, political, and economic governance of the EU.
Models of Economic Integration
Brexit has made it critical to question the kind of economic models that can be adopted to sustain trade relations between the UK and the EU. Four main models of economic integration that apply to this analysis include the European Free Trade Association Model, European Economic Area Model, World Trade Organization Model, and the Customs Union Model. These frameworks of economic governance are explained below in the context of their application to the single market and customs union status of the EU.
A single market operates where member countries in a trading bloc remove trade barriers by adopting common policies on product regulation. The UK could remain part of the EU single market even after withdrawing from the bloc because it is possible to negotiate trade agreements as a non-EU member (Huang and Reilly, 2018). Iceland and Switzerland are two non-EU member states that have access to the EU single market (Vickers and Khorana, 2018). They both negotiated for this privilege by adopting selective EU regulations. Iceland did its negotiations using the European Economic Area Model, while Switzerland did the same using the Customs Union Model (Huang and Reilly, 2018). Collectively, both sets of negotiations have made it possible to access the EU single market albeit in a limited way.
The UK has not declared the kind of relationship it intends to have with the EU after withdrawing from the economic bloc. However, it has been unable to gain access to the single market in the same manner as Iceland and Switzerland have done because it has not met three criteria for consideration. The first one relates to its inability to contribute to the net financial inflows of the EU after Brexit (Sacco, 2019). Secondly, it is unable to accommodate the net inflow of EU immigrants because its exit from the EU meant that it had to make such decisions individually (Vickers and Khorana, 2018). Third, the UK is unable to gain access to the EU single market because it has disassociated itself from EU laws (Sacco, 2019). Thus, the UK has failed to meet the three criteria for gaining access to the single market, as described above.
Brexit has significant implications for the national sovereignty and market access of the UK in Europe. Positively, it has enabled the UK to make an individual determination of issues affecting its social and economic policies, such as immigration (De Grauwe, 2020). Negatively, Brexit has limited UK’s access to continental markets because it is unable to enjoy the benefits of collective negotiations (Huang and Reilly, 2018). Broadly, these insights show that the UK’s exit from the EU has had both positive and negative implications for the country.
A common customs union is often developed when member countries choose to impose the same rate of import duty to foster trade among one another. In the EU context, countries do not necessarily have to be members of the trading bloc to gain access to the customs union. For example, Ukraine completed individual negotiations with the EU in 2014 using the Deep and Comprehensive Free Trade Area (DCFTA), which minimized tariffs for goods exported from the Eastern European nation into the UK (European Commission, 2021). This arrangement has seen the country benefit from the elimination of trade tariffs by almost similar margins of 98.1% for the EU and 99.1% for Ukraine (European Commission, 2021, par. 3). Monaco is another example of a non-EU member state that belongs to the customs union. This territory entered the EU customs union through negotiations that involved France (Baur, 2020). These examples show that access to the customs unions is not dependent on membership.
The UK could have followed similar market negotiations, such as those adopted by Monaco or Ukraine, but the circumstances of negotiation are unique to each country. For example, unlike Ukraine and Monaco, the UK freely chose to exit the EU and negotiate afresh (De Grauwe, 2020). Ukraine and Monaco did not follow the same strategy because, unlike the UK, they were not original members of the EU. Therefore, in this context of analysis, negotiations about customs and tariffs are done on an individual, or country-specific, basis. Therefore, unlike other non-EU member states, the UK has to adopt an individualized approach to customs union engagement.
Brexit implies that the UK is excluded from the customs union framework it enjoyed with EU member states. This decision had implications for the UK’s national sovereignty because it meant that it could negotiate with the EU trading bloc on an individual, as opposed to collective, basis (Jacobs, 2018). Brexit also has implications for UK’s international trade because it limits access to continental markets. Concisely, by negotiating alone, the UK has a weaker bargaining power compared to an alternate scenario defined by EU membership.
Institutional Implications of Brexit
Institutional support is critical to the functioning of economic blocs, such as the EU. Three main institutions supporting the EU’s functions include the European Commission, the Court of Justice, and the Council/Parliament. Brexit has had implications on the functioning of these institutions because it has affected the political balance within the EU parliament and delineated the constitutional limits surrounding the participation of several member states in the economic bloc (European Parliament, 2019). Relative to this assertion, Brexit has affected the composition of the European Union Parliament because voting rights are based on the population of member countries within the bloc (European Commission, 2020). Given that the UK’s withdrawal from the EU led to a decline in the bloc’s population, the composition of the European Parliament had to be changed to reflect this adjustment (Martill and Staiger, 2018). However, before Brexit, the UK played a significant role in maintaining a political balance between Western and Eastern European countries within the union (European Commission, 2020). Therefore, Brexit has implications for the policies of the economic bloc, especially in areas involving the freedom of goods, people, and capital within the union.
The findings of this investigation show that Brexit has had implications for the political, economic, and social governance of the EU. In this regard, the UK’s exit from the economic bloc has had both positive and negative repercussions for the EU and UK, respectively. For the UK, the positive implications are centered around the renewed interest in making individual state decisions on immigration and the free movement of goods or services. Comparatively, the negative implications of Brexit are highlighted through limited access to continental markets.
De Grauwe, P. (2020) The economics of monetary union.13th edn. Oxford: Oxford University Press.
European Commission. (2020) EU customs union – unique in the world. Web.
European Commission. (2021) EU-Ukraine deep and comprehensive free trade area. Web.
European Parliament. (2019) The impact of the UK’s withdrawal on the institutional set-up and political dynamics within the EU. Web.
Huang, D. and Reilly, M. (eds.). (2018) The implications of Brexit for East Asia. London: Springer.
Jacobs, F. B. (2018) The EU after Brexit: institutional and policy implications. London: Springer.
Martill, B. and Staiger, U. (eds.) (2018) Brexit and beyond: rethinking the futures of Europe. London: UCL Press.
Sacco, M. (ed.). (2019) Brexit: a way forward. London: Vernon Press.
Vickers, B. and Khorana, S. (2018) Navigating uncertainty: towards a post-Brexit trade and development agenda. London: Commonwealth Secretariat.