By Jan Mládek
Brexit has been a very important event for the United Kingdom (UK) and the European Union (EU). We are only now finding out what will be the consequences of the decision made in June 2016 for UK citizens. There is no socio-economic area that will not be affected by this event. First, it will impact the economy. The EU is a political economy project, but with politics lagging behind the economy. European economic integration has been successful so far and Brexit is threatening it. Not only did the EU lose its second-biggest economy and is now smaller, but it has also lost the momentum for integration. Hence, both the EU and the UK have a real interest to keep the UK as close as possible to the other 27 European member states (EU27), but there is the problem of “cherry-picking” and the “right to regulate”. One of the main reasons for the UK to pursue Brexit was “regaining control”. But this represents a problem. The UK would like to keep free tariffs to trade with the EU and with declining non-tariff barriers. At the same time, the UK wants to use its newly obtained right to regulate. So far, they are speaking about regulating Artificial Intelligence, GMO food, and animal welfare. However, in the Brexit agreement is written that tariff-free trade is possible unless substantial harm will be done to free-market between the EU and UK. “Cherry-picking” was a big problem during the Brexit negotiation. The UK wanted to be part of the single market in some areas and stay out of others. The European Commission has been boldly against this attitude.
The UK declared its interest to intensify foreign trade with non-EU partners but not a lot has happened so far. The British exports to EU27 and to non-EU partners is roughly the same as it was before Brexit 50:50. Exports to the EU overtook non-EU countries in May 2021 and remained higher in June 2021. However, non-EU exports became higher again in July 2021. In the other words, the structure of UK export hasn’t changed up to now. Theoretically, the UK can intensify trade outside the EU, but the EU is so close geographically and other partners are so far…
At the moment, the UK is dealing with shortages of gas in petrol stations and empty shells in supermarkets. The main reason behind this domestic issue is the shortage of lorry drivers. Foreign drivers are gone, and UK citizens are not enthusiastic about this type of job. The government wants to push UK companies to increase drivers’ wages. Under the current crisis, the government is issuing a short-term working visa for three months. It is not clear whether this measure will be enough to attract foreign drivers back to the UK.
Brexit is also a challenge to UK integrity. Northern Ireland is still part of the EU single market and there is a custom border between Northern Ireland and Great Britain in the Irish Sea. This may be the first step towards the unification of Ireland. The possibility to declare a new referendum is a part of the Good Friday Agreement and it will be difficult for the London government to stop it. There is also a tense situation in Scotland. Scotland voted for staying in the EU and is considering its independence from the UK. However, it is unlikely that this independence process will happen. The central government in London has no reason to allow a referendum on Scottish independence in which voters are expected to vote against “staying in the UK”. If the Scottish government organizes its own referendum, it could finish like the government in Catalonia in Spain.
Brexit was expected to create little harm in security matters because the UK is an important member of the North Atlantic Treaty Organization (NATO). However, recent developments, with the creation of the Australia, UK, and US alliance (AUKUS[1]), threaten these optimistic expectations. There are growing tensions between the UK and France and the EU is once again considering the creation of a common army.
Brexit also brought negative consequences to EU27 members. The European integration lost its dynamism and momentum. Plans for enlargement have been forgotten and the EU has not been able to integrate the Western Balkans, Ukraine, Turkey, Moldova, and Georgia. The way Brexit was done unified EU27. A strong message was delivered: if a big, wealthy, and important country like the UK is facing such problems with exiting the EU, how could smaller countries handle the problem of exiting? On the other hand, resistance to deeper political integration, which is needed for the stability of the common currency, the Euro, is still very high and EU27 can face serious economic crises in a short time. The EU can expect a period of stagnation, not disintegration, deeper integration, or EU enlargement.
Brexit is something that will take a “long time to land” and we are just at the beginning of the process, which may last five to ten years. The UK is searching for a new position in the globalized world. Apparently, after divorcing the EU, the UK wants to play again an important role in the Indo-Pacific area. Discussions about extending the G7 to G10, and include Australia, South Korea, and India, are starting. However, this idea finds no enthusiasm in countries like France, Germany, and Italy.
[1] AUKUS is a trilateral security pact between Australia, the United Kingdom, and the United States, announced on 15 September 2021 for the Indo-Pacific region.
Dr. Jan Mládek is a GFCC Distinguished Fellow and the Director of the Czech Institute of Applied Economics, Ltd. He served the government of Czech Republique as a Minister of Agriculture (2005–2006) and minister of Industry and Trade (2014- 2017) and, is currently a member of the Czech Parliament (2002–2005, 2013–2017).
