Article 50 is a part of the European Union law that lists the process of the withdrawal of a member from the European Union. The Brexit referendum was held in the UK on 23rd June 2016, in which the majority voted to leave. The UK will trigger Article 50 on 29th March 2017. Why did it take a long time to be triggered? Prime Minister Theresa May announced in October 2016 that she did not want to rush the withdrawal process. After the article is triggered, there is a two-year time limit (during which the EU laws still apply to the UK) in which the UK have to complete negotiations. If negotiations do not go to plan, the UK will have to leave empty handed. The UK would continue to participate in the EU; however, the UK members would not be allowed to participate in discussions about the withdrawal of the UK.
The EU customs union is a system which allows all member states to follow a set of common rules about custom controls over goods entering the EU from the outside. This system focuses on the levying of tariffs and trade quotas, they also include other matters, such as checking food with health standards and checking that consumer goods comply with safety rules (e.g. children’s toys).
According to figures by the Office for National Statistics (ONS), the UK exported £134.3 billion worth of goods and services to countries in the EU but imported £223 billion, meaning there was £88.7 billion more imports than exports. This results in the EU exporters facing a struggle as their incomes will decline as the UK leave the EU. As a result of this, this will allow the EU to reach an agreement which avoids the imposition of tariffs on exports to its largest single export market (the UK), this is known as a ‘mixed agreement’.
However, an important question for the UK is: who decides whether the UK can have a free trade agreement? It will need to be finalised by EU leaders via a majority-wins vote, the European Parliament also by a majority-wins vote and by the remaining national parliaments across the EU. The general rules of the EU policy of free movement of goods and services have generally worked well with other countries, for example, Korea; This means there should be no difficulty in replicating these rules in an EU-UK trade agreement. And since this rule benefits the consumers of the imports, there is a strong argument for replicating these rules.
Other examples of negotiations that Article 50 will cover are discussions about unspent EU funds, access to EU agencies who have a role in the UK law (e.g. European Medicines Agency), access for UK citizens to the European Health Insurance card, the rights of UK fishermen to fish in non-UK waters (including the North Sea) and many others.
What happens next? During May/June 2017, the negotiations will commence. And in the autumn of 2017, the UK government is expected to introduce laws to leave the EU and to incorporate some of the EU laws into the UK laws, which is known as the ‘Great Repeal Bill’. The negotiations are said to be completed by October 2018 and in March 2019, the UK will formally withdraw from the EU (unless the two-year time limit is extended, but this will only happen if the other EU member states grant approval).
Greece joined the Euro in 2001, and its confidence for the economy grew leading to a big economic boom. In 2007, the financial crisis hit 5,000 miles away in the United States. It then hit countries around the globe and every country in Europe experienced the recession but Greece suffered the most as it was one of the poorest countries and had a lot of debt at that time already. The unemployment rate reached 28% in 2013, which was worse than the United States during the Great Depression.
The government debt carried on rising and as it was the aftermath of the global financial crisis, investors were concerned that Greece would not be able to pay back their debt. This meant that it became expensive for Greece to borrow money, resulting to their first bail out loan in 2010. This was provided by the European Central Bank and the International Monetary Fund on a condition that they would decrease government spending. Many economists did not agree with this agreement and believe that it might be the reason for why Greece is in this situation. Government spending is important because it likely to increase aggregate demand and as it is an injection into the economy which could increase the rate of economic growth.
Greece could not pay their bills, interest/dividends on their bonds, payments due on loans nor could it pay for all the new jobs it had unwisely creates. This then led to a decrease in unemployment, a crisis of confidence, a decrease in foreign direct investment and political uncertainty. This debt carried on increasing. The Greek people have been rushing to ATMs to withdraw as much money as they can, after they have been giving a limit to withdraw up to sixty euros per day. The Greek government spent more than it received in revenue and over the years this accumulated deficit became extremely large compared to their GDP. Not to say that other countries do not have large deficits, the US deficit is large and growing larger and it is unsustainable; Japan’s debt is also very large.
However, the US and Japan are not considered broke, while Greece is because:
Japan’s currency (yen) and the US’s currency (euros), can be printed whenever needed (this will cause inflation in the future but they can use the printed money to pay their bills). Greece has to pay in euros, which cannot be printed whenever needed.
Also, creditors know that Japan and the US will be able to handle their problems and pay off their debts with valuable currency. But Greece, has failed to implement reforms and so creditors do not believe that they can pay off their debts.
More than 1 billion people around the world do not have access to safe drinking water. 5000 people die every day as a result of drinking unclean water. People who live in high-density air pollution areas have 20% higher risk of dying from lung cancer. United States produces 30% of the world’s waste and uses 25% of the world’s natural resources. Almost 80% of urban waste in India is dumped in the River Ganges. Over 1 million seabirds and 100,000 sea mammals are killed every year.
So what are all these statistics related to? Pollution. Pollution is the introduction of harmful substances or products into the environment. How does this issue affect the government? Well, the government would have to set new regulations and introduce funding programmes to clean up the pollution. Also, if too many people become ill from all the pollution present in our environment, actions would need to be taken to make sure the right treatment is available therefore increasing government expenditure, creating an opportunity cost.
In 2005, the European Commission set up an Emissions Trading System (ETS) in an attempt to limit greenhouse gas emissions from heavy industry. Tradable pollution permits are an attempt to solve the problem of pollution. Its main focus is to curb carbon dioxide emissions by major polluters in the European Union.
So how does it work? Every year, the European Commission allocates a set amount of carbon dioxide permits to national governments, who then divide up the allowances among firms who are a part of the scheme. These permits are tradable, which means that firms can buy and sell between themselves thereby creating a market. Most of the pollution permits are free and have been allocated to firms depending on how much pollution they created before the scheme was introduced. However, the government are able to retain up to 10% of the permits and offer them for sale. Some of the permits are also kept as a reserve to enable new firms to enter.
Is this the most efficient way to solve the issue of pollution? The price mechanism is used to internalise the negative externalities created by pollution. Furthermore, governments are able to raise their funds by selling permits that they reserved. And by having these permits, it creates an incentive for firms to invest in clean technology and so reduce carbon emissions in the long term – resulting in a decline in pollution. If firms exceed their allowance then they face fines which will increase their costs of production. This means that they learn their lesson and do not exceed their allowance next time. However, if the European Commission issues too many permits, there is little incentive for firms to reduce pollution which means that these pollution permits are pointless. Moreover, firms may decide to pass on the cost of purchasing these permits onto consumers. This means that the prices of goods and services will increase. The government also face a cost of running this system as they have to monitor the pollution emissions from the many companies part of the ETS.
We must consider that the EU is just approximately 15% of the world and unless all countries decide to run a similar carbon monitoring scheme, then global emissions will continue to increase and have many severe effects on the environment.
The single market’s main aim is to simplify trade within the European Union. Since the inauguration in 1993 it has been the backbone of the European economy and has served in many ways, but with recent reports of Theresa May looking to leave the single market, people wonder what does this mean for Britain?. The main rule is the free movement from one EU member country to another of goods, people, services and capital - in other words is known ‘four freedoms’. In addition, it also eliminates tariffs or taxes on trade. The EU creates minimum regulatory standards, and then requires all members to comply with them. If Britain does leave the single market, exporters would no longer be required to make 28 variants of their products to comply with national rules.
In recent years we see that Britain’s trade with countries outside the EU is growing. Trade with the EU has been decreasing. Trade connections between non-EU and the emerging economies have been rising steadily - however the EU remains the UK’s largest trading partner. It is said that ‘The UK will not be able to dictate exit terms to the EU because it is running a trade deficit’.If there were trade barriers between Britain and the EU put in place, the EU would lose more export earnings from Britain, than vice versa. Another advantage would be that the UK would not have to follow the rules and regulation put in place, and be able to boost trade with faster growing parts of the world. Moreover, the UK’s access to non-EU markets is to a great degree determined by its membership of the EU. The UK on its own, would have much less bargaining power than the EU.
There are alternative arrangements that can be arranged to replace the departure of the single market. If Britain withdrew from full membership of the EU, it would open up many doors in terms of trading relationship. These include membership of the EEA - if Britain joined, they would have unlimited access to the single market however Britain would have no say over EU trade policy. Another alternative would be the custom union - similar to the one Turkey has with the EU. This type of arrangement eliminates internal tariff, but requires the EU to agree common tariffs with countries outside. Another possible way is the so called ‘Swiss-style’ relationship. This is based on bilateral negotiations and agreements. A free trade agreement (FTA) could also be put in play if the UK decides to leave the single market. This would mean that trade with the EU would be tariff-free and also Britain could set its own trade policies with non-European countries. The final option would be to trade under the WTO rules. Therefore means the UK would not comply with EU regulations, but with the CET.
To conclude arrangements such as EEA, ‘Swiss-style’ relationship or a custom union would be pointless as the UK would still have to comply with the EU regulations. So if the UK was to leave the EU than the best possible option is the FTA. Whilst the exit of the UK from the single market, could trigger a second referendum for Scotland, as well as one for Northern Ireland, the economy will no doubt be harmed. Angela Merkel has also emphasised that there will be no single market for the UK if it does not allow free movement, an issue many “brexiters” thought needed attention. Britain is anxiously awaiting the president-elect Trump to sort out the US trade deal, but at the moment Theresa May seemingly attempting to create a dispute that will be of no benefit for anyone.