Conventional wisdom says the UK will get hit harder than the EU in the event of a no deal Brexit. Conventional wisdom is wrong.
Here are eight reasons the EU will suffer more in both the short and long term.
Reason 1: Corporate Taxes
The UK can and likely will slash corporate tax rates. A lower corporate tax rate will mitigate much of the profit damage suffered by UK corporations in the event of no deal.
Note that one of the EU’s biggest complaints against Ireland now is the “unfair” corporate tax structure of Ireland.
Reason 2: Currency Fluctuations
A falling currency is good for exporters and bad for importers. The British Pound has been falling in anticipation of Brexit.
Reason 3: Balance of Trade
In the event of no deal, WTO tariffs kick unless the EU offers to work out a trade deal. Under WTO rules, the EU could do that and rules allow a lengthy 10 years to get it done. The EU should agree to do that, but with animosity rising, it probably won’t.
In a rising tariff setup, exporters will suffer far more than importers. Germany has an enormous trade surplus with the UK.
Image from Order of Rank of Germany’s Trading Partners.
Angela Merkel is very concerned about German exports as well she should be.
Throw in the increasing chance of Trump putting tariffs on German cars and the EU will get crucified. A very severe German recession is in the cards and the EU faces a double whammy of Brexit plus Trump.
Note that a falling currency will mitigate some of the Tariff damage on UK exporters while compounding the problems for the EU.
Reason 4: Fishing Rights
In Brexit, the UK halts all EU fishing rights. EU fishermen will get clobbered.
Reason 5: Trade Deals
The UK will be able to make its own trade deals and set tariffs how it pleases.
Reason 6: Rules and Regulations
The UK will finally be free of inane EU rules and regulations on basically everything but especially agriculture.
Reason 7: Brexit Fees and Pay to Play Fee
Some dispute this, but the UK can halt the Brexit breakup fee. Boris Johnson has threatened to do that. Regardless, the UK will stop paying into the EU coffers even it does pay the breakup bill. The EU has budgeted for UK payments. When the UK stops paying, the EU will have to raise taxes to cover the difference.
Reason 8: Long Term Consequences
Both the EU and UK will suffer in the event of no deal but the long-term consequences strongly favor of the UK.
Mike “Mish” Shedlock
The EU really does have more to fear…https://www.telegraph.co.uk/business/2019/08/01/europe-has-fear-no-deal-brexit-britain/
I’m sorry, but this is a nonsense. Cut corporation tax? The UK exchequer will pay for it – i.e. UK taxpayers. That’s NOT a positive outcome. Currency fluctuations can force inflation up, pushing up interest rates – but just ignore that! The EU loss will be spread amongst its members – the UK takes its hit all on its own. Trade deals are far, far more involved & complicated than the UK simply “making its own” – and what’s the guarantee that the UK will get better deals than the entire EU?! Why? Rules & regulations are hardly “inane”. They guarantee standards & protect consumers – UK manufacturers, for instance, not following EU regs will be unable to export to the EU. The UK cannot simply withhold contracted fees, with the EU doing nothing in return! It’s a fantasy! And the long term consequences do not “strongly favour the EU”. I mean, why has Sterling bombed since the vote? Why has it dropped on the threat of no-deal? The EU CANNOT give the UK special deals – what’s the point of a trading block like the EU if you can leave & get better or equal status? It’s utter bollocks – a thin, poorly thought out article that really is piss poor.
Interesting Angles there
Reason 1: Corporate Taxes –
Now I have just moved my Company to Dublin. It’s wasn’t the taxes I I am moving reluctantly I am a Brit, its market size. 65m vs 450m , and paperwork. I used to fill out all customs stuff , carnets etc just to take equipment to trade shows , used to have a permanent team … So not going back to that
Also I moved to selling humanware – people security experts but they need FOM and carry a lot of tech so it makes sense to leave Blighty and British experts unfortunately. And no I do not want to sell in Australia, USA, Asia (except for Sri Lnak and India where we have a presence already. It makes no sense for my business. +
Reason 2: Currency Fluctuations
Reason 3: Balance of Trade
MY European Customers (of which I have far more) are not really happy with being called NAzi’s , USSR etc So I think the appetite to help the Uk is all but dried up.
Reason 4: Fishing Rights – no comment other than I remember the Cod Wars with Iceland .. The fish move round the sea although I am told they would rather be caught by true Brits.
Reason 5: Trade Deals –
Trade deals are a numbers game – You have 1.2bn people you call the shots. So any country of less than 65m we can get a great deal pity they won’t have large disposable incomes r buy Plane wings.
Seriously in 30 yrs of international sales never won or lost or even mentioend an FTA in a sales engagement. But I was not selling commodity, bags or sugar etc so we will compete with India, Vietnam, Malaysia and China .. good luck with that
Reason 6: Rules and Regulations
Hate to bust that bubble , but if you want sell in Brazil, or Laos, Thailand India USA Japan – you have to follow their domestic regulations and even the USA has it’s quirks. SO we can have a bonfire of regulations to make exporting to the UK easier … makes perfect sense to me … lets increase the deficit to the ROW and not just the EU.
Reason 7: Brexit Fees and Pay to Play Fee
Let’s show the world that we may not pay up on our commitments – great marketing campaign for the companies that want to move in to take advantage of the low tax low reg business environment
Reason 8: Long Term Consequences
Yes not only the UK and the EU but also many parts of the World . If The EU goes tits up then countries to export to it will feel the pinch same with UK
But they don’t see the benefits of Blue Passports , Easier to Export to and the long term more jam for all.
Other than that I agree totally especially about the fishermen
More LEAVE delusions. Little England can make deals for sure, but it will have to re-make 40-60 that it loses with BREXIT. And it only took them 3 years to re-sign 4 little ones. And nobody seriously thinks Little England has the economic clout to get the same quality of deal, or as many, as a market 10 times as large. Canada has CETA but told Little England to go away when it asked for a free trade deal. Falling Pound may make exports cheaper but countries, especially America want to EXPORT not Import. Trade deficits and all that. A peso-like Pound will make that impossible. Speaking of America, Little Englanders’ fantasy FTA with America will die on the Irish border, regardless of tRump’s promises. EU countries average about 8% of their trade with Little England-a serious hit but nowhere near the 40% of Little England’s exports to the EU. Finally, EU countries have the ability to pull hundreds of thousands of jobs (Airbus, BMW, etc., etc.) out of Little England to bolster their own economies. Little England has maybe three bars it can pull out of the EU. Yes, Little England can become a low tax, low regulation country for a while, but there are plenty of other countries that can out lower themselves already.
I agree with Stuki that a falling currency is not a good thing. But with all the emphasis on manufacturing exports, it is not generally viewed as such. And to be sure, German manufacturing will suffer.
We just don’t care about Germany. And even if they are going to suffer, now, they have one of the biggest trade balance of the world, a better GDP than us, less debt and more!
So maybe, it’s better to stay focus on us, and our problems rather than german’s “potential” problems, no?
Yes
“Mish you are normally rational but repeating Brexit unicorns doesn’t make it so. I repeat a question that you have consistently ducked. What is the point of a WTO exit that only covers 20% of the UKs economy and ignores services?”
The point is the UK will be free to setup its own trade agreements. How can you not understand the benefits of that?
The question seems silly.
Of course UK wil have more freedom to propose what we want but UK GDP is now 2 620 billions, compared to EU, or China or US all over 13 000 billions (62% of world GDP all together), so don’t think that UK will be the one who decide. We need them far more than they need us. And we have a clock above our head which is also not good to make good deal.
Currently if you meet the single set of rules that govern the single market then you can ply your trade anywhere in the EU-cf America can a member of the California bar practice in Washington DC without also passing the DC bar? No they cannot, in this way the EU is streets ahead of the US.
The UK economy is 80% services. We have a surplus with the EU in services. Leave on no deal and the current FTA we have in services falls. That is why services are more important to the UK than industry. These marvellous free trade agreements you blather on about. Can you name one FTA other than the SM that contains a comprehensive services agreement? No you cannot. Over what timescale are you talking about? Months, a year, five years ten? The liars Johnson and Rees-Mogg talk of the UK flourishing in fifty years hence. I haven’t got 50 years left on earth so that is no good to me or for that matter 80% of UK citizens alive today. How is it that you cannot understand that? Please do not repeat your fisheries canard again. It has been destroyed several times by me and other commentators on this sight. It only makes you look foolish
Going to find out soon enough – somewhere between immediately to 2 years max
So, I guess you accept that it is supreme folly to leave the best FTA on the planet for promises made by charlatans and fools.
You have to understand Mish. He hates the EU with passion. Boris can wreck the country by splintering into pieces and Mish will be ok with it as the UK leaves the EU. He is all against the EU regardless of the consequences…
Against the EU or worried about America’s future?
No I just think against the EU but he can actually answer himself
It should also be noted: politically and economically, the EU is a powder keg waiting for a spark. The euro debt crisis of 2010-2012 was probably just a preview. Italy is the third-largest economy of the EU now that the UK will be gone, and it is an increasingly impoverished wreck. Since it seems to be impossible to implement the structural reforms that would be required to get Italy out of its rut, it is hard to see how the country can remain part of the euro area. Naturally Italian politicians will attempt to muddle on for as long as possible, because an exit would no doubt invite chaos on a grand scale. The problem with that strategy is that it may not be entirely up to them. One must keep in mind that the problems underlying the initial crisis have not been resolved – they have merely been papered over with money printing. If a worst case scenario comes to pass and Italy drops out, the entire bailout architecture would crumble, since Italy is (perversely) among its largest guarantors. Meanwhile, the ECB has become a fount of economic ruin with its crazy ZIRP/NIRP policies. We can already see this in Germany, the former economic locomotive of the EU that is in the process of reverting to being its “sick man”. The ECB’s policies ensure capital consumption. All the illusory accounting profits of the “recovery” will eventually disappear. Brexit is a mere sideshow compared to the potential problems lying in wait for the EU. As a further aside, the UK’s input will be sorely missed in Brussels. The UK was a voice of sanity on many occasions – frequently at odds with the EU’s socialistic bureaucracy, to the benefit of everyone living in the EU.
Et in stultia es oh father of shadows.
“Cut taxes to 0 if you want. If nobody can import from the place without tacking on vast tariffs as per WTO rules”
For starters, You don’t understand WTO rules!
Reason 1: Corporate Taxes
That’s right but these corporates’ production will not have access to the 2nd biggest world market → EU unlike Ireland … So not so attractive
Reason 2: Currency Fluctuations
Right but UK imports more than exports so it cost more than it pays.
Reason 3: Balance of Trade
Right about Germany, but on the UK side :
First in raising tariff, don’t forget that 53% of imports to UK are coming from EU (352 billions) which in not good at all for UK consumer.
Second, 46% of export of UK go to EU which represents 291 billions £, compared to 4 476 billions £ the EU exports in the world (intra and extra EU). So a decrease of exportations doesn’t have the same impact on each economy.
Third : Angela Merkel is clearly important in Europe but you don’t seem to know well how it works. She’s not the only ruler for all the European policies. And I don’t speak only of the French.
Fourth : Prevision on Trump policies on german cars is more fortune telling than something else and whatever tariff, it concerns Germany not UK …
Fifth on the note about mitigation of falling currency for UK exporter, this is right but it’s twice worse for importations which represent 24% of our GDP, a big source of high inflation.
Reason 4: Fishing Rights
Generally right even with the lost of the access to EU area. That represents only 90k tons compared to the 722k tons of UK fishing (12% lose) but globally a win.
Reason 5: Trade Deals
UK will lose free Trade Deals with EU (27 nations), Japan, South Korea, Mexico, Canada, Singapore, Vietnam, Australia, New Zealand, Argentina, Brazil, Paraguay, Uruguay, Venezuela, Chile, Colombia, Peru, Ecuador and Bolivia.
And the time to remake each deal need years and years !!!
Without forgotting, the America First principle in the next negociation with US as the US ambassador has said (prepare you to eat chicken washed with Chorine etc.)
Because, finally, in a deal, the size matters so you’re right on the fact that we can make as we please but that’s doesn’t mean that the result will be what we want. Care Bears is a film, not a economic reality. (Think about China/India)
Reason 6: Rules and Regulations
Right about the freedom, except that a bunch a these rules are made to protect consumers (and our children) and few of these rules really restrict the UK economy but like a lot of others subjects, we are going to rediscover that we are the main source of our problems. It’s the way of responsibility.
Reason 7: Brexit Fees and Pay to Play Fee
Wrong, EU doesn’t use strategy of raising tax. They will go to court and sincerely with big chance to win. The consequence will be the payment but more dangerous for us, we will have made a failure to pay which will decrease the trust of all our future trade partners around the world. That is really not a good point to make a deal and maybe some move from rating agencies which have a direct impact on our debt interest.
Reason 8: Long Term Consequences
You have the right to make wishful thinking but I’m sorry to say that nobody is skilled enough to say the long term consequences. To do it, is selling illusions. Illusions which can be true or not. So it’s better to stay humble.
History will judge.
What is sad here is you just don’t speak about to see the potential end of the UK, with a possible departure of Scotland and/or Northern Ireland in case of a No Deal and so many issues we need to work on.
I don’t really understand that some people continue to try to see things on 1 side like if they try to convince themselves. Here and now, we speak about this the future of the next generation, of our children and their children. I don’t know for you, but because the situation is too serious, I prefer to stay lucid rather lull me to delusion.
It will be hard and scary. Many will suffer and especially among the most fragile of us.
There will be blood and tears.
If there is victory, it will have a very bitter taste.
Keeping the spirit high, Yes ! Invoking Unicorn, No !
#9?
Mish your analysis is as wrong on what is going to happen after Brexit as to your prediction of Cataluna. In the mean time people who deal with the harsh realities of the world noticed the following
https://www.theguardian.com/politics/2019/jul/31/brexit-mess-with-good-friday-and-well-block-uk-trade-deal-us-politicians-warn
https://www.theguardian.com/business/2019/jul/28/uk-aerospace-industry-steps-up-no-deal-brexit-plan-to-leave-regulator
Fisheries The EU is the main export market for UK fish and fisheries products accounting for 70% of UK fisheries exports by value. Valued at £1.3 billion, this trade far exceeds the £980m value of fish landed in the UK, due to the added value from the processing sector. Some of the remaining 30% of exports that go to countries outside of the EU are governed by trade agreements negotiated by the EU that reduce trade barriers. So the single market, and additional trade agreements, are crucial to the success of the UK fishing industry.
This reliance on trade into the EU puts the industry in a position where unilaterally preventing access to UK waters would likely be met by reciprocal trade barriers and tariffs. This would increase the cost of their product, while reducing access to their biggest market. The question for the government, then, is how to balance a political issue against an economic one?
Reason 2: Currency Fluctuations
Yes that will go really well when negotiating with Trump
Reason 7: Brexit Fees and Pay to Play Fee
Basically make the UK more like Argentina…
So let me tell you what can happen if Brexit goes side ways
Northern Ireland leaves
Scotland leaves of all reasons to protect their fish exports into the EU..
GB gets to negotiate with the US under the handicap of being dying to leave WTO for something better … Good luck with that..
Mish would say well the UK can drop tariffs to zero. Sure lets see how long the UK government last with that…
Your problem Carlos is that you don’t believe hard enough, your faith is lacking. The Brexiteers told us that we would leave the EU and enjoy the exact same benefits of membership. That the EU needed us more than we need them. The UK holds all the cards. That the German car industry would ride to our rescue etc.. Why didn’t the EU fold? Why is the UK in chaos? Because Mrs May didn’t believe enough. I don’t think the Brexiteers were lying, I think they believed their guff. They are lying now because reality is a bitch and truth hurts. So our only choice is to ignore reality and believe harder, traitors, saboteurs all over.unbelievers, heretics we need faggots and a stake.
The question as to whether the EU or UK will hurt more from brexit is irrelevant. The real issue is whether the pain can be tolerated by internal political forces. On that level, Britain is far weaker. EU trade constitutes a far higher portion of the UK economy than vice versa. Moreover, from the EU’s perspective, the consequences of giving Britain a good deal are far worse than feeling an economic pinch from a significant drop in UK trade.
EU politicians view a prosperous post-Brexit UK as an existential threat to the survival of the union, which would encourage more states to leave. Thus, ANY pain is work bearing if it will assure a prostrate and suffering post Brexit UK.
That’s exactly why we Leave won. The EU is fascist in nature. It’s very essence is fascist. I agree with your post.
There are changes the EU has brought about that are to be applauded. Like FTA with Japan and future Mercosur etc plus others. Suspiciously like a response to brexit.
However, said changes are more deflationary to the EU. I dont see them able to do much outside of steal UK services, trade off cheap eastern European labour, put up none tariff barriers.
Its aging rapidly with a dysfunctional banking sector, dysfunctional currency, major democratic deficit and a fear of global competition. Worse start to the downward slope than Japan had late 1980s.
All the US need do is implement reciprocal tariffs on the EU, nothing more.
Brexit cannot be stopped now, too late. Its 1939 again and needs same level of determination. Battles will be lost, outcome of the war 6-10 years hence.
You are probably right Mish, the clueless, megalomaniac EU bunch( a la Juncker&CO) couldn t care less, I,am afraid, as long as their worthless, outrageously overpaid cushy jobs are guaranteed for life with a mighty golden handshake if necessary and mind boggling pensions afterwards ….
not much being said about UK pensioners living in Europe, who have seen a real cut in their income due to Euro/£ exchange rate
What’s to be said? As time goes on, they’re simply going to have to move back to Bristol and Manchester and Aberdeen. But even there, the pound’s not going to buy what it used to when they left…
They may well have to. Obviously, this will add to the overstretched NHS and housing crisis……
housing crisis ???….but I ve been told everybody, corporates and their staff in particular, is leaving the sinking UK ship, hurrying for the safe, great life guaranteed EU continent ….
The only positive to come of this might be cheaper UK housing if people to start to leave
Would love them all to come home. Usually asset rich. Great shame they relocate. Changes would like to see:
single nationality vote. Dual+ nationals, no vote.
out of country for a period unless on behalf of a uk plc or gov – say 2 years = no vote.
Their uk state pensions already lose index linkage so uk based pensioners at least get some increase.
Come home everyone!
Cut taxes to 0 if you want. If nobody can import from the place without tacking on vast tariffs as per WTO rules, what corporation in its right might will stay in the UK, let alone move there? We’re already seeing the reverse trend, and the UK hasn’t even left yet. And this is one of those rare analyses I’ve seen that champions a crumbling currency… yes, that’s exactly how the US (and Britain, for that matter) got rich in the first place: by having a worthless currency nobody wanted to be holding when the music stopped and flushed out of their reserves because they had so little faith in its future. Terrific if all you export is bananas and straw hats and your people grow their own beans and never heard of a cell phone. And I’m truly impressed by the ability of supposedly grown man to read just one line in a list and ignore dozens of others that add up to vastly more. Now how about the corollary list showing Britain’s partners with EVERYBODY highlighted in yellow, since Britain won’t be losing tariff-free access to just ONE of its partners, but essentially ALL of them? And if Trump shuts out German cars, ALL of the EU will shut out American cars; it’s as simple as that. The Yankees won’t sell a car from Lisbon to Latvia if they pull that. That’s WHY most European nations find it indispensable to be in the EU. Britain never got that, but it’s about to. As for refusing to pay “the divorce bill”, which is money Britain COMMITTED TO PAY AS A MEMBER OF THE EU, that will be seen by the bulk of mankind as a default on a promissory debt. Good luck ever getting a loan below 20% interest anytime in the next 50 years if you do that. EU fishermen will get clobbered? By what? Losing about 5% of their fishing grounds? They still have 60-some countries to sell their fish to, tariff-free. Just where are British fishermen going to sell their fish when WTO rules insist countries slap tariffs on them? It’s the British fishermen who’ll be watching their nets dry up and blow away in the wind. Brexit’s going to be a disaster for everything except the writing of new tunes to whistle while passing grave yards… just like the one you’ve presented us with here today.
Dont worry about currency, post Brexit the problem will be holding down the £. No kidding. Watch out for whiplash is a couple of years. Fortunately UK is so small we can manage the £ down and not look like a manipulator.
Meanwhile EU banks are due a major comeuppance. Greece and Cyprus had bail-ins by law. Watch the rules change when the problem is at the core soon enough. It’s really very scary is EU bank land and the elite know it. When Germany gets hit by Deutshe and Commerz bank the ramifications will be massive – everyone for themselves and watch solidarity dissolve when they change the rules vs what others had to live with.
Its unfolding now. Brexit is small beer in comparison.
“post Brexit the problem will be holding down the £”
Why? Who’s going to want it? Do you understand WHY people hold a currency in reserve in the first place? Not because it’s magical or has a nice picture on it. Because they’re expecting to do significant volumes of trade with that country in the future and need to hold that currency to either pay for those goods or to buy or sell off to keep their own currency in a certain range against it. That’s all. So if every country on Earth on November 1st has WTO tariffs on pretty much everything Britain sells, what do you think… will that INCREASE or DECREASE their volume of trade with Britain? That’s right! DECREASE. And if the overall global volume of trade with Britain DECREASES, what will that do to the demand for the pound, increase it or decrease it? Right again! It will DECREASE the demand for the pound. Countries will sell it off and flood the market with excess pounds they no longer need to hold in reserve, and the pound will tend to fall more, and its value will remain low until such time as its volume of trade begins to recover. And given that that will depend on the UK managing to cobble together free trade deals, which typically take 5-10 years to conclude with other major nations, you can count on the pound being worth a lot less than it traditionally has been over the past century for a significant amount of time… during which time, British home assets will be firesale prices, particularly valued in euros and US dollars… a lot of your country is going to wind up belonging to foreigners over the next generation or so. And when prices go back up, they’ll be the ones benefitting from that, not you.
The EU is not the one in trouble. They’re the ones concluding deals with Canada, Japan, South Korea. They have problems, sure; everyone does. But they ain’t got the kind of problems Britain has. I am willing to bet the mortgage that come 2030, there will still be an EU, and it will probably have more members then than it currently does. I am nearly almost as sure that there will be no United Kingdom in 2030… unless a union of England and Wales counts.
I agree with everything you have written. The trouble is that it is too long and coherent for the brexiteers to understand. By the way Mish, how will loss of cabotage rights affect the UK economy?
Watch what happens. Just wait. Yes, I do know what drives currencies. Give it 2 years and holding the £ down will be a consideration.
“Give it 2 years and holding the £ down will be a consideration.”
On what basis? Lay it out. You say you understand. Tell us what will drive the value of the pound up, keeping in mind that Britain will not have anything like the kind of free trade it currently has with the world’s wealthiest nations for another 5-10 years at best… what’s going to drive such demand IN JUST TWO YEARS?
Off you go.
Do your research. Having recently dealt with what you would call an expert that was right on the coming deflation back in the 90s as well as the glaring problems at the foundation of the euro (but was ignored) I’m quite sure he and his cohort are right. Why dont I tell you his name? If I did it would cause a stink.
Watch what happens.
Dont take my word for anything. Just be patient and watch.
Having been involved in “Big Ticket” international sales for 30 yrs (yes Im a baby boomer citizen of No-Where Brit) I have to agree with you.
I have worked with Commonwealth Counties, USA, China, India, Latin America, CIS mostly very big sales projects , several million £.
Never, have I discussed the presence or absence of an FTA during a sales engagement … Tariffs are mostly insignificant compared to warranty, after-sales, actual price. What can kill you are customs .. they are staffed by mafia in some countries .. it’s real brown paper bag stuff.
So it makes me laugh that the UK is somehow going to export more to Asia , Africa , Latin America than Europe. If the EU was holding us back how ? Look at Germany or France or even Italy …
I just wonder how many of these pundits ever got on Long haul flight to sell several million £’s or they are armchair sales people who ‘know it makes sense’
Do they cost in Market entry ? To send a sales team to Europe costs peanuts and they are all back home for the weekend.
Try sending a Team to Australia or even better Latin America …
The Internet removing geography – another laugh . Yes for commodity items but we are in competition with China, India and low cost producers who have already mastered it.
We should be moving up the value chain and making stuff Asia can’t … Seems like Brexit is a race to bottom … If these guys can make, ship and sell and beat China I will drink warm beer from shoe.
But I voted with my feet, Company moving to Dublin me to Germany.
All the best
Mish you are normally rational but repeating Brexit unicorns doesn’t make it so. I repeat a question that you have consistently ducked. What is the point of a WTO exit that only covers 20% of the UKs economy and ignores services?
Surely a lower pound would still be beneficial for this as the UK is a net exporter of services thus counteracting any tariffs?
Also, the UK’s corporate tax rate is already lower than the EU’s. If the Johnson government cuts that further I can’t see companies leaving to go back to the continent…
Services are also not necessarily immediately substitutable goods. The Brits can always buy cars from the Japanese or Americans in the event of a WTO Brexit. If you’re a European cargo-shipping company and you have a fleet of ships insured by Lloyds you’re not exactly spoilt for choice in terms of alternatives.
Tariffs aren’t the point in services. On a simple level it is whether you can sell your services in the single market at all. One example: if a UK truck is insured in the UK then this insurance is valid throughout the EU. Once we leave the EU this selfsame truck will have to have insurance issued by each individual country through which it passes. This is an enormous increase in costs. Furthermore the UK has cabotage rights in the EU. This means that they can load up in the UK make several drops in Europe and then pick up a load for the return journey to the UK. No deal will mean that UK hauliers will not be able to make multiple drops in the EU. End of 90% of British Hauliers who currently make a living driving to and fro in Europe willy nilly. By the way threePontiacs in a row on any street in Europe is a road block. American cars will not fit in European garages. 1 litre of diesel at my local garage costs £1.31. That is approx £2.62 per gallon. Can’t afford to run US cars in Europe.
“Once we leave the EU this selfsame truck will have to have insurance issued by each individual country through which it passes. This is an enormous increase in costs.”
I doubt it. Competition will find a way to offer valid insurance to the trucker that wishes to drive through Europe. Once you have found a system that works, and they will, the price will fall. Same with almost every other example you can think of.
Remember too that the point of trade is that it flows both ways. If the EU blocks our goods and services, then without a balancing 3rd party flow, then EU goods and services to the UK must fall by a reciprocal amount. Given that trade is in both the interest of the EU and the UK, I very must suspect that trade will continue and increase.
The deadweight cost of being in the EU will be gone though. Our democracy will be restored and the single chain of command from the people to our laws will enable our economy to flourish.
Competition has nothing to do with it. Loss of cabotage rights is the problem.
Interesting graphs that demolish arguments for the UK to remain in the EU…https://theblueanchor.wordpress.com/2018/02/19/the-graphs-that-demolish-remain/
What’s really annoying is that this was entirely predictable—which is presumably why the government had to initiate a scheme of disinformation to get it past the electorate.
Why would anybody think that taking a historically successful global export island and shackling it to trade only with its traditional enemies and rivals on the nearest landmass under THEIR rules, would be great for the economy?
It would be as insane as Japan dealing only with China—under Chinese rules, or Cuba trading only with Mexico—under Mexican rules.
You do know Little England, through its EU membership trades with 40+ OTHER countries and that trade accounts for 60% of it exports, right? I mean you’re not one of those idiots who think the EU only trades with itself, right?Because that would make all those Minis and other UK assembled cars I see on American roads optical illusions.
Oh wait, I reread your post. You are indeed one of those idiots.
I always rely on random websites on WordPress for all my technical information, too. Did you know there are Aliens in Area 51?
Lowering “Corporate Taxes” only matter, if other taxes aren’t simultaneously increased. Otherwise, it’s just simple redistribution from one group of lobbyers to another.
A falling currency makes British people poorer. Their salaries lower. Their savings less worth…. It takes some real dedication to parroting regime sustaining nonsense, to claim that British people getting poorer, is somehow “good” for Britain.
In a rising tariff/increasing barriers to trade, environment, the larger entity generally suffers less than the smaller. Simply because larger size render domestic substitutes more likely and viable. Monaco imports darned near everything it consumes (which is a lot). Increasing trade barriers sufficiently, and they starve to death, unless dehydration beats starvation to it. Germany have both water and the ability to produce food. The only reason Trump can even remotely get away with posturing the way he is, is that America is large enough to suffer less from a trade shutdown than smaller countries individually. The EU is in a similar position. As is China. The UK….. it ain’t Monaco, but at the same time, it’s a lot smaller, and more dependent on imports, than the EU.
The potential benefit to be derived from Brexit, is simply one of (possibly) less regulation and other externally imposed inefficiencies. Like fishing rights (UK is an Island with lots of water per capita or area), lack of transfer payments, lack of plain weird regulations imposed for political posturing reasons by politicians removed even further from their “constituency” than those in London already are etc….
Thanks for an interesting comment, May I pick you up on one point? (I’ll leave Mish to handle the currency question.)
“Germany have both water and the ability to produce food.”
Actually, the main cause of Germany waging war TWICE on its European neighbours was its lack of natural resources, including agricultural land and mineral resources, and access to oceans. They were right: those were two of the main reasons Germany lost both wars. Having failed to (permanently) conquer the Ukraine for its soil, and (permanently) occupy Belgium and northern France for their coal and metal ore, the EU was Plan B.
The UK played along, positively begging to join this cabal (as many British elite did during the wars). They have obeyed all the authoritarian laws and Alice-in-Wonderland regulations like good little doggies, while the Germans (and French) played fast and loose with the same rules whenever it suited them.
This simply could not stand, and Brexit was always inevitable. Arguing over tariffs and currencies is like trying to drive back the tides: it will happen whether we will or no.
Best to co-operate with the inevitable. Too late to do otherwise.
Don’t forget, Monetary Sovereign nations do not pay for anything with taxes. Proof? Ben Bernanke on sixty minutes in 2009. plus the fact that the government’s fiscal budget cannot have spending on both sides of the equation. Only one side is revenue [deficit spending]. The other side [tax] has to be a cost, or currency destruction.
Rework the argument .
You don’t realize that EU is a many (27) countries and they are France, we are the second producter of food behind the US.