Brexit Part II - Look to the Long Term: Response to Stay

In his article, Lloyd argues that a Brexit would pose a massive risk to the UK’s economy and that it would ultimately lead to economic catastrophe. Lloyd raises two points against a Brexit: first, that a Brexit prevents the UK from accessing the benefits of the EU’s shared market, and second, that a Brexit would reduce the UK’s leverage in international free trade negotiations outside of the EU.

Before dealing with Lloyd’s individual points, it is important to understand the broader context of the EU as it stands. The EU is an institution that may not exist in the next ten or twenty years; the festering extremism and Euroscepticism in countries like France, Greece, and Denmark threaten the stability of the EU in the long-run. The financial collapse of Greece is an indication that the Eurozone is less stable than many may have suspected. Given that fact, it is very possible that member states may leave, the EU will fail and the increased cost from the UK’s additional years of membership and further reduced investor confidence may bring upon all of Lloyd’s worries in a far worse fashion.

However, even assuming that the EU does not collapse, Lloyd’s arguments do not stand under further scrutiny and inspection. First, Lloyd claims that there are a variety of benefits that come from trading within the EU and from abiding by its common set of regulations. This argument has two key flaws. The first flaw is that the EU and UK may still enjoy a trade relationship; it is very plausible that the UK will get a free trade agreement with the EU given the fact that EU already runs a trade deficit with the UK and needs the UK more than the UK needs the EU. Second, even presuming that the deal the UK gets with the EU is slightly worse, it allows the UK to not comply with all of the regulations that the EU sets in place, decreasing costs for UK firms substantially. Given the lessened importance of the EU to the UK, that is not a significant enough concern to oppose a Brexit.

Second, Lloyd argues that negotiation with other nations becomes significantly more difficult as a consequence of the UK losing leverage due to the comparatively small size of its economy. Again, this arguments falls under two fronts. First, the UK has no ability to choose whether or not it can negotiate free trade agreements; even if the UK has less leverage, it is still better if it can get a free-trade agreement with China in the first place, no matter how minimal that agreement may be. Second, the UK may be better at negotiating free-trade agreements given the openness of its service sector and its lack of agricultural protectionism. These are key points which may draw potential free trade partners in.

In addition, Lloyd identifies some smaller issues. He claims that negotiations will be difficult due to the large number of agreements that a limited number of UK diplomats will have to negotiate. That is undeniably true, but the UK should prefer Brexit with a small period of time renegotiating deals rather than remaining in the EU and abiding by its regulations for perpetuity, or worse, having to renegotiate deals after the EU fails. Lloyd additionally argues that uncertainty will reduce FDI into the UK, a claim that is contingent on the truth of Lloyd’s other arguments about less access to markets. In the likely case that the UK will still have preferable access to many markets with low tariffs, the speculation that may impede FDI will not exist.

There is no question that leaving the EU will cause some short-term problems for the UK. However, it is clear that the EU’s restrictive regulations and the impediments it creates for other free trade agreements will hurt the UK far more in the long-term. It is time for the UK to recognize that the EU is no longer serving it well and vote for a Brexit.

By,

Jason Xiao

Works Cited

http://www.thenation.com/article/european-union-may-be-verge-collapse/

https://www.cer.org.uk/sites/default/files/smc_final_report_june2014.pdf

Picture taken by Hash Milhan on April 3rd, 2011, titled "The bank with all the watchmakers", obtained through Creative Commons.