class: center, middle, inverse, title-slide .title[ # Brexit ] --- class: inverse, center, middle # Introduction --- ### Introduction Brexit --- ## Brexit > "Brexit frees us to build a truly global Britain." - Boris Johnson > "Should the United Kingdom remain a member of the European Union or leave the European Union?" - 72% of voters - 52%: 'Leave'. Working people and young people prefer to 'stay in the EU': - 73% of 18-24 year olds wanted to stay - 60% of those over 65 wanted to leave - The inactive (unemployed and retired) wanted to leave. --- ## Brexit No party logic: - Among those who voted to leave: 40% are Tories and 20% are Labor. - Among those who voted to stay, 30% are Tories and 40% were Labor. --- ## Brexit 3 things to remember : 1. Rising inequality 2. The rise of populism 3. A (lonely) journey into the unknown --- ## Agenda 1. The reasons for Brexit 2. The British economy 3. The Future of the United Kingdom 4. UK-EU Trade and Cooperation Agreement 5. The consequences for the EU-27 --- class: center, middle # 1. The reasons for Brexit --- ## The reasons for Brexit - Globalization is costing jobs - The United Kingdom is not a European economy - Immigration - The UK's contribution to the European Union is unfair --- ## The UK White Paper 12 Principles <img src="./figures/fig11.png" width="1000px" style="display: block; margin: auto;" /> --- ## Globalization is costing jobs? Dani Rodrik, The Globalization Paradox (2011) > “Markets are most developed and most effective in generating wealth when they are backed by solid governmental institutions.” --- ## Globalization is costing jobs? <img src="./figures/ukMapImports.png" width="50%" height="50%" style="display: block; margin: auto;" /> --- ## Globalization is costing jobs? <img src="./figures/regressionShock.png" width="50%" height="50%" style="display: block; margin: auto;" /> --- ## The United Kingdom is not a European economy? - Multinational companies - European value chains - Europe's place in the world - the English language - The finance industry --- ## The United Kingdom is not a European economy? - The EU is the most important destination market for British products and services. - The UK is also highly dependent on the EU: a trade deficit of US$ 151 billion in 2015. - Exports to the US are 1/4 of the exports to the EU. - US imports are 1/6 of EU imports - The United Kingdom accounts for 4.9% of US merchandise exports (20.8% to the EU-27). --- ## Immigration <center> <img src="./figures/tweets.png" width="60%" height="60%" style="display: block; margin: auto;" /> --- ## The UK's contribution to Europe is unfair ### Total expenditure in 2019 (millions of euros)
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--- ## The UK's contribution to Europe is unfair ### National contribution in 2019 (millions of euros)
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--- ## The UK's contribution to Europe is unfair ### Budget balance in 2019 (millions of euros)
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--- ## The UK's contribution to Europe is unfair ### British correction in 2019 (millions of euros)
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--- class: center, middle # 2. The British economy --- ## GDP growth (annual %)
Region
Year
--- ## Inflation, consumer prices (annual %)
Region
Year
--- ## EUR vs GBP Foreign Exchange Reference Rate
Year
--- ## Business activity (sales) development over the past 3 months
Region
--- ## Unemployment, total (% of total labor force) (modeled ILO estimate)
Year
--- class: center, middle # 3. The Future of the United Kingdom --- ## The political future - Article 50 of the Treaty on European Union <img src="./figures/article50.png" width="100%" height="100%" style="display: block; margin: auto;" /> --- ## The political future - Relations with members in the United Kingdom - Relations with the EU-27 --- ## The political future <img src="./figures/europe1.png" width="100%" height="100%" style="display: block; margin: auto;" /> --- ## The political future - Free trade agreements with the EU - Free trade agreements with the USA and other countries - Adapting to European regulations --- ## The political future 1. The Norway option: almost like the Common Market (products, services, finance and people), without the right to vote and the budgetary impact. 2. The Canada option: CIG (products, services, finance) 3. the WTO option: tariff and non-tariff barriers 4. The Turkey option --- ## The political future - Living without the European institutions - Living without European programs (ESA, etc.) --- ## The economic future ### Total Exports in 2019 (US$ billion)
--- ## The economic future ### Total Imports in 2019 (US$ billion)
--- ## The economic future The finance industry: - 1970s: development of international money markets - 1980s: Mr. Thatcher's deregulations - 1990s: a concentration of the wholesale market in London (American banks) - 2000s: euro markets - 15 to 20% of banking activity to the Common Market - £66.5bn in taxes (2/3 of the education budget) --- ## The economic future ### General government debt (% GDP) <div style="border: 1px solid #ddd; padding: 5px; overflow-x: scroll; width:800px; "><table class="table table-striped" style="font-size: 11px; margin-left: auto; margin-right: auto;"> <thead> <tr> <th style="text-align:left;"> country </th> <th style="text-align:right;"> 2019 </th> <th style="text-align:right;"> 2018 </th> <th style="text-align:right;"> 2017 </th> <th style="text-align:right;"> 2016 </th> <th style="text-align:right;"> 2015 </th> <th style="text-align:right;"> 2014 </th> <th style="text-align:right;"> 2013 </th> <th style="text-align:right;"> 2012 </th> <th style="text-align:right;"> 2011 </th> <th style="text-align:right;"> 2010 </th> <th style="text-align:right;"> 2009 </th> <th style="text-align:right;"> 2008 </th> <th style="text-align:right;"> 2007 </th> <th style="text-align:right;"> 2006 </th> <th style="text-align:right;"> 2005 </th> <th style="text-align:right;"> 2004 </th> <th style="text-align:right;"> 2003 </th> <th style="text-align:right;"> 2002 </th> <th style="text-align:right;"> 2001 </th> <th style="text-align:right;"> 2000 </th> </tr> </thead> <tbody> <tr> <td style="text-align:left;"> Germany </td> <td style="text-align:right;"> 59.6 </td> <td style="text-align:right;"> 61.8 </td> <td style="text-align:right;"> 65.1 </td> <td style="text-align:right;"> 69.3 </td> <td style="text-align:right;"> 72.3 </td> <td style="text-align:right;"> 75.6 </td> <td style="text-align:right;"> 78.7 </td> <td style="text-align:right;"> 81.1 </td> <td style="text-align:right;"> 79.7 </td> <td style="text-align:right;"> 82.3 </td> <td style="text-align:right;"> 73.0 </td> <td style="text-align:right;"> 65.5 </td> <td style="text-align:right;"> 64.0 </td> <td style="text-align:right;"> 66.7 </td> <td style="text-align:right;"> 67.3 </td> <td style="text-align:right;"> 65.0 </td> <td style="text-align:right;"> 63.3 </td> <td style="text-align:right;"> 59.7 </td> <td style="text-align:right;"> 57.9 </td> <td style="text-align:right;"> 59.1 </td> </tr> <tr> <td style="text-align:left;"> Euro area - 19 countries (from 2015) </td> <td style="text-align:right;"> 84.0 </td> <td style="text-align:right;"> 85.8 </td> <td style="text-align:right;"> 87.7 </td> <td style="text-align:right;"> 90.1 </td> <td style="text-align:right;"> 90.9 </td> <td style="text-align:right;"> 92.8 </td> <td style="text-align:right;"> 92.6 </td> <td style="text-align:right;"> 90.7 </td> <td style="text-align:right;"> 87.7 </td> <td style="text-align:right;"> 85.8 </td> <td style="text-align:right;"> 80.2 </td> <td style="text-align:right;"> 69.6 </td> <td style="text-align:right;"> 65.9 </td> <td style="text-align:right;"> 68.3 </td> <td style="text-align:right;"> 70.3 </td> <td style="text-align:right;"> 69.6 </td> <td style="text-align:right;"> 69.3 </td> <td style="text-align:right;"> 68.0 </td> <td style="text-align:right;"> 68.0 </td> <td style="text-align:right;"> 69.0 </td> </tr> <tr> <td style="text-align:left;"> European Union - 28 countries (2013-2020) </td> <td style="text-align:right;"> 79.2 </td> <td style="text-align:right;"> 80.3 </td> <td style="text-align:right;"> 82.0 </td> <td style="text-align:right;"> 83.8 </td> <td style="text-align:right;"> 84.9 </td> <td style="text-align:right;"> 86.9 </td> <td style="text-align:right;"> 86.3 </td> <td style="text-align:right;"> 84.4 </td> <td style="text-align:right;"> 82.0 </td> <td style="text-align:right;"> 79.5 </td> <td style="text-align:right;"> 73.9 </td> <td style="text-align:right;"> 61.3 </td> <td style="text-align:right;"> 58.1 </td> <td style="text-align:right;"> 60.7 </td> <td style="text-align:right;"> 62.2 </td> <td style="text-align:right;"> 61.7 </td> <td style="text-align:right;"> 61.1 </td> <td style="text-align:right;"> 59.5 </td> <td style="text-align:right;"> 59.9 </td> <td style="text-align:right;"> 60.6 </td> </tr> <tr> <td style="text-align:left;"> France </td> <td style="text-align:right;"> 98.1 </td> <td style="text-align:right;"> 98.1 </td> <td style="text-align:right;"> 98.3 </td> <td style="text-align:right;"> 98.0 </td> <td style="text-align:right;"> 95.6 </td> <td style="text-align:right;"> 94.9 </td> <td style="text-align:right;"> 93.4 </td> <td style="text-align:right;"> 90.6 </td> <td style="text-align:right;"> 87.8 </td> <td style="text-align:right;"> 85.3 </td> <td style="text-align:right;"> 83.0 </td> <td style="text-align:right;"> 68.8 </td> <td style="text-align:right;"> 64.5 </td> <td style="text-align:right;"> 64.6 </td> <td style="text-align:right;"> 67.4 </td> <td style="text-align:right;"> 65.9 </td> <td style="text-align:right;"> 64.4 </td> <td style="text-align:right;"> 60.3 </td> <td style="text-align:right;"> 58.3 </td> <td style="text-align:right;"> 58.9 </td> </tr> <tr> <td style="text-align:left;"> Italy </td> <td style="text-align:right;"> 134.7 </td> <td style="text-align:right;"> 134.4 </td> <td style="text-align:right;"> 134.1 </td> <td style="text-align:right;"> 134.8 </td> <td style="text-align:right;"> 135.3 </td> <td style="text-align:right;"> 135.4 </td> <td style="text-align:right;"> 132.5 </td> <td style="text-align:right;"> 126.5 </td> <td style="text-align:right;"> 119.7 </td> <td style="text-align:right;"> 119.2 </td> <td style="text-align:right;"> 116.6 </td> <td style="text-align:right;"> 106.2 </td> <td style="text-align:right;"> 103.9 </td> <td style="text-align:right;"> 106.7 </td> <td style="text-align:right;"> 106.6 </td> <td style="text-align:right;"> 105.1 </td> <td style="text-align:right;"> 105.5 </td> <td style="text-align:right;"> 106.4 </td> <td style="text-align:right;"> 108.9 </td> <td style="text-align:right;"> 109.0 </td> </tr> <tr> <td style="text-align:left;"> United Kingdom </td> <td style="text-align:right;"> 85.4 </td> <td style="text-align:right;"> 85.8 </td> <td style="text-align:right;"> 86.3 </td> <td style="text-align:right;"> 86.8 </td> <td style="text-align:right;"> 86.7 </td> <td style="text-align:right;"> 86.1 </td> <td style="text-align:right;"> 84.2 </td> <td style="text-align:right;"> 83.2 </td> <td style="text-align:right;"> 80.0 </td> <td style="text-align:right;"> 74.3 </td> <td style="text-align:right;"> 63.2 </td> <td style="text-align:right;"> 49.3 </td> <td style="text-align:right;"> 41.5 </td> <td style="text-align:right;"> 40.5 </td> <td style="text-align:right;"> 39.6 </td> <td style="text-align:right;"> 38.4 </td> <td style="text-align:right;"> 35.4 </td> <td style="text-align:right;"> 34.2 </td> <td style="text-align:right;"> 34.0 </td> <td style="text-align:right;"> 36.7 </td> </tr> </tbody> </table></div> --- ## The economic future ### Net lending (+) / net borrowing (-) (% of GDP) <div style="border: 1px solid #ddd; padding: 5px; overflow-x: scroll; width:800px; "><table class="table table-striped" style="font-size: 12px; margin-left: auto; margin-right: auto;"> <thead> <tr> <th style="text-align:left;"> country </th> <th style="text-align:right;"> 2020 </th> <th style="text-align:right;"> 2019 </th> <th style="text-align:right;"> 2018 </th> <th style="text-align:right;"> 2017 </th> <th style="text-align:right;"> 2016 </th> <th style="text-align:right;"> 2015 </th> <th style="text-align:right;"> 2014 </th> <th style="text-align:right;"> 2013 </th> <th style="text-align:right;"> 2012 </th> <th style="text-align:right;"> 2011 </th> <th style="text-align:right;"> 2010 </th> <th style="text-align:right;"> 2009 </th> <th style="text-align:right;"> 2008 </th> <th style="text-align:right;"> 2007 </th> <th style="text-align:right;"> 2006 </th> <th style="text-align:right;"> 2005 </th> <th style="text-align:right;"> 2004 </th> <th style="text-align:right;"> 2003 </th> <th style="text-align:right;"> 2002 </th> <th style="text-align:right;"> 2001 </th> <th style="text-align:right;"> 2000 </th> </tr> </thead> <tbody> <tr> <td style="text-align:left;"> Germany </td> <td style="text-align:right;"> -3.6 </td> <td style="text-align:right;"> 0.9 </td> <td style="text-align:right;"> 1.1 </td> <td style="text-align:right;"> 0.6 </td> <td style="text-align:right;"> 0.7 </td> <td style="text-align:right;"> 0.7 </td> <td style="text-align:right;"> 0.6 </td> <td style="text-align:right;"> 0.2 </td> <td style="text-align:right;"> 0.2 </td> <td style="text-align:right;"> -0.5 </td> <td style="text-align:right;"> -3.3 </td> <td style="text-align:right;"> -2.2 </td> <td style="text-align:right;"> -0.3 </td> <td style="text-align:right;"> -0.2 </td> <td style="text-align:right;"> -1.2 </td> <td style="text-align:right;"> -2.2 </td> <td style="text-align:right;"> -1.8 </td> <td style="text-align:right;"> -1.6 </td> <td style="text-align:right;"> -1.9 </td> <td style="text-align:right;"> -1.4 </td> <td style="text-align:right;"> -1.1 </td> </tr> <tr> <td style="text-align:left;"> Euro area </td> <td style="text-align:right;"> -6.9 </td> <td style="text-align:right;"> -0.8 </td> <td style="text-align:right;"> -0.8 </td> <td style="text-align:right;"> -1.3 </td> <td style="text-align:right;"> -1.4 </td> <td style="text-align:right;"> -1.7 </td> <td style="text-align:right;"> -2.0 </td> <td style="text-align:right;"> -2.3 </td> <td style="text-align:right;"> -2.7 </td> <td style="text-align:right;"> -3.2 </td> <td style="text-align:right;"> -5.2 </td> <td style="text-align:right;"> -4.8 </td> <td style="text-align:right;"> -1.5 </td> <td style="text-align:right;"> -0.9 </td> <td style="text-align:right;"> -1.5 </td> <td style="text-align:right;"> -2.4 </td> <td style="text-align:right;"> -2.4 </td> <td style="text-align:right;"> -2.6 </td> <td style="text-align:right;"> -2.1 </td> <td style="text-align:right;"> -1.5 </td> <td style="text-align:right;"> -1.1 </td> </tr> <tr> <td style="text-align:left;"> European Union </td> <td style="text-align:right;"> -6.7 </td> <td style="text-align:right;"> -0.6 </td> <td style="text-align:right;"> -0.6 </td> <td style="text-align:right;"> -1.1 </td> <td style="text-align:right;"> -1.3 </td> <td style="text-align:right;"> -1.7 </td> <td style="text-align:right;"> -2.0 </td> <td style="text-align:right;"> -2.4 </td> <td style="text-align:right;"> -2.7 </td> <td style="text-align:right;"> -3.1 </td> <td style="text-align:right;"> -4.9 </td> <td style="text-align:right;"> -4.7 </td> <td style="text-align:right;"> -1.4 </td> <td style="text-align:right;"> -0.7 </td> <td style="text-align:right;"> -1.3 </td> <td style="text-align:right;"> -2.1 </td> <td style="text-align:right;"> -2.3 </td> <td style="text-align:right;"> -2.7 </td> <td style="text-align:right;"> -2.2 </td> <td style="text-align:right;"> -1.5 </td> <td style="text-align:right;"> -1.0 </td> </tr> <tr> <td style="text-align:left;"> France </td> <td style="text-align:right;"> -8.9 </td> <td style="text-align:right;"> -3.0 </td> <td style="text-align:right;"> -2.4 </td> <td style="text-align:right;"> -3.0 </td> <td style="text-align:right;"> -3.8 </td> <td style="text-align:right;"> -3.6 </td> <td style="text-align:right;"> -3.7 </td> <td style="text-align:right;"> -3.7 </td> <td style="text-align:right;"> -4.8 </td> <td style="text-align:right;"> -5.1 </td> <td style="text-align:right;"> -6.8 </td> <td style="text-align:right;"> -6.8 </td> <td style="text-align:right;"> -2.8 </td> <td style="text-align:right;"> -2.2 </td> <td style="text-align:right;"> -2.2 </td> <td style="text-align:right;"> -3.2 </td> <td style="text-align:right;"> -3.4 </td> <td style="text-align:right;"> -4.0 </td> <td style="text-align:right;"> -3.3 </td> <td style="text-align:right;"> -1.4 </td> <td style="text-align:right;"> -1.4 </td> </tr> <tr> <td style="text-align:left;"> United Kingdom </td> <td style="text-align:right;"> -14.8 </td> <td style="text-align:right;"> -3.5 </td> <td style="text-align:right;"> -3.8 </td> <td style="text-align:right;"> -3.3 </td> <td style="text-align:right;"> -3.8 </td> <td style="text-align:right;"> -5.6 </td> <td style="text-align:right;"> -6.9 </td> <td style="text-align:right;"> -6.7 </td> <td style="text-align:right;"> -10.0 </td> <td style="text-align:right;"> -9.7 </td> <td style="text-align:right;"> -6.6 </td> <td style="text-align:right;"> -12.4 </td> <td style="text-align:right;"> -7.7 </td> <td style="text-align:right;"> -5.2 </td> <td style="text-align:right;"> -5.3 </td> <td style="text-align:right;"> -5.4 </td> <td style="text-align:right;"> -5.4 </td> <td style="text-align:right;"> -5.6 </td> <td style="text-align:right;"> -4.2 </td> <td style="text-align:right;"> -2.0 </td> <td style="text-align:right;"> -0.8 </td> </tr> <tr> <td style="text-align:left;"> Italy </td> <td style="text-align:right;"> -9.4 </td> <td style="text-align:right;"> -1.5 </td> <td style="text-align:right;"> -2.4 </td> <td style="text-align:right;"> -2.6 </td> <td style="text-align:right;"> -2.6 </td> <td style="text-align:right;"> -3.0 </td> <td style="text-align:right;"> -3.2 </td> <td style="text-align:right;"> -2.9 </td> <td style="text-align:right;"> -3.3 </td> <td style="text-align:right;"> -3.3 </td> <td style="text-align:right;"> -3.8 </td> <td style="text-align:right;"> -4.9 </td> <td style="text-align:right;"> -2.4 </td> <td style="text-align:right;"> -1.3 </td> <td style="text-align:right;"> -2.7 </td> <td style="text-align:right;"> -3.3 </td> <td style="text-align:right;"> -2.6 </td> <td style="text-align:right;"> -2.9 </td> <td style="text-align:right;"> -2.1 </td> <td style="text-align:right;"> -2.8 </td> <td style="text-align:right;"> -2.2 </td> </tr> </tbody> </table></div> --- ## The economic future - The EU accounts for 30% of world trade in goods and 45% in services (16.9% of its GDP). - The USA represents 23% of the world trade in goods and 25% of services (14.5% of its GDP). - China accounts for 23% of world trade in goods and 16% in services (22.3% of its GDP). - The United Kingdom accounts for 6.4% of world merchandise trade and 11.75% of services (29.4% of its GDP). - Germany accounts for 14% of world merchandise trade and 11.5% of services (42.4% of its GDP). - France accounts for 6.5% of world trade in goods and 10% in services (30.8% of its GDP). --- class: center, middle # 4. UK-EU Trade and Cooperation Agreement --- ## UK-EU - Trade and Cooperation Agreement (TCA) - on December 24, 2020 <https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531> --- ## What's in the deal: Goods trade - Level playing field: UK agrees to maintain non-regression on labour, environment, state aid. Targeted tariffs can be imposed if regulations diverge sufficiently, after arbitration period. - Industrial goods: zero-tariff, zero-quota access, although rules of origin means complex declarations. No mutual recognition of product standards - Agriculture: sanitary and phytosanitary checks necessary for all animal products Fishing: 25% decline in EU quota, and 5.5 year phase out of common fisheries policy, followed by annual renegociations --- ## What's in the deal: Services trade - General services: agreement to honour some professional qualifications but varies significantly by member state - short-term business travael rules are vague - Financial services: negotiations ongoing on regulatory equivalenece, but loss of passporting access guaranteed - Data: Right of UK individuals and firms to access EU data extended for six months. **Data adequacy decision** to follow in 2021 (to comply with GDPR) - Legal: Still some lack of clarity, particularly on whether judgements in one jurisdiction will be honoured in the other --- ## What's in the deal: Other issues - Border infrastructure: some rules of origin declaration have been suspended for 6 months, but total time for implementation will increase. Northern Ireland under special arrangements - Migration: UK has implemented points-based system emphasising skilled workers, with limited provisions for unskilled agricultural workers - Participation in EU programmes: UK will buy into most EU scientific research schemes (Horizon 2020). Participation in Erasmus programme will be discontinued. --- ## Impact of Covid and Brexit will slow UK Growth
Region
Year
--- ## Sectoral impact of Covid and Brexit are different ![the impact of lockdown has been severe](images/lockdown.png) Source: [OECD](https://www.oecd.org/coronavirus/policy-responses/evaluating-the-initial-impact-of-covid-19-containment-measures-on-economic-activity-b1f6b68b/#figure-d1e134) --- ## Risk and Resilience See Ana Nicholls Risks: - reliance on exports to the EU 2. Reliance on EU imports 3. Tariffs barriers 4. Non-tariff barriers and regulatory barriers 5. reliance on recruiting EU workers Resilience: 1. sector's ability to grow trade outside the EU 2. potential benefits of regulatory divergence 3. .. 4. .. --- ## UK exports, imports & balance of goods & services (in millions)
Indicator
<br><br><br> Source: <https://commonslibrary.parliament.uk/research-briefings/cbp-7851/> --- ## Risks: UK reliance on EU trade ![EU's share of UK trade - imports and exports by sector](images/Uk1.png) Sectors that are highly integrated with EU supply chains face challenges despite the TCA, given that tariffs and regulatory --- ## Risks: TCA is not the single market .pull-left[ The TCA gives the UK tariff-free access to EU markets But duties could be applied: - if goods are bought on holiday or online, VAT and customs duties may apply - if goods are imported from the EU then re-exported to the EU without enough UK processing - if goods do not adhere to rules of origin - if either side thinks that the other has implemented too much regulatory divergence Non-tariffs have a cost: - time spent on paperwork - need for separate EU-UK operations - freight delays - inability to sell into EU at all for some products ] .pull-right[ <img src="./figures/Uk3.png" width="350px" /> The cost if 5% for business if we infer from the EU-Swiss TCA ] --- ## UK's relaince on EU employees **Employees by sector**
Indicator
Year
--- ## Effects so far - UK-EU freight volumes down 38% y-o-y in the third year of January - Chartered Institute of Procurement and Supply (CIPS) reports that 60% of UK-to- EU exporters are experiencing delays, and 45% of EU-to-UK exporters - Fish exporters encountered delays with paperwork that meant goods were no longer sealable - Asos, M&S, Superdry among those affected by re-eports tariffs - Demand for Dutch warehousing soaring - London lost US$7.7 bn in dialy stock trades to EU venues on Jan 4 - Vaccine disputes over Astra Aeneca deliveries But: - Nissan commits to investments in Sunderland plant --- ## Resilience: non-EU markets hold opportunities .pull-left[ **UK Growth, annual average per decade**
Decades
] .pull-right[ - 29 deals came into effect in Jan 2021, mostly EU continuity deals and some provisional eg Turkey (Provision) - Plus Comprehensive Agreement with Japan - Canada (Provision), Jordan, Mexico deals due to come into effect soon - Six more being negotiated, mainly Balkans - Mutual recognition deals with Australia, New Zealand, US - on the horizon: China, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). ] --- ## Resilience: regulatory divergence and influence National influence + international influence + regulatory divergence = international leadership + EU tariffs The room for regulatory divergence will be limited by the Trade and Cooperation Agreement --- ## Resilience: food and agriculture face biggest risks **Risk and Resilience by sector** .pull-left[
sector
] .pull-right[ Resilience: - national influence - international influence - divergence (innvoation) - divergence (business envt) - Potential from non-EU trade Risks: - reliance on EU exports - reliance on EU imports - tariffs barriers - non-tariffs barriers - reliance on EU employment ] --- ## A prolounged rebound **Real GDP forecast (OECD)**
Region
--- ## Foreign investment flows are weaker **Net foreign direct investments**
Region
Year
--- ## Foreign investment flows are weaker - Brexit has already impacted both the inflow and outflow of foreign direct investment, particularly in 2017 and 2020 - EU companies are the biggest investors in the UK in terms of the direct parent company (pounds 579 bn in 2018) - but North America is the biggest in terms of the ultimate parent company (pounds 630 bn) - Investments from the US and Asia have been rising fast, EU has been stable but somewaht volatile - Financial services accounts for 45% of foreign assets in the UK, and most are based in London --- ## The United Kingdom is not a European economy? ### Total UK Exports by Destination (2019)
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--- ## The United Kingdom is not a European economy? ### Total UK Imports by Origin (2019)
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--- ## The United Kingdom is not a European economy? ### UK FDI inflows by partner country (millions $US)
Region
--- ## The United Kingdom is not a European economy? ### Outward FDI flows from the UK by partner country (millions $US)
Region
Year
--- class: center, middle # 5. The consequences for the rest of Europe --- ### EU Members' Positions on Key Brexit Issues <center> <table class="table" style="font-size: 12px; margin-left: auto; margin-right: auto;border-bottom: 0;"> <thead> <tr> <th style="text-align:left;"> Country </th> <th style="text-align:left;"> Flexibility on Trade </th> <th style="text-align:left;"> Flexibility on FDI & financial services </th> <th style="text-align:left;"> Flexibility on Labour mobility </th> <th style="text-align:left;"> Kinship on liberals views </th> <th style="text-align:left;"> Concern about UK's budget contribution </th> </tr> </thead> <tbody> <tr> <td style="text-align:left;"> Austria </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Some </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> Yes </td> </tr> <tr> <td style="text-align:left;"> Belgium </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Finland </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Germany </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Greece </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> Yes </td> </tr> <tr> <td style="text-align:left;"> Hungary </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Ireland </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Italy </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Some </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Some </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Netherlands </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Some </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Poland </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> </tr> <tr> <td style="text-align:left;"> Portugal </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> Yes </td> </tr> <tr> <td style="text-align:left;"> Slovakia </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> </tr> <tr> <td style="text-align:left;"> Spain </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> - </td> <td style="text-align:left;"> - </td> </tr> <tr> <td style="text-align:left;"> Sweden </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> No </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> Yes </td> <td style="text-align:left;"> - </td> </tr> </tbody> <tfoot><tr><td style="padding: 0; " colspan="100%"> <span style="font-style: italic;">Source: </span> <sup></sup> What To Do With the UK? EU perspectives on Brexit.</td></tr></tfoot> </table> </center> --- ## The consequences for the EU-27 - Fracture of the EU-27 - Legitimization of the populist vote (see Mateo Renzi, Donald Trump) - Slowing down European integration or speeding up European integration? - Detour of European resources in the next 2 years --- ## Conclusion The reasons for Brexit: - Dissonance between political institutions and the economic reality of the 21st century - Inequalities The future of the United Kingdom: - economically uncertain - politically uncertain --- ## Conclusion The future of Europe: - Brexit reinforces populism and anti-European sentiment - economically uncertain - politically uncertain - unless... --- ## Conclusion <center> <img src="./figures/reseau.png" width="80%" height="80%" style="display: block; margin: auto;" /> </center> --- ## Data Challenge ### Political Risk > You are an analyst for an international company and the CEO would like to open a British subsidiary. Aware of the possible political risks, he asks you to determine what British population think about Brexit. Based on the concepts currently being discussed and the data available to you, create a graph and explain a district's position on Brexit. In order to create your visuals, you will find relevant data [[here]](https://github.com/warint/Landscape-and-Challenges/tree/main/session5) --- ## Data Challenge ### Political Risk > Polarity evolution by district.
District