BREXIT single market on the European phase. Theoretical Framework

BREXIT has been one of the
greatest issues in the agenda for many years. In 2016, British people voted for
the leave and BREXIT process had officially started. This process has both
long-term and short-term effects on the world economy. This article would seek
answers to the BREXIT process in economic and political direction for UK and
possible consequences of it on the EU countries.

The debate surrounding a
potential BREXIT has largely focused on the costs and disadvantages for Britain
of making such a move. Nevertheless, leave of Britain from EU would change the
balance of power and profile of the European Union. UK is the EU’s second
largest economy, and contributed a lot to the EU budgetary. Also, London hosts
Europe’s leading global financial center despite Brexit and an important representative
of the reform of single market on the European phase.

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Theoretical Framework

This introduction summarizes the
scope of the Brexit, but first provides some background on the EU and the UK’s
relations with it. This is important. The Brexit decision is impossible to
understand without a clear grasp of how Britain and the EU got to this
juncture. I start with the 1945 worldview (Term of Brexit and Historical
Background, Chapter 1.1). This historical background would lead us to the
European Economic Cooperation (EEC) and European Free Trade Association (EFTA)
paths. After the EU and EFTA negotiated the European Economic Area (EEA)
agreement, all the EFTA nation governments applied to join EU. But Norwegians
said “NO” to the EU. This is how the EEA agreement, or the ‘Norway Option’ as
it is known in Brexit parlance, came about. It allows for the free movement of
goods, services, capital, and people, but there were no formal input about
continuously evolving Single Market rulebook.

Crucially, the switch from the
Common Market to the Single Market turned the ‘free movement of workers’ (you
had to have a job to move) into the free movement of people (EU citizens have a
right to live anywhere in the EU with or without a job). This was also one of
the most contentious issues in the referendum. Some argue that it was the main

This article also provides a
briefing paper on several aspects of the possible economic impact of Brexit on
the UK and the EU27 based on the data proven by some official institutions, (Basic
Facts: trade, investment, labor flows and budgetary Issues, Chapter 1.2.)
covering namely;

the current level of trade in goods and services
between the UK and EU27 as a share of GDP, and labor flows.

Indication of the possible economic impact of
alternative scenarios

After addressing all these
points, also particular attention would be given to the

Idea of a Comprehensive Free Trade agreement (CFTA), since
it was announced as the UK’s objective in her speech of 17 Jan 2017.

In the chapter of Brexit and
globalization, (Chapter 1.3.) I would point out there is some association
between voters who suffered from globalization and those that voted for Leave.
Foreword, ‘Leave’ was especially popular in the Midlands and North of England,
where deindustrialization struck hardest and where average incomes have stop
flowing. Contrary, in London, which is an area has thrived in a more open
world, had very high share of Remain voters. It has long been obvious that
globalization can leave people behind and ignoring this can have sever
political consequences. As we can see from the history, too much market and too
little state invites a backlash.

For the EU side, this study
mentions a wide range of scenarios, in the range of hard and soft Brexit’s,
with Membership of the European Economic Area (EEA), and membership only of the
World Trade Organization (WTO) with no preferential trading relationship with
the EU. However Prime Minister May’s speech that I mentioned before narrows the
field considerably with the declared preference of CFTA. In chapter 2.1., these
scenarios would be examined.

The vote for Brexit is not just a
British matter and it provides a unique opportunity to usher in useful reforms
of the EU. Interpreting this issue as a purely British matter, will be a big
mistake. Indeed, the British voters are not the only ones who feel that the EU
is not functioning properly. Despite it is an innovative case of deep economic
integration, it inevitably entails some errors. In order to be successful,
these errors must be recognized and accepted, and then fixed. Some of this has
been done, but much remains not recognized, or only partially recognized.
Indeed, criticism of the EU’ s structure is very broad term. But Brexit is
regarded as critical backlash for the EU. In chapter 2.2., I am going to
analyze the possible policies of the EU after Brexit.

The new UK prime minister stated
that the mandate is to “make success of Brexit”.  Chapter 2.3. suggests that “success” for the
UK should be interpreted as retaining access to the Single Market while gaining
concessions on rights to control immigration, and argues against the EU
agreeing to any such special deal. By exiting, UK may continue to signal to other
EU countries to enjoy benefits of the Union without effecting from the costs
that would weakened the EU. Namely, the main argument in this chapter is that
how the EU should negotiate with the UK?

European Union membership has
contributed to the economic welfare of the Britain. But, the outcome of this referendum
is already showing its effects and started to weaken the United Kingdom’s
growth rate. Brexit would be a huge negative trauma to the UK economy, could
lead to economic problems in the rest of the OECD, and particularly in other
European countries. In long term, there are some structural and economic
impacts would hit through the channels of free movement of people, capital, and
the decreased technical progress. The effects would be larger in more
pessimistic scenario and remain negative even in the optimistic scenario. To
prevent these backlashes, the what are the possible policy options for UK
government? In chapter 3, I will widely talk about the consequences of Brexit
and life after it.

In this research, my conclusions
are quite clear. Leaving the EU will make Britain poorer than it would be were
to remain. Of course, the EU is far from perfect. It is over-bureaucratic and
insufficiently democratic. However, there is no better confederation along the
nations that achieved all of these economic and political progress in the last
half century. Of course, Leave decision of the UK citizens would not be
explained with just economic analyzes. There are some other issues like
migration. My research criticizes the fate of UK and EU after the Brexit with
critique work of significant institutions and academics. To help the UK government,
Brexit is also important for economists to recommend best possible alternative
policies. After Brexit, EU has to respond significant challenges and the main
goal is to achieve best possible economic and political methods to reduce its harm
to minimum.