#92: The Impact of Brexit on Trade

There is no question that Brexit will impact trade between the European Union and the United Kingdom negatively. This is not something that needs to be answered in the concrete. A simple history lesson will survive.

The European integration process that began after World War II led to the European Union and its component institutions, among them the Free Market, the Schengen Agreement, the Euro currency and common policies on economic, atomic, judicial, foreign and security policy.

The purpose of this integration process was to intensify cooperation and trade in Europe to make any future war between the member states very difficult if not impossible, but most of all, unnecessary. Every single border in Europe is the outcome of warfare and strife. Most currently existing European nation states have seen territorial changes in history, and many are recent creations of the 19th or 20th century.

It stands to reason that in order for there to be trade, there needs to be peace, and in order for there to be peace, that which has divided Europe – the quest over territory and dominion in Europe – needs to be removed as an obstacle. As the question of national sovereignty is tied to the question of territory, any attempt to secure peace and prosperity (which includes trade) needs to limit national sovereignty. Put differently, peace can be made if trade replaces war.

To facilitate trade, many barriers to trading were eliminated by the European integration process. That does not mean that trade did not exist prior to the European Economic Communities, but it was more difficult. Eventually the UK joined the EEC in order to facilitate trade.

If the UK leaves, it must mean that the barriers and obstacles to trade that were limited or removed by the EU will reappear. This is not because of European ill will, it is simple logic: European Integration means the removal of barriers, and if you undo that process, the barriers will reappear.

What does “barrier” mean in the context of trade? Typically, it means costs and time – through paperwork, tariffs, regulations, et cetera – basically all the boring stuff the European Union takes care of.

Thus it is not a matter of whether Brexit will hurt trade, but how much.

Does that mean that it will hurt peace? Hopefully not. Ask around in Northern Ireland. Blame those in the UK that for decades have pushed anti-EU misinformation, set up a non-binding (!) referendum, made a political decision to accept its imperfect conclusion on a strict 50-50 line, and ignored all advice to ameliorate the situation. But don’t blame the EU. Their message has always been clear: You may leave, but the price to pay will be higher than the UK’s already discounted membership rate.

There is a reason that Norway and Switzerland pay into the EU budget. They should really be members, but that is up to their populations. If being a quasi-member who has most obligations but no say-so is an attractive state of affairs, so be it.

If the UK ends up paying into EU budget as well to alleviate Brexit pains (or rejoin as a member), it will have achieved the most paradoxical result: similar monetary contributions with an even greater loss of sovereignty due to lack of true membership.

There are no words to describe this scenario that do not involve any real or implied insults. I’ll leave it there.