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Brexit: A Smart move Or an Economic Disaster

Brexit: A Smart move Or an Economic Disaster

The Brexit/ EU Crossroad

By Racquel McKenzie

A hybrid of the words “Britain” and “exit,” Brexit is shorthand for Britain’s split from the European Union, changing its relationship to the bloc on trade, security, and migration.

Britain has been debating the pros and cons of membership in a European community of nations almost from the moment the idea was broached. It held its first referendum on membership in 1975, less than three years after it joined.

In 2013, Prime Minister David Cameron promised a national referendum on European Union membership with the idea of settling the question once and for all. The options it would offer were Remain and Leave, and Mr. Cameron was convinced that Remain would win handily.

But on June 23, 2016, as a refugee crisis made migration a subject of political rage across Europe and amid accusations of lies and fraudulent tactics by the Leave side, Britons voted for a hazily defined Brexit by 52 percent to 48 percent.

On Friday, March 29, British lawmakers rejected Prime Minister Theresa May’s plan for withdrawing from the European Union for the third time. This means that Britain is moving closer to the departure date of April 12 without a deal — a scenario that much fear will be economically damaging.

Research from the New York Times alluded that already companies are jumping ship as fears of medicine shortages in a no-deal departure are rising.

Many options, from the daringly complete break with no deal to abandoning Brexit altogether, remain on the table, but Parliament already has weighed several alternatives and voted all of them down.

The European Union agreed recently to postpone the original Brexit deadline, March 29, saying that if Mrs. May could win passage of her deal by then, Brexit would take effect on May 22.

Otherwise, there will be the potentially chaotic “no-deal” Brexit on April 12, unless both sides agree by then on a much longer delay, to allow a more fundamental reconsideration of their divorce.

What ultimately emerges could determine the shape of Britain and its place in the world for decades. Following is a basic guide to Brexit, what it is, how it developed into the mess it is today and how it could ultimately be resolved.

With the widely feared prospect of a no-deal Brexit coming closer, Mrs. May made a last-ditch bid this week to win support for her deal.

She said this week that if Parliament accepted it on her third try, she would step down, setting off a frenzy of speculation about a successor and jockeying for position among the contenders in her Conservative Party.

At the same time, Parliament took an extraordinary step of its own, holding a series of votes over the prime minister’s objections to try to agree on another approach. The effort fizzled; lawmakers rejected all eight options they considered.

Some of the steps Parliament weighed lost only narrowly, with many lawmakers abstaining, making it unclear what would have happened if everyone had voted.

Just about the only clear decision Britain has made on Brexit since the 2016 referendum was to give formal notice in 2017 to quit, under Article 50 of the European Union’s Lisbon Treaty, a legal process setting it on a two-year path to departure. That set March 29, 2019, as the formal divorce date, now pushed back to April 12.

Mrs. May has yet to find a way to overcome seemingly impossible parliamentary arithmetic and get lawmakers to back her agreement with European leaders. The fantasy that Brexit would be easy has crumbled, and lawmakers who made lofty promises to their constituents have to face a hard reality.

Uncertainty over Brexit has slowed the U.K.’s growth to 1.3 percent in 2018. U.K.’s Treasury Chief Philip Hammond reported that it would slow to 1.9 percent in 2019 and 1.6 percent in 2020. A resolution should allow the economy to improve to 2 percent in 2019. The British pound is 14 percent lower than before the referendum. That helps exports but increases the prices of imports. The pound would strengthen once a deal is approved.

Critics of the May’s plan said the U.K. must still follow EU guidelines and pay EU exit fees. But, since it’s no longer a member, it won’t be able to vote on those guidelines.

A hard Brexit without a trade agreement would eliminate Britain’s tariff-free trade status with the other EU members. Tariffs would raise the cost of exports. That would hurt exporters as their goods became higher-priced in Europe.

Even with a trade agreement, a hard Brexit could be disastrous for The City, the U.K.’s financial center. Companies would no longer use it as an English-speaking entry into the EU economy.

The City of London reported that 5,000 jobs could be lost. That could lead to a real estate collapse. There are many new office buildings under construction that would sit empty. Housing prices have already started to fall.

The United Kingdom would lose the advantages of the EU’s state-of-the-art technologies. The EU grants these to its members in environmental protection, research and development, and energy.

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