We stand on the edge of a precipice
AS decisions on the trading relationship between the UK and the EU hurtle towards us, the whole process appears to be a total mess.
We are treated to the spectacle of JRM, Johnson, Davis, Fox et al behaving like a bunch of kids playing water pistols with petrol in a fireworks store. We have others indulging in what appear to be theological debates on sovereignty and whether the EU is developing into some form of fascist dictatorship. This however is not a chlldrens’ game or school debating society. Thousands of people’s livelihoods and futures are at stake.
Concentrating on the economics, the level of ignorance displayed by those who should know better is truly frightening. The complexities of the customs union, the single market and new free trade deals are many when taken as single issues, taken together however these are multiplied exponentially as they interact with each other. Examining just one part of this is illuminating. Once we start to negotiate new trade deals and trying to grandfather existing ones the issues of local content and country of origin rules will play a crucial part. The single market altered the economic landscape of Europe with the building of transnational supply chains in many industries, and this has serious implications for Wales.
Taking manufacturing, new trade deals will require a definition of what is a “British” good. What percentage of its value has to originate in the UK? To what extent will the parts we import from Europe as part of supply chains count in exports under a new trade deal with for example Korea? What about importing Korean goods as part of a value chain for the export of goods to the EU? Thus new trade deals are not built on bilateral negotiations as many Brexiters seem to think, they are at essentially trilateral. Best of luck with that. Trade of course is only one aspect, investment is equally important. Thus Airbus has announced that as a result of Brexit, if it wins the Galileo control project, it will move the work to France or Germany.
We stand at the edge of a precipice. When it comes to Brexit economics the world is not flat or populated with unicorns, no matter how much people believe and want it to be. Our trading relationship has to be negotiated. As a third country outside the EU, agreement will take place only if it is in the interests of the EU. Expect no favours. Also companies will make rational investment decisions based on facts not sentiment. Brexit is the largest peacetime political and economic crisis this country has perhaps ever faced. It is entirely self inflicted.