Sunday, June 23, 2019

Three Years since the Brexit Vote: Looking Back

Three years ago today, on June 23, 2016, the Brexit vote occurred. After three years of negotiation, I have no clear idea what the endpoint will be. But to commemorate the day and some of the choices to be faced, here are links to a three earlier posts on Brexit.

1) I happened to be on a family vacation in the UK on the day of the Brexit vote. When I got back, I wrote "Seven Reflections on Brexit" (June 27, 2016).  Here was my first point:
The Brexit vote seemed to me a strangely American moment. Some of the lasting slogans handed down from the American revolution against England are "no taxation without representation" and "don't tread on me." Thus, for an American there was some historical irony in hearing many of the British argue, in effect, that there should be "no regulation without representation," or perhaps "no legislation without representation." There was similar irony in hearing some of the British turn loose their "don't tread on me" spirit while railing against annoying but in some sense small-scale regulatory impositions from the central power, like rules that sought to standardize shapes and sizes for fruit and vegetable produce, or the rules with force of law that sales of loose and packaged good use only metric measurements. I found myself half-expecting some "Leave" advocates to start quoting the US Declaration of Independence: "When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them ..."

2) A couple of months later, Richard E. Baldwin edited an e-book for VoxEU, Brexit Beckons: Thinking Ahead by Leading Economists, with short and readable contributions by 19 economists.  I tried to sum up some of the main possibilities for what might come next in "Brexit: Getting Concrete about Next Steps" (August 2, 2016). Looking back today at those options has a sort of nostalgic feeling to it. Some of those options might have been achievable, with a certain kind of determined and talented political leadership. But three years later, with a legacy of failed negotiations and various timetables that seem to be threatening to expire on some days and then retreating a few months into the future, I'm not confident that any of the possibilities from three years ago are still on the table.

3) In the Fall 2017 issue of the Journal of Economic Perspectives, and Thomas Sampson sums up the research on what is known and what might come next in "Brexit: The Economics of International Disintegration, "  In turn, I offered some summary of his main points and thoughts of my own in "Brexit: Still a Process, Not Yet a Destination" (November 17, 2017). In thinking about the effects of Brexit, one can do worse than start with Sampson's one-paragraph description of the UK economy:
The United Kingdom is a small open economy with a comparative advantage in services that relies heavily on trade with the European Union. In 2015, the UK’s trade openness, measured by the sum of its exports and imports relative to GDP, was 0.57, compared to 0.28 for the United States and 0.86 for Germany (World Bank 2017). The EU accounted for 44 percent of UK exports and 53 percent of its imports. Total UK–EU trade was 3.2 times larger than the UK’s trade with the United States, its second-largest trade partner. UK–EU trade is substantially more important to the United Kingdom than to the EU. Exports to the EU account for 12 percent of UK GDP, whereas imports from the EU account for only 3 percent of EU GDP. Services make up 40 percent of the UK’s exports to the EU, with “Financial services” and “Other business services,” which includes management consulting and legal services, together comprising half the total. Brexit will lead to a reduction in economic integration between the United Kingdom and its main trading partner.
At this point, perhaps the only positive description one can offer of the Brexit negotiations is that any business or consumer or investor with eyes to see should know not to be relying on British economic integration into the EU in the future. Thus, there has been a three-year period of having time to plan and adjust for that outcome.