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Britain and the European Union are seeking a post-Brexit trade deal, and the failure is likely to lead to further chaos in mutual trade, falling financial markets and huge economic costs.
These are some of the possible pressure points of the lack of a trade agreement.
POUND STERLING
Investors and banks have long predicted that a trade deal would close, so a no-deal would hit the British pound, currency traders say.
But investor sentiment was hurt by parties that said Saturday that there was no deal yet covering annual trade worth nearly $ 1 trillion, and the British pound has fallen against the dollar since then.
The shocking result of the British referendum on leaving the EU in 2016 saw the pound fall 8% against the dollar, its biggest drop in a day since the era of free-floating exchange rates began in the 1970s. .
COMMERCE
In the event of a “no deal” on trade, Britain would lose tariff-free and quota-free access to the European single market of 450 million consumers overnight.
Britain would violate the terms of the World Trade Organization (WTO) in its trade with the 27-state bloc. It would impose its new UK Global Tariff (UKGT) on EU imports, while the EU would impose its common external tariff on UK imports.
Non-tariff barriers could hamper trade, and prices are expected to rise widely for British consumers and businesses.
Borders are at risk of disruption, especially major crossing points, and experts say shortages of certain foods are possible in Britain, as it imports 60% of its fresh food, and also potential disruptions to British exports. of lamb to the EU.
Sectors that rely on just-in-time supply chains, including cars, food and beverages, would feel any disruption most acutely. Other sectors likely to be affected include textiles, pharmaceuticals, and petroleum and chemicals.
The EU is Britain’s largest trading partner, accounting for 47% of its trade in 2019. It had a £ 79 billion trade deficit with the EU, a surplus of € 18 billion in services offset by a deficit of 97,000. millions of pounds sterling in goods. .
Even with a deal, Britain expects thousands of trucks bound for EU countries to pile up in the county of Kent in southern England, with delays of up to two days.
AUTO SECTOR
The impact would be strongly felt by the auto industry in both Britain and the EU, as British carmakers face a 10% tariff on all car exports to the EU and up to 22% for trucks and vans if not. a Brexit deal is reached, industry associations said.
The cost will almost certainly be passed on to consumers, he added, predicting € 57.7 billion in costs for EU plants and costs of € 52.8 billion for UK plants.
The same group, the Society of Car Manufacturers and Traders, said a “no-deal” Brexit would reduce UK vehicle production by 2 million units over the next five years and undermine its ability to develop the next generation of vehicles. zero emissions.
FISHING INDUSTRY
The outcome of the negotiations on fishing rights is also being closely monitored as it will have political and economic consequences, despite the fact that fishing alone contributed only 0.03% of British economic output in 2019.
France has sought a deal protecting its ability to fish in UK waters for several years, but has told its fishermen to prepare for a smaller catch.
THE ECONOMY
The long-term impact could be costly for both Britain and the 27 remaining EU member states.
A no-trade deal would wipe out an additional 2% of British economic output in 2021 while rising inflation, unemployment and public borrowing, Britain’s Office for Budget Responsibility (OBR) predicted.
The OBR said that tariffs under WTO rules and border disruptions would affect parts of the economy like manufacturing that were emerging relatively unscathed from the Covid-19 pandemic.
According to an economic investigation conducted by insurer Allianz in November, a hard Brexit, a sharp and disorderly split, could cost the EU up to € 33 billion in annual exports, with Germany, the Netherlands and France being the worst hit.
The impact would be felt unevenly across continental Europe, with the worst hit being Ireland, the Netherlands, Denmark, France, Germany, Sweden, Portugal, Poland, the Czech Republic, Cyprus, Malta and Hungary.
The Halle Institute for Economic Research has predicted that EU companies exporting to Britain could lose more than 700,000 jobs if a trade deal is not reached.
Hylke Vandenbussche, a professor at Belgium’s University of Leuven, said in a report last year that Belgium would be the most affected EU member state relative to size, especially its food sector, with 10,000 job losses.
NORTH IRELAND
Both sides want to avoid a hard border between Northern Ireland and the Republic of Ireland, which is in the EU. Implementing the Northern Ireland protocol, which is part of the withdrawal agreement under which Britain left the EU on January 31, will be complicated without a trade agreement.
Under the treaty, Northern Ireland remains, in effect, in the EU’s single market for goods and aligned with its customs rules after December 31, unlike the rest of the UK.
It is not yet clear exactly how the controls, regulations and paperwork will work between Britain and Northern Ireland. But without a trade deal, the divide between Great Britain and Northern Ireland would become clearer.
Brexit without a trade deal could allow Northern Ireland to become a back door to the EU single market, creating the specter of a hard border on the island of Ireland for the first time since a 1998 peace deal .
ACRIMONY
Both sides are likely to blame each other for any chaos after a no-deal exit and Europe would split just as it faces the challenges of China’s rise, Russian assertiveness, and the continuing fallout from the Covid-19 pandemic.
There could also be acrimony within the EU, which would lose one of Europe’s top military and intelligence powers, its second-largest economy, and the only financial capital to rival New York. Britain would be much more dependent on its alliance with the United States.
Britain is pushing for legislation that would allow it to break parts of the withdrawal treaty related to Northern Ireland, making it unclear to what extent it would implement the divorce deal.
CITY OF LONDON
The world’s international financial capital is largely Brexit-ready, as a trade deal will never cover the most competitive British industry globally.
While most banks and investors have found ways to navigate Britain’s exit from the bloc, the long-term impact of a bitter Brexit would be unpredictable and the EU is likely to try to get more market share from the City of London. .
London is the center of the world’s $ 6.6 trillion-a-day foreign exchange markets, accounting for 43% of global turnover. Its closest EU competitor, Paris, accounts for around 2%.
The British capital is also the world center for euro trading, a potential headache for the European Central Bank.
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