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Brexit: 'The UK Government Needs to Decide Where It Wants to Go' - Economist

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The British economy is losing 350 million pounds a week as a result of Brexit, according to an article by The Financial Times. Inflation has also increased more in Britain than in other advanced economies with the pound falling about 10 percent. Radio Sputnik discussed the economic consequences of Brexit with professor of economics Geraint Johnes.

Would you consider Brussel’s demands to be fair?

Geraint Johnes: Certainly fair that the UK should be contributing to the pension payments because those are the services that the UK has already received and also for commitments that the UK has already made.

How long will Britain have to bear this additional cost? How long will it take for Britain to really recover from Brexit?

Geraint Johnes: This is  big amounts that we have got here and what people should be far more focused on than the budgetary contribution that the UK has been making to the EU are the amounts involving trade. We trade primarily with countries that are relatively close to us geographically, so the European Union is the major trading partner. If impediments are put in the way of that trade then there are going to be economic costs associated with those impediments. We will be trading much less efficiently; we will be buying from countries that are not the most efficient producers of those products. It’s those massive trade costs that are likely to arise as the result of not being able to trade according to an agreed set of rules within the community of 28.

If you look at the situation prior to joining the EU, the UK benefited from the Commonwealth, but increasingly over the years before the UK joined the European Union there was more and more trade going on with European partners. They are the UK’s neighbors geographically and trade does tend to follow the rule of proximity. Of course a lot of trade already goes on outside the European Union; much of that is facilitated by trade agreements that the European Union itself has with other countries and from which the UK benefits. The UK will need to rewrite those arrangements as it leaves.

Looking forward what kind of relations do you see ultimately between the UK and the EU in terms of financial and trade relations in the post-Brexit era?

Geraint Johnes: Much of the negotiation really is going on within the UK government itself rather than between the UK and the EU. The UK government really needs to decide where it wants to go on this. There seems to be two main options available now and one is to go for a quite far-reaching trade deal. David Davis has argued in favor of what he calls a Canada +++ deal, which is similar to the deal that the European Union has with Canada but with a lot of added extras on to it. 

I am not sure at what stage Canada +++ merges into, something that looks very similar to the European economic area, a kind of Norway model where the UK would remain within the single market, possibly unlike Norway it could also remain within the customs union. But I suspect that if the UK were to go for an option like that it would need to be renamed, rebranded, so that it wasn’t looking as though it was staying within the single market and customs union. 

Geraint Johnes is a professor of economics with the Lancaster University Management School.

The views expressed in this article are solely those of the analyst and do not necessarily reflect the official position of Sputnik.

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