Brexit - The Withdrawal of membership of the UK from EU - What is the Impact of Brexit?

By Admin. Last updated 7/14/2022 11:33:52 PM. Previous || Next0 comments

Economic Impact of Brexit

Brexit is considered to be the withdrawal of membership of the UK from the EU (European Union). In a referendum that was conducted in the UK in 2016 it was revealed that 52% voted in favour of Brexit and 48% voted against Brexit (What Is Brexit, 2019). Thus, after this referendum, the UK has decided to quit the European Union. Europe or regarded as the most valuable market for import and foreign investment is the biggest resource. After the occurrence of Brexit, major companies started leaving Britain. Brexit translates into free movement of people in Britain from other European countries. There are very serious reasons for the purpose of Brexit. The first is that the EU is regarded as a threat to the sovengrity to Britain. Furthermore, the policies in the EU have been led by radical reforms and corporate interest. Problems involving immigration further cannot be ignored in this respect. The phenomenon of Brexit had a deep impact on the scenario of global trade. Morocco is one of the major trade partners of the UK and Brexit has impacted this country in the most serious manner. In 2018, Morocco and the UK had a trade that was worth £2.5.

Impact of Brexit on UK and Morocco

In terms of economic impact, Brext has hit a major blow on the economy of Morocco. Both GDP and trade of Morocco have been affected by the UK leaving European Union. As per the exchange office of Morocco, in 2015, the country exported almost $600 million to Britain. Thus, it is understandable that the way Brexit has affected the economy of Morocco. In the long-run, funding of Morocco by the EU has been affected severely. The UK used to contribute $11.3 billion to the budget of Morocco. However, it no longer sustained because of the UK's exit from the EU. UK contributed to 4.6% of the FDI made in Morocco. Post Brexit, this volume has dropped significantly (What Is Brexit, 2019). After the imposition of duties of custom, there has been a significant impact on the trade between Morocco and the UK. Exit of Britain from the EU contributed to severe economic decline. Moreover, there has been declining demand for goods from Morocco. There was a need to initiate a free trade agreement between the EU and the government of Morocco to maintain the flow of goods in the European Union. However, security cooperation and anti-terrorism have been maintained by the country. After Brexit, Morocco has been drawing attention to export to the African countries and it is further exploring the North American market also. In the agreement, there has been provision of tariff free trade. Thus, this can offer an immense opportunity to the global leaders operating in the EU. As suggested by Lu et al. (2017), in order to increase productivity in industry, tariff free products are highly essential. There can be an association of positive relationship between Morocco and the UK through the assessment of this agreement. Under this trade agreement, it has been clearly stated that the UK can get benefits from the aspect of lower price of the imported goods. Value of pound has decreased due to the occurrence of Brexit. There has been impact on the currency of Morocco also.

Terms in the trade agreement and the way it benefits the economies

In 2019, Morocco and Britain had signed the agreement for continuity. In this agreement, both the countries would resume their trade agreement as it did earlier. The trade that the UK secured from Morocco accounted for £109 billion. The agreement has ensured that both consumers in Britain and British businessmen will be benefited from the scenario of continued access to the market of Morocco. Both the countries have a close diplomatic relationship and the history of diplomatic relationship dates back to 800 years old (UK and Morocco sign continuity agreement, 2019). The continuity trade agreement has allowed both consumers and exporters to continue the aspect of free trading. According to Asmae and Ahmed (2019), furthermore, certainty in business of Morocco can be made sure through the approach of this agreement. The agreement has allowed that the agreement is highly essential for the purpose of strengthening cooperation between the two countries. In 2018, the trade between Morocco and the UK had reached up to 3.2 billion U.S. dollars.

Role of countries in world economy

Both Morocco and Britain contribute significantly to the prospect of a world economy. The UK has been a developed and fiercely independent economy and it was in the forefront of economic development from the 19th century. In order to offer a stable market in terms of economic activity, the UK is highly effective. Encouragement of different trade policies of the country has enabled it to focus on the scenario of free trade. The UK has been able to achieve the high level of self-sufficiency approach that has enabled the organisation to manage the economy in a stronger way. The economy in the UK has been slowly growing to proper fiscal health and government integrity. There has been steady growth occurring in Britain and this has contributed to the phenomenon of improved world trade, the open market policy in the country is helpful for promotion of global trade in most significant manner. Services and goods import in the economy account for 61.3% of the total GDP (Economic freedom, 2020). In terms of traditional trading, Britain has a deep connection with the US. Furthermore, Morocco is another country which contributes to the prospect of a world economy in the most significant manner. The liberal economy in Morocco is allowing other countries to engage in free trade. Thus, there has been facilitation of both import and export in terms of improving the aspect of global trade. Significant improvement in global management is regarded as the most essential perspective that is capable of driving a positive growth phenomenon of the world economy. There have been different sectors in the economy of Morocco that contribute to the aspect of better economic activities and the sectors include telecom, tourism, and textile. The country's economic policy is majorly characterised by the open and free trade policy. The economic freedom score of Morocco is 63.3 and it makes the country rank in the 78th position. The total value of both export and import of this country is 87.1% of the total GDP. There have been major initiatives to attract foreign direct investment. The prospect of FDI has been helpful for this organization to attract large scale investment. As per 2017 report, the per capita GDP of Morocco is 3,007.24 USD. In 2018, Morocco had a trade deficit of US 22.43 billion (Trade balance, 2018).

Trends in foreign direct investment and foreign value-added activities

In terms of capital flow, there has been significant inflow and outflow of funds. However, there has been significant foreign direct investment in the country's economy. In the UK, however, there has been a 61% drop in FDI inflow and also 44% drop in FDI outflow. The bilateral relationship of the country has been very good and it is associated with improvement in the economic activities in the economy of the country.

In the 2008 global recession, there had been a significant decline in FDI flows in Morocco. However, after 2013-2015, FDI flows to Morocco have increased significantly, as it exceeded 3 billion every year. The insurance sector in Morocco is the major beneficiary in FSI flow, as it bagged 20.9% FDI inflow in 2018 (Foreign investment in Morocco, 2018). The strength and opportunity involve better economic activity due to increased FDI inflow. However, the weakness includes poor domestic investment; as a result domestic business got severely affected.

OLI framework
Ownership:

The ownership advantage for an organisation includes ownership rights and proprietary information. The ownership information consists of trademark, patent right, branding and copyright. It helps a foreign investor to increase market positioning and also increase market assessment in the most innovative way.

Location:

Furthermore, location advantage is another essential perspective that is helpful for performance of specific functions for countries such as Morocco and the UK. In order to create increased resources by a foreign investor, there is a perspective of better function in the economy. As suggested by Mulatu (2017), the approach of partnership can be an innovative way of doing business in the market. Furthermore, there is a situation concerning the process of negotiation that has impacted the market economy in the most vital manner. Requirement of partnership is capable of driving growth in the market.

Internationalisation:

Internationalisation is regarded as a potential opportunity for the investors. Focus on market economy is evaluated for the purpose of generating higher profit. Negotiation of partnership can be made through the approach of proper way of innovative business operation. Knowledge of the local market can be taken into consideration for bringing significant improvement in the process of assessing business in the most opportunistic manner.

Economic trade theory application

Specialization in trade is regarded as a theoretical trade perspective that allows the process of free trade in the most vital manner. There can be involvement in increased opportunity for promotion of trade in business. Furthermore, specialisation in trade opportunity can be focused through the approach in evaluation of organisational framework in the most vital manner. Evaluation of global trade can be highly beneficial for the purpose of getting a good return. Microeconomic specialization in nations such as the UK and Morocco include broad advantages through better rates of production. According to Aluculesei and Bulin (2017), proper utilisation of innovative technology is capable of driving growth in a nation. Absolute advantage is an international trade theory that focuses on gaining improved market specialization. The scenario of trade agreement has been helping the country to achieve its targeted growth in the most prominent manner. Discrepancy in the world market can be significantly reduced through the approach of evaluation of global trade management. Improvement in the scenario of trade negotiation is regarded as highly beneficial for the approach of better trade activities. As per 2019 report, the per capita GDP of Britain is 39,720.44 USD. In 2018, the UK had a trade deficit of £66 billion with the EU. However, it had a trade deficit of £36 billion with the countries that are non-EU (Trade balance, 2018).

There can be an association of proper market framework that can be involved in the procedure of gaining added advantage in the market. Better economic growth in the market can be brought easily in the market through assessment of the market economy in the most innovative manner. Natural resources, labour and capital can be used in the most effective manner by utilising this economic trade theory.

Inclusion of company or example

The aspect of trade agreement is regarded as beneficial to the business organisations. The trade agreement between Morocco and the UK has benefited the manufacturing organisation the most. The manufacturing organisation has documented a significant growth in the prospect of the global economy through the scenario of trade. Improvement in free trade has further facilitated the creation of jobs and it has increased employment in both the UK and Morocco. As suggested by Mulatu (2017), in the globalised environment, the scenario of trade is considered to be highly beneficial for offering assistance to the growth of an organisation in a globalised world.
Cultural implication and anti-globalisation critique

There have been proponents in both Morocco and Britain who suggest that both the countries reduce the exposure to globalisation, as exposure to globalisation is associated with a lot of risks. Recession in the global environment can affect the economic condition of both the countries.

Conclusion

It can be ultimately argued that Brexit has a major impact on the global economy. Morocco which is a major trade partner of the UK has got affected due to Brexit. However, initiation of new trade agreements between the two countries is capable of driving growth. Furthermore, the aspect of FDI is essential in the globalised world, as it promotes growth of the countries.

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