The Economic Advantages and Disadvantages of the UK Remaining in the EU - Assignment Example

The Economic Advantages and Disadvantages of the UK Remaining in the EU Introduction The EU is an exceptional economic and political affiliation linking the 28 European countries among which the UK is a member and covers a significant size of the continent. It was created by the second world with the aim of enhancing economic cooperation through economic interdependence to avoid regional conflicts (“How the EU”, n.d.). The UK has benefited from the EU's success in delivering 50 years of peace, stability and prosperity together with raising the living standards of its member countries. The UK has an important role in enhancing the EU's strength through its vast economic power that it has earned through its wide range of industrial-commercial and socio-cultural environmental factors (Jones, 2007). Its EU membership has, however, been cited to be one-sided, and thus has been termed detrimental to the region’s economy. The EU's total contribution to the improvement of Britain's economy compared to the UK's economy contribution is less significant. As a result, a referendum on opting out of or remaining in the EU for British citizens has been proposed as required by the EU (De Waele, 2005). Britain’s continued membership of the EU is very beneficial in terms of trade as it provides the UK with one of the largest single markets for its products. However, the costs seem to surpass the benefits. For instance, since 1979, Britain has paid about €260 billion to the EU and only received €97 back in benefits (De Waele, 2005). The essay examines why it is more beneficial for the UK to opt out of the EU than it is detrimental to the region’s economy. The exit of the UK from the EU zone is more beneficial to the region’s economic growth and development than it is detrimental to the economy. Advantages of Remaining in the EU Withdrawal from the EU would save the UK a lot of money The UK spends ridiculously large amounts of money in the EU in terms of membership fees and other “hidden tariff” costs paid by the UK taxpayers due to red tape, waste, fraud and other factors. For instance, in 2014/15, a net payment of £8.6 billion out of a total £731 billion in public spending was paid into the EU budget by the UK (“UK Budget”, 2015). The amount of the money is far much less than the contribution UK makes towards the development of roads and railways, which is £5.2 billion and £3 billion respectively. It also surpasses the jobseekers’ allowances that amounts to £4.9 billion (“UK Budget”, 2015). Moving out of the EU would, therefore, mean that there would be more funds available for extensive development. It would also ensure that infrastructural projects such as railway and roads receive more funds for development and improvement. The funds can also be useful for making more internal investments to ensure there is continued improvement of the GDP and the overall economic growth of the UK. A study by the UKIP MEP, Gerard Battern has showed the total annual cost of the UK to EU membership is around £65.7 billion, which includes membership fees and “hidden tariff” costs (Batten & Party, 2006; Batten, 2008). Therefore, this implies that the EU membership is a very expensive affair to the UK that if avoided can accelerate the economic growth and development prospects of the UK. It would open doors to possibly other more practical alternatives than the EU Over the years, Britain has established successful trading relationships with major economies such as the USA, Switzerland and even Japan; countries that are outside the EU zone. Additionally, it has been argued that, in the past years, the economic growth is of the EU has consistently been on a downward trend with its share of the world’s GDP being forecasted to decrease from 26% in 1980 to 15% by 2020 (Jones, 2007). The euro is also projected to be of lesser value than the sterling pound (Baimbridge and Whyman, 2008). Therefore, basic on these statistics it is more beneficial for the UK to move out of the EU and explore other better options to boost its economic prospects. Furthermore, the UK can do exceptionally well on its own without being a member of any trading block in consideration to its well established trading relationships with other countries. Conversely, with the relatively strong and stable economy of UK, which is not pegged to the EU membership, the UK can still continue to attract more investors because of its economic potential. Expert projections also indicate, by 2020, the UK’s will better off than its current position seven globally among the top 10 largest economies (“Top 10 GDP Countries”, 2005). Thus, this makes the UK a very attractive option for investors and thus, can stand, independently and possibly acquire the hegemony status. Detachment from the EU will most likely boost the nation’s global trade and investment The UK has always focused on trade and investment as its main source of development and national income (Jones, 2007). It is arguable that remaining in the EU will boost the UK’s trade chances in international as opposed to being outside the EU block but this could, however, be far from the truth. The fact that the UK’s small size, unlike its European counterparts, does not necessarily mean that its economic growth and development will decline if it pulls out of the EU. Prosperity of an economy in the modern world of business depends on the country's output, state and its overall contribution to the outside world as opposed to its physical size. The UK is highly internationalised to the global trade than regional trading and investing (Jones, 2007). Moreover, the UK trades more with the United States than with Germany and France combined; countries that are within the EU. The UK, therefore, would open up to more trading opportunities outside the EU zone since it will be able to avoid the trade protectionism policies imposed by EU such as the high bloc taxes and other regulatory costs that have a negative impact. Opting out of membership of the EU will lead to reinstatement of lost jobs and also prevent the decline of Britain’s economy A relatively large number of industries in Britain have been affected by the directives of the EU (“EU Directives”, 2011). These industries include fishing, postal services, manufacturing and farming. The Common Fisheries Policy (CFP) has led to an overall loss of employment to about 115,000 people from the coastal communities of Britain. The Common Agricultural Policy (CAP) has been an obvious waste of resources that has led to an increased prices of commodities (“EU Directives”, 2011). Additionally, the Alternative Investment Fund Managers Directive of the EU is likely to cause loss of more jobs if implemented because private equity markets and hedge fund have already started relocating to other countries to escape the stringent rules of the Directive (Kamal, 2012). Thus, this is likely to cause a decline in the financial services sector, which contributes about 12% of the GDP as well as about 15% of income tax receipts to the Britain's economy (Kamal, 2012). Therefore, a walk out will enable the UK to institute its policies that can protect the economy from external shocks. Independence in the law making process and VAT control Pulling out of the EU will enable the UK to regain its sovereignty and be reunited with its voters (The Economist, 2012). It would lead to the UK's taxpayers having more faith in their government and its ability to make its laws. Britain would have a chance to operate on their laws free from the restrictions and directives of the EU. Such as the European Arrest Warrant. Britain would also have the power over their VAT that is currently under the control of the EU; hence, making it more flexible to adjust to prevailing economic conditions such as the inflation rates (The Economist, 2012). Disadvantages of leaving the EU Compromising free trade Being a member of the EU enables Britain to benefit from the EU market where it gets access to over 500 million consumers that are within the EU member countries (The Economist, 2012). Free trade with these states enables the UK to gain a substantial market for its goods and services, which enables it expands economically as well as better off its trade payment balances. Leaving the EU, therefore, implies that the trading with other EU members will attract taxes and other trade restrictions. For this reason, being in the EU, therefore, is imperative than being a non-member. For instance, according to The Economist (2012), the UK has sold goods worth more than £400 a year, which represents about 52% of its entire product sales. Therefore, on the basis of these statistics it is evident that the EU provides the largest market for the UK’s products and services and thus an exit will be detrimental to the UK’s economy. Moreover, the EU‘s plans to create one of the world’s biggest free trading block with the US is undergoing and, therefore, if the negotiations bear fruits, the UK will be on the losing end to find a new major trading partner. Loss of major investors Opportunistic investors in the UK are likely to exit if the free trade benefits the UK gets from the EU zone cease because they will be obliged to incur the trade restriction costs that they had previously tried to avoid (The Economist, 2012). Therefore, if the costs becomes too heavy for their investments, the investors will possibly exit from the UK to another nation that is a member of the EU so that they can continue leveraging from the free trade arrangements of the EU integration. Thus, this would have a very big impact on Britain's economy and perhaps result in a downward trend on the economic gains of the country. Conclusion Ultimately, it is evident that a UK’s pull-out from the EU has both advantages and disadvantages to the UK's economic growth and development. However, because the advantages outweigh the disadvantages, it is justifiable to say that a pull-out is a better option since the disadvantages can be overcome. For instance, loss of free trade benefits is single most significant disadvantage that the UK will be faced with in dealing with the remaining EU members. However, the UK can seek other lucrative opportunities and trade partners such as the U.S., Switzerland, Japan and other emerging economies. Therefore, the exit of the UK from the EU zone is a more beneficial option to economic growth and development of the UK’s economic prospects as opposed to being detrimental. Bibliography Baimbridge, M., & Whyman, P. B., 2012. Britain, the euro and beyond. London, LA: Ashgate Publishing, Ltd. Batten, G., &Party, U. I., 2006. How much does the European Union cost Britain?. World, 1973, 7. Batten, G., 2008. How much does the European Union cost Britain?. London, LA: The Bruges Group. De Waele, H., 2005. The European Union on the Road to a New Legal Order ― the Changing Legality of Member State Withdrawal. Tilburg Law Review, 12(2), pp.169-189. EU Directives and International Agreements. (2011). Available at: http://www.defra.gov.uk/industrial-emissions/eu-international/ [Accessed 15 Mar. 2015]. How the EU works. (n.d.). Available at: http://europa.eu/about-eu/index_en.htm [Accessed 15 Mar. 2015]. Jones, A., 2007. Britain and the European Union. Edinburgh: Edinburgh University Press. Kamal, S., 2012. Hedge Fund Regulation and the EU Directive. Available at SSRN 2050411. The Economist, (2012). Making the break. How Britain could fall out of the European Union, and what it would mean. Available at: http://www.economist.com/news/briefing/21567914-how-britain-could-fall-out-european-union-and-what-it-would-mean-making-break [Accessed 15 Mar. 2015]. Top 10 GDP Countries 2000-2050. (2005). Available at: http://www.photius.com/rankings/gdp_2050_projection.html [Accessed 15 Mar. 2015]. UK Budget: UK Budget Breakdown for 2014 - Charts. (2015). Available at: http://www.ukpublicspending.co.uk/uk_budget [Accessed 15 Mar. 2015]. Read More