FINC 460 University of Maryland US Economy in Unforeseen Ways Discussion

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6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? https://www.thebalance.com/brexit-consequences-4062999 U.S. & WORLD ECONOMIES WORLD ECONOMY What Was Brexit, and How Did It Impact the UK, EU, and the US? ••• BY KIMBERLY AMADEO REVIEWED BY JANET BERRY-JOHNSON Updated March 12, 2021 On Dec. 31, 2020, the transition period for the United Kingdom (U.K.) to withdraw from the European Union (EU), otherwise known as "Brexit," officially came to an end. This marked the end of a years-long process that was overseen by two different Prime Ministers, included several delays and extensions, and left the U.K. divided. [1] [2]  https://www.thebalance.com/brexit-consequences-4062999 1/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? Advertisement What Was Brexit? Brexit was the nickname for "British exit" from the EU, the economic and policy union that the U.K. had been a member of since 1973. [3] That changed on June 23, 2016, when the U.K. voted to leave the EU. [4] The residents decided that the benefits of free trade weren't enough to offset the costs of free movement of immigration. The vote was 17.4 million in favor of leaving versus 16.1 million who voted to remain.[5]  Advertisement https://www.thebalance.com/brexit-consequences-4062999 2/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? Key Takeaways • Brexit is the nickname for "British exit" from the EU. • It took four years to complete after the 2016 vote. • A new trade agreement between the U.K. and EU retains their tariff-free status. • Constraints on immigration could hurt the U.K.'s labor force. • The U.K. could lose Scotland, which may opt to join the EU. https://www.thebalance.com/brexit-consequences-4062999 3/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? What Caused Brexit? In 2015, the Conservative Party called for the referendum. Most of the pro-Brexit voters were older, working-class residents of England's countryside. [6] They were afraid of the free movement of immigrants and refugees, claiming in the process that citizens of poorer countries were taking jobs and benefits. Advertisement Small businesses were also frustrated by EU fees. Others felt leaving the EU would create jobs. Many felt the U.K. paid more into the EU than it received. Those who voted to stay in the EU primarily lived in London, Scotland, and Northern Ireland. They liked free trade with the EU, and claimed most EU immigrants were young and eager to work. Most felt that leaving the EU would damage the U.K.’s global status. [6]  Brexit Process Leaving the EU was a complicated process. Former U.K. Prime Minister Theresa May, following the voters' will, submitted the Article 50 withdrawal notification to the EU on March 29, 2017.She negotiated a withdrawal agreement with the EU that outlined their new relationship but couldn't get approval from a divided Parliament. [7]  https://www.thebalance.com/brexit-consequences-4062999 4/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? Advertisement In July 2019, Boris Johnson succeeded May as the U.K.'s Prime Minister. [8] Johnson’s Conservative party subsequently attained a majority during a royally mandated general election on Dec. 12, 2019. [9] That allowed him to get Parliament's approval of the Withdrawal Agreement he negotiated with the EU. [10]  Advertisement On Jan. 23, 2020, the Agreement ActSreceived the necessary legislative Royal Assent, UMMER THE NISSAN SALES EVENT which is when the Queen formally agrees to make the bill into law. [11] [7] The U.K. formally STARTING AT left the EU on Jan. 31, 2020, but entered a transition process that ended on Dec. 31, 2020. 24,450 $ The EU-UK Trade and Cooperation Agreement was agreed to on Dec. 24, 2020 (and signed MSRP* on Dec. 30). [12] [13]  THE 2021 NISSAN ALTIMA ® *MORE OFFER INFORMATION https://www.thebalance.com/brexit-consequences-4062999 5/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? MORE OFFER INFORMATION *AS SHOWN $34,755 MSRP 2021 ALTIMA 2.5 PLATINUM AWD WITH SPLASH & MATS, OTHER OPTIONAL EQUIPMENT SHOWN, SEE DEALER FOR DETAILS SHOP NOW FIND LOCAL DEALERS Advertisement Brexit Trade and Cooperation Agreement Summary THE NISSAN S Uhas MME R The Trade and Cooperation Agreement three main pillars: trade, cooperation, and SALES EVENT governance that took effect on Jan. 1, 2021. Notably, the agreement does not cover foreign STARTING AT 24,450 $ policy and defense. [13]  MSRP* Advertisement THE 2021 NISSAN ALTIMA ® *MORE OFFER INFORMATION *AS SHOWN $34,755 MSRP 2021 ALTIMA 2.5 PLATINUM AWD WITH SPLASH & MATS, OTHER OPTIONAL EQUIPMENT SHOWN, SEE DEALER FOR DETAILS SHOP NOW FIND LOCAL DEALERS † and What you can’t We detect, alertsee can hurt you. work to fix ID theft. Save up to 25%* *Discount is for first year. Terms apply. Trade The U.K. is no longer part of the customs union and single market with the EU.Instead, it has a trade agreement that allows zero tariffs and zero quotas on goods traded that comply with the appropriate rules of origin. [14]  Important: Brexit put a big strain on the relations of U.K. member Northern https://www.thebalance.com/brexit-consequences-4062999 6/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? Ireland with its neighbor, the Republic of Ireland, an EU member. The new agreement allows Northern Ireland to adopt EU customs rules so there isn't a hard border between the two adjacent countries. Instead, there is a customs and regulatory border between Great Britain and Northern Ireland in the Irish Sea. [8]  Free movement between the U.K. and EU has ended. European nationals already living in the U.K. must make sure they have documents from the U.K. government specifically allowing them to remain. [15]  Travelersbetween the EU and the U.K. must have passports ready to show at the border. [16] Business travelers have additional requirements. If they do business regularly in an EU country, they may need to set up a local subsidiary. Many services, such as telecommunications, broadcasting, and electronic services, may be taxed. [17]  The U.K. must pay a "divorce bill" of 25 billion pounds by 2057. This is to fulfill any remaining financial commitments made while a member of the EU. [18] [19]  Security While EU law no longer applies to the U.K., the latter will cooperate with the EU on law enforcement and criminal justice matters. [20] [21]  Governance The agreement established a Joint Partnership Council to make sure the agreement is properly applied and interpreted. This includes dispute settlement, legal enforcement, and rules for retaliation if needed. [13]  How Did Brexit Impact the UK? The U.K. has already suffered from Brexit. The economy has slowed, and many businesses have moved their headquarters to the EU. [22] Here are some of the impacts on growth and jobs. There would also be consequences specific to Ireland, London, and Scotland. Growth Brexit's biggest disadvantage is its damage to the U.K.'s economic growth. Most of this has been due to the uncertainty surrounding the final outcome. Uncertainty over Brexit slowed the U.K.'s growth from 2.4% in 2015 to 1.0% in 2019. [23] The https://www.thebalance.com/brexit-consequences-4062999 7/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? U.K. government estimated that Brexit would lower the U.K.’s growth by up to 6.7% over 15 years. It assumed the current terms of free trade but restricted immigration. [24]  The British pound fell from $1.48 on the day of the referendum to $1.36 the next day. That helps exports but increases the prices of imports. It has not regained its pre-Brexit high. [25]  Jobs Brexit hurts Britain's younger workers. Germany is projected to have a labor shortage of 3 million skilled workers by 2030. [26] Those jobs won't be as readily available to the U.K.'s workers after Brexit. Employers are having a harder time finding applicants.One reason is that EU-born workers left the U.K., their numbers falling by 95% in 2017. This has hit the low-skilled and mediumskilled occupations the most. [27]  Trade The U.K. must negotiate new trade agreements with countries outside of the EU, which had more than 40 trade agreements with 70 countries already in place. [28]  Ireland Northern Ireland remains with the U.K. The Republic of Ireland, with which it shares a border, stays a part of the EU. The agreement avoids a customs border between the two Irish countries. A customs border could have reignited The Troubles, which was a 30-year conflict in Northern Ireland between mainly Catholic Irish nationalists and pro-British Protestants. [29]  In 1998, it ended with the promise of no border between Northern Ireland and Ireland. A customs border would have forced about 9,300 commuters to go through customs on their way to and from work and school. [30]  London Brexit has already depressed growth in the U.K.'s financial center of London, which saw only 1.4% in 2018 and was close to zero in 2019. Brexit also diminished business investment by 11% between 2016 and 2019. [31]  International companies are less likely to use London as an English-speaking entry into the EU economy.Barclay's moved 5,000 clients to its Irish subsidiary, while Goldman Sachs, JP Morgan, and Morgan Stanley switched 10% of their clients. Bank of America has also https://www.thebalance.com/brexit-consequences-4062999 8/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? transferred 100 bankers to its Dublin office and 400 to a broker dealer unit in Paris. [32]  Scotland Scotland voted against Brexit. [33] The Scottish government believed that staying in the EU was the best for Scotland and the U.K. It had been pushing the U.K. government to allow for a second referendum. To leave the U.K., Scotland would have to call a referendum on independence. It could then apply for EU membership on its own. [34]  The Brexit Vote In summary, the Brexit vote imposed these three hard choices on the U.K.: [35]  1. Leave with no deal, known as "no-deal Brexit." Without a trade agreement, ports would be blocked and airlines grounded. In no time, imported food and drugs would run short. 2. Vote again on Brexit. Many argue that voters did not understand the economic hardships that Brexit would impose. On Dec. 10, 2018, the European Court of Justice ruled that the U.K. could unilaterally revoke its Brexit application to remain in the EU. [36]  3. Approve a negotiated deal. The sticking point had been the nature of the border between the U.K.’s Northern Ireland and the EU’s Republic of Ireland. [8]  How Did Brexit Impact the EU? Brexit is a vote against globalization. As a result, it has weakened forces in the EU that favor integration. [37] Members of right-wing,anti-immigration parties are particularly antiEU in France and Germany. If they gained enough ground, they could force an anti-EU vote. If either of those countries left, the EU would lose its most robust economies and would dissolve. On the other hand, the majority of EU citizens still strongly support the union.In a Pew Research Center survey across 10 European nations, almost 75% say the EU promotes peace, and 55% believe it supports prosperity. In addition, more than a third see the role of the U.K. as diminishing. [38]  How Did Brexit Impact the US? https://www.thebalance.com/brexit-consequences-4062999 9/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? Brexit threw into uncertainty the status of London as a global financial center. U.S. stability, though, means London's loss could be New York's gain. Important: The long-term effects of Brexit could be positive for the U.S. The day after the Brexit vote, the currency markets were in turmoil. The euro fell 2% to $1.11. [39] The pound fell 8% to $1.36. [25] Both increased the value of the dollar. That strength is not good for U.S. stock markets. It makes American shares more expensive for foreign investors. A weak pound also makes U.S. exports to the U.K. more expensive, although that hasn't slowed exports. In 2019, U.S. exports to the U.K. were $147.4 billion, up from $141 billion in 2018. That's created a $21.8 billion trade surplus. Meanwhile, imports were only $125.6 billion. [40]  Brexit dampened business growth for companies that operate in Europe. U.S. companies invested $851.4 billion in the U.K. in 2019.Most of this was in the finance and insurance sector, as well as manufacturing and nonbank holding companies. These U.S. companies previously used the U.K. as the gateway to free trade with the EU nations. U.K. businesses, on the other hand, invested $505.1 billion in the U.S. in 2019, up 1.7% from 2018. Most of this was in manufacturing, wholesale trade, and finance. [41]  The U.K. is in the process of negotiating a trade deal with the U.S. The biggest stumbling block is agriculture. The U.K. requires greater food safety and animal welfare regulations than the U.S. does. U.K. farmers are concerned about inferior, cheaper agriculture products putting them out of business. [28]  ARTICLE SOURCES https://www.thebalance.com/brexit-consequences-4062999 10/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? TRADE POLICY What Happened to the Trans-Atlantic Trade and Investment Partnership? GDP GROWTH & RECESSIONS Top Economic Events of the 21st Century TRADE POLICY What Affects the U.S. Dollar Rate? TRADE POLICY 6 Ways Trump Changed NAFTA WORLD ECONOMY What Happens When the World's 7 Top Leaders Meet TRADE POLICY The History of NAFTA and Its Purpose INTERNATIONAL INVESTING How Globalization Impacts International Investors and Economic Growth https://www.thebalance.com/brexit-consequences-4062999 TRADE POLICY Top 12 US Bilateral Trade Agreements 11/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? WORLD ECONOMY 7 Reason's Japan's Economy Is Stuck WORLD ECONOMY 3 Types of Free Trade Agreements and How They Work MARKETS Dow Jones Highest Closing Records TRADE POLICY International Trade: Pros, Cons, and Effect on the Economy ECONOMIC THEORY President Donald Trump's Economic Plans and Policies WORLD ECONOMY What Countries Use the Euro? US ECONOMY STOCKS How Have Democratic Presidents A Look at When Timing the Market Can https://www.thebalance.com/brexit-consequences-4062999 12/13 6/30/2021 What Was Brexit, and How Did It Impact the UK, EU, and the US? How Have Democratic Presidents Affected the Economy? A Look at When Timing the Market Can Actually Work FOLLOW US ABOUT US COOKIE POLICY ADVERTISE TERMS OF USE EDITORIAL GUIDELINES PRIVACY POLICY CAREERS CALIFORNIA PRIVACY NOTICE CONTACT TRUSTe The Balance is part of the Dotdash publishing family. https://www.thebalance.com/brexit-consequences-4062999 13/13 Read – Week 5: 1. Interest Rate Parity 2. Covered Interest Rate Parity Examples 3. http://www.public.asu.edu/~mmelvin/lecture1part4IR P.pdf 4. https://www.youtube.com/watch?v=bROJrFa3MZc 5. https://www.youtube.com/watch?v=fS6La0Vs_Fo 6. http://www.tutorialspoint.com/international_finance/i nterest_rate_parity_model.htm 7. https://www.youtube.com/watch?v=Cpj_P4Dp5kU ( What is a bitcoin?) 8. https://www.youtube.com/watch?v=RDFnls2KPYo (usi ng bitcoin as a hedge in Forex)
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Article Review: What Was Brexit, and How Did It Impact the UK, EU, and the US? By
Amadeo

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Article Review
The overarching theme that lingers throughout Amadeo’s (2021) article, ‘What Was
Brexit, and How Did It Impact the UK, EU, and the US?' is that the UK lost more than it gained
by leaving the European Union (EU). Moreover, the Brexit process may have had other unseen
ramifications. The Brexit vote, which was a vote against globalization, effectively weakened the
EU's message of encouraging cooperation and assimilation through immigration. German and
French anti-immigration and right-wing parties which oppose the EU may exploit the Brexit
vote's sentiment to fuel their ...

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