Economics

Explanations

A Brexit Thread for Core Understanding

Geoff Riley

24th April 2019

A homely hat tip to the economics team at RGS Guildford who today published this really focused twitter thread on Brexit.

#1 trading blocs are like clubs, where countries agree common rules in order to help do more business together. These clubs can be structured in different ways, with increasing levels of integration...
— RGSG Economics (@RGSGEconomics) April 24, 2019

#2 Free Trade Agreements (FTAs). Countries agree to remove barriers to trade (e.g. tariffs) between one another, but are free to reach trade agreements with other non-member countries. EG NAFTA.
— RGSG Economics (@RGSGEconomics) April 24, 2019

#3 Customs Unions. This is what the UK Labour Party are pushing for. Like a Free Trade Agreement, but with the added restriction that all members of the Union set common restrictions against non-members. Stops a member negotiating separate agreements (ie with US).
— RGSG Economics (@RGSGEconomics) April 24, 2019

#4 Single Market. This is what the UK is part of (the EU). Like a Customs Union, but with the added freedom of movement of people and goods across borders. Also entails common rules (i.e. trading standards). Brexit referendum voted to leave Single Market.
— RGSG Economics (@RGSGEconomics) April 24, 2019

#5 Monetary Union. Like the Single Market, but members lose control of monetary policy to a single entity (i.e. the ECB in the case of the Eurozone) and also give up their currencies. Fundamentally an even closer relationship between member, no prospect for the UK on this one!
— RGSG Economics (@RGSGEconomics) April 24, 2019

#6 finally, Fiscal Harmonisation. All of the previous ingredients, but this involves ceding control over government spending and taxes to a central entity. Strong economic arguments suggest this is necessary to avoid Greece-type crises.
— RGSG Economics (@RGSGEconomics) April 24, 2019

#7 So what did the UK vote for, with Brexit? To leave the Single Market (perhaps - although Change UK may have plans here), but for a Customs Union?, a Free Trade Agreement?, or none of the above (a WTO-default, 'no agreement' solution)? Time will tell...
— RGSG Economics (@RGSGEconomics) April 24, 2019

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

@tutor2uGeoff