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MD4099 | Assessment 1 Individual Academic Essay | Management

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Essay Question: 

Critically analyze the economic impact of ‘Brexit’ (Britain’s exit from the EU). Brexit means that the UK will be breaking away from its main trading partner; The European Union, and will therefore no longer benefit from the free trade deals within this trading bloc. Although this is causing much uncertainty and disruption, there could potentially be the opportunity for the UK to negotiate new or revised economic partnership agreements (EPA) or trade deals with that outside of the EU. Using the UK and one non-EU member state from the list below, discuss the economic implications of Brexit for these two countries, including trade relations, FDI inflows, and outflows, as well as each country’s economic growth forecasts, to assess the economic activity for these two countries as a result of Brexit. 

Select one of these non-EU member states listed below to discuss alongside the UK in your essay. All of the countries below have signed trade deals with the UK, which will come into effect after Brexit:

• South Korea (signed trade deal with the UK on 22nd August 2019). In 2018, total trade between the UK and South Korea was worth £14.6bn

• Norway (signed trade deal with the UK on 2nd April 2019). Total trade between the UK and Norway was worth £30bn in 2017.

• Israel (signed trade deal with the UK on 18th February 2019) According to the ONS, total trade between the UK and Israel was worth £3.9bn in 2017.

• Switzerland (signed 11 February 2019) Trade between the UK and Switzerland was worth £32.1bn in 2017.

(Data from BBC, 2019)

Aspects to consider:

• Brief background context- what is Brexit and the uncertainty it has caused?

• How will Brexit affect the UK and the other country you have chosen to discuss? What are the terms of their trade agreement and how does this benefit each economy?

• What are the countries' roles in the world economy? 

• Foreign Direct Investment (FDI) trends and foreign value-added activities (drawing on relevant frameworks such as the OLI paradigm). 

• Application of appropriate economic trade theory – such as the absolute and comparative advantage

• The inclusion of a relevant company or industry examples to further illustrate the points being made

• Any other relevant considerations, such as the anti-globalization critique or cultural implications, which are of particular relevance for the two counties?

A very brief example:

This essay is going to critically assess the economic impact of Brexit. In these critical discussions, this essay will focus on the UK and Switzerland specifically and assess how Brexit has affected this trade relationship. The points made in this essay will be supported by relevant economic theory, financial and economic measures (such as FDI and GDP) as well as draw from wider literature to result in a critical appraisal of the Brexit situation for these two countries. 

Firstly, this essay will provide a brief general background context to Brexit, before moving on to address the specifics of the essay question. Without trade agreements in place, the UK would be subject to the World Trade Organisation (WTO’s) regulations when exporting goods to other countries. However, as the WTO’s regulations involve higher border tariffs than trading agreements between countries, this would result in higher costs for UK exporters (Department for International Trade, 2019).  Applying this to the OLI framework (Dunning, 1973), multinational enterprises (MNEs) choose to invest in particular countries depending on their environmental, social and policy-oriented characteristics. (Grey, 2003) Part of the decision to invest in a country, therefore, involves an appraisal of what cross-border opportunities there might be. Trade relations and agreements (or the lack of) therefore might influence Foreign Direct Investment inflows.     

As disagreements ensued over the specific economic partnership agreement (EPA) between the UK and the EU post-Brexit, in the year running up to the Brexit deadline of 31st October 2019, the UK government’s attention turned to address trade deals with non-EU countries, in case of a no-deal Brexit (BBC News, 2019). One of these deals was between the UK and Switzerland, who agreed together on the continuity of their agreement in February 2019 (The Guardian, 2019). This essay will now discuss the impact of Brexit for these two countries in particular.

With regards to the UK and Switzerland, trade between these two countries was worth £32.1bn in 2017, meaning that Switzerland is the UK’s 10th largest trading partner (Department for International Trade, 2019). As is common for trade deals, there is no specific agreement for the trade of services (book reference), instead, the UK-Swiss trade agreement focuses upon the free trade of goods. One of the top 5 UK goods exported to and imported from Switzerland, is machinery and mechanical appliances (ONS, 2018) and as a result, one of the biggest industries affected by trade relations between the UK and Switzerland, is the UK’s motor industry. Without a free-trade EPA in place with Switzerland, the UK motor industry could have faced up to £8m in extra tariff charges (BBC News, 2019). This would, therefore, result in a potential loss to the UK if the renewed trade agreement with Switzerland was not secured. 

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