On 23rd June UK citizens will be voting on a referendum to decide their standing in the EU. For the past six months the Leave and Remain campaigns have been rallying supporters creating a breach within all parties and the society. 15th of June polls revealed the population is leaning towards Brexit, with 46% for Leave, 39% for Remain, 11% undecided and 4% abstention.
With this in mind, on Wednesday 15th June, the British Chamber of Commerce invited expert panellists Damian Fraser (Managing Director, UBS) and Lorena Rauno (Professor and Researcher, CIDE) to share their insights on the upcoming referendum. The panel was moderated by Curtis Founding Partner and Member of Chamber Board Antonio Prida Riva.
Antonio Prida opened the debate by posing the essential questions for the experts to address. How would Brexit impact the European Union (EU) in the short and long term? Are bilateral free trade agreements (FTA) better than economic and political unions? Is the World Trade Organisation enough when it comes to free trade? What would Brexit mean for Mexico?
Lorena set the stage by explaining the history of the UK’s complicated relationship with the EU. Though many consider the UK as one of the EU’s founding members the country did not join until 1973 after failing to obtain certain concessions. Given this delay, the UK joined a “club” that was not tailored to its needs and this soon became a problem. In 1975, only two years after becoming a member, the UK held a referendum to leave the European Community, which resulted in a vote of 66% to remain.
Lorena went on to talk about the sectors that might be affected by Brexit. Most notable is the education sector which would lose a large amount of funding from EU members and would be cut out of the Erasmus Mundus network. Another sector that would suffer greatly is the agricultural sector since it is heavily subsidised by the EU.
During his intervention Damian Fraser explained that this referendum resulted from Prime Minister David Cameron’s promises to hold a vote to leave the EU during his campaign last year pressured by the United Kingdom Independence Party (UKIP). UKIP has been gaining supporters locally and among some members of the Conservative Party. As main supporters of the Brexit campaign they have brought issues such as immigration and terrorism to the spotlight. This has overshadowed their main argument: the cost of giving up sovereignty to access the common single market is no longer worth it. He insisted that there is logic behind the Leave campaign and that we cannot equate voting for Brexit with voting for Donald Trump.
Meanwhile, the Remain campaign has based their arguments on hard hitting facts supported by reports from HM Treasury. The UK’s main trade and investment partners are EU members representing 45% of total trade. Not only will leaving the EU drastically change the way the UK trades, it will also affect the GDP per capita and the pound, which will drop between 10 and 15%.
Finally, Mr. Fraser went through the three most likely models that would replace the EU after Brexit:
- The Norwegian Model. Norway has access to the common market without much interference but without a voice and a veto, conditions the UK will be unlikely to accept.
- The Canadian Model. In 2014 Canada reached an agreement with the EU which intends not only to reduce tariffs but also contemplates certain non-tariff barriers. This would enable the UK to have access to the common market without allowing free movement of persons. However, this agreement does not cover all services, which represent 80% of the UK’s GDP. Also an agreement of this magnitude is unlikely to happen between the UK and the EU after Brexit.
- The World Trade Organisation (WTO) Model. In this model the UK will trade exclusively under WTO regulations like Brazil and Russia and it would have to pay duty on all exports.
The panel was followed by a Q&A session which mainly cover economic issues such as the status of the City of London, whether Brexit might weaken or strengthen other commercial trading blocks and the implications of the UK leaving for Mexico, its peso and TTP negotiations.
The purpose of this article is to cover a breakfast-conference hosted by the British Chamber of Commerce in Mexico with external panellists. The views expressed in this article do not represent those of the British Chamber of Commerce in Mexico or any of its associates.