As the European Parliament unanimously votes to ratify the post-Brexit trade agreement between the EU and UK, Professor Abhinay Muthoo from the Department of Economics and Professor Nigel Driffield of Warwick Business School comment:

Professor Muthoo says: "The European Parliament has now given its overwhelming support for the post-Brexit trade deal. That was never in doubt, of course. We are where we are. It is time now for the two parties, the UK and the EU, to move forward positively and cooperatively, and work together to build a strong and positive relationship.

"Loads of issues confront them, some tricky such as those relating to Northern Ireland. And all these issues need addressing, and with some urgency. Furthermore, the world is going through a generational crisis, and strong cooperation between the UK and EU is crucial in so many respects let alone in helping to provide necessary international leadership."

Nigel Driffield, Professor of International Business at Warwick Business School, said: "Perhaps the most telling quotes after the ratification of the Brexit deal were from the Parliament's Brexit Co-ordinator, Guy Verhofstadt, who described the deal as "a failure for both sides, but better than nothing", and from Michel Barnier: "This is a divorce. It is a warning, Brexit. It's a failure of the European Union and we have to learn lessons from it".

"Both recognise how much the exclusion of the UK from the single market will hurt both sides, and are comparing the deal with the position under EU membership, while the UK side has championed the deal as “getting Brexit done”.

"The UK has for 30 years been a bridge between America and Asia, and the EU, attracting far more than its share of investment, from firms who wish to serve the whole of the EU. At the same time, European firms have taken advantage of the UK's more flexible labour markets to locate certain EU facing activities in the UK, and as a result value chains cross between the UK and the EU several times. As Verhofstadt recognises, any frictions in this are contrary to the aims of the single market, and will deter investment in Europe. Whether the UK will be hit disproportionately hard (as seems likely) will become clear in due course, though EY in their FDI surveys have highlighted an increase in UK FDI to the EU, and it is accepted that inward investment into the UK has declined significantly since the vote.

"This was essentially inevitable however from the point at which the UK government decided to interpret the Brexit vote as a vote to end European free movement of labour in the UK, and, even ignoring the human element, on issues such as UK residents abroad, or questions over the Northern Ireland border, it is clear that the very limited deal that we have, is sub-optimal in economic terms for both sides. There is no evidence that the UK will be able to replace EU trade with trade with the rest of the world, or the UK firms will find it easier to export to Asia or America than they did as EU members, because at best the UK is rolling over existing deals not improving on them. All potential partners recognise the political need for the UK to announce trade deals to its own population, and the deals that are being done reflect the somewhat one sided nature of the imperative to have things agreed, the Australia deal being a case in point."

28 April 2021

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