Question

Suppose a large, important country, called Blair, leaves a large, important trade and economic organization, called the UE, that is designed to ease trade between members and provide a measure of political stability. Discuss some of the potential economic and trade implications of Blair leaving this arrangement. (Yes this is a question on Brexit, but there's a whole chapter in the book that covers arrangements and organizations like this. Use that.)

Answer 1

Trade agreements are arrangements negotiated between two or more countries to facilitate free movement between the members of the trade organisation for goods and services. These treaties can reduce or exclude trade barrier, such as tariffs and quotas, which can be bilateral or multilateral. This will help countries build new markets, promote high-quality goods and service and improve economic growth.

Now if Blair leaves the agreement the following consequences need to be suffered;

• A political instability between both the EU and Blair may contribute to limiting trade between other countries and Blair.
• Blair will forfeit the union's legal protection.
• Prices will rise for goods and services, and Blair will pay higher tariffs in other countries to export its products.
• Blair's negotiating position would drop and unemployment could rise as if Blair remained in the agreement there could be more possibilities of outsourcing. So those jobs will be gone. That's why it's bad for employment perspective.
• During the situation as Blair's net export is going to reduced, that's why the trade deficit will be increased.

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