On June 23, 2016 a referendum was held in the United Kingdom, this resulted in a 51% majority vote by UK residents in favour of Britain leaving the European Union against the lesser 48%. While still part of the European Union the United Kingdom was paying £350 million weekly in taxes to the European Union. This proposal to leave the European Union came to be known as BREXIT a short form for Britain exist from the European Union. It was brought forth due to the fear that there was an influx of immigrants from Africa and Middle East into the United Kingdom and most of the jobs in the UK were serving more foreigners than British citizens.
There has been a strong argument by most economists, including the UK Treasury, that being in the European Union has positively impacted Britain in terms of trade and as a result the United Kingdom’s trade would be negatively affected if it left the European Union.
The following are the outcomes of BREXIT on the United Kingdom
The positive outcome of BREXIT is that it will limit the free flow of immigrants into the United Kingdom. That was the primary reason people voted for Brexit. British residents like the senior working class were concerned about an increase in immigrant populations with in the United Kingdoms. Such free flow was discredited with an increase in crime rate such as drug trafficking, human trafficking as well as acts of terrorism.
The UK will regain its taxation system independent from that of the European system. It also won’t have to be liable to European Union tax fees as the case was when it had to pay a weekly sum of £350 million to the European Union.
Brexit will to an extent slow down UK’s economic growth. Philip Hammond Chancellor of the Exchequer (Secretary to the United Kingdom Treasury) reported that his country’s growth would reduce in following years.
According to studies made by various economists, BREXIT will likely reduce the real per-capita income levels of the United Kingdom. A recent study made in 2017 indicated due to the creation of new trade barriers, the United Kingdom will become poorer in the long run once it leaves the European Union. In recent times Prices were rising higher than wages in the United Kingdom.
Britain will start incurring trade tariffs for its exports which will in turn make British exports more expensive as a result of leaving the union.
It also increases prices of imports into the UK. One third of UK’s food imports comes from the European Union. Higher import prices will create inflation and lowers the standards of living with in the United Kingdom.
The city of London will greatly be affected by BREXIT having been used by many companies as the English-speaking entry point of the European Union which turned it into a key financial hub within the region. This could result into the collapse of the real estate business in the city. Many new office buildings are under construction and soon they may sit empty if The City’s financial services industry such as banks relocate.
The EU grants these to its members in environmental protection, research and development, and energy. If the United Kingdom leaves the Union it will miss out of the state of the art technologies that come from the European Union.
In addition, British companies are most likely to lose their stand to bid on public contracts offered in any EU country. Usually these are open to bidders from any member country. London will most likely lose a lot in the service sector considerably in banking. Practitioners will lose the ability to operate in all member countries. This could also raise the cost of airfares, the internet, and even phone services.
The residents of the United Kingdom will lose out on employment opportunities. For example it was estimated that by 2030 Germany will be faced with a supply of labour shortage of two million workers. Those jobs will no longer be as readily available to the UK’s residents after BREXIT.
There will be a customs border between Britain and the Republic of Ireland upon the exit of of Britain from the Union. This was formulated after a proposal from the European Union. Trade and travel to the Island of Ireland will be hindered considering the fact Ireland exports a big portion of its goods to the United Kingdom. The Northern Ireland will remain with the UK whereas, Republic of Ireland will remain with the European Union.
Under Brexit, the United Kingdom may lose Scotland. First, Scotland will tried to stop Brexit by voting against it. But Scotland doesn’t have the authority to do that. It could therefore decide to join the EU on its own, as some countries under the Kingdom of Denmark did. Last but not least, Scotland’s leader also warned she may call for another referendum to leave the UK after the initial one of 18th September, 2014 ended with a majority of the Scots voting NO.
There could be a shortage of labor force. It should be noted that most of the labor force in the United Kingdom came from neighboring European Union countries. This labor supply-side shortage could slow economic growth in the UK.
The following are the impacts of BREXIT on the European Union.
The Brexit vote could strengthen anti-immigration sentiments throughout Europe. If this anti-immigration wind blows through France and Germany, they could force a vote against anti-European Union. If either of those countries left, the EU would lose its most vital economies and would collapse.
On the other hand, new polls show that many in Europe feel a new level of common understanding will be reached among remaining member states of the European Union. This is so because the UK often opposed policies largely embraced by other EU members.
These are generally the impacts of BREXIT to both the United Kingdom and European Union.
THE WORLD BANK
The World Bank was founded in 1944 after World War 2. It was originally formed to provide loans meant rebuild countries destroyed by the Second World War. In later years its scope shifted from reconstruction to development, with concentration on roads, dams, irrigation systems and electrical grids. Today it is comprised of 189 countries.
The following are the functions of the World Bank.
It offers loans to countries that are still developing as well as advice and knowledge related to development.
It helps in development of states that hold membership status through promoting and adding on both private and foreign investment.
The World Bank also promotes expansive growth in international trade as well as ensure that it is well balanced among member states.
The World Bank helps determine amount of loans to be granted to member states as well as interest to be paid against the loans.
The World Bank through its various institutes for example The Economic Development Institute, provides various technical services to its member states.
These are generally the functions of The World Bank.
The World Bank was formed with the following objectives
To provide long term capital to member states for development and reconstruction purposes.
To encourage investment in order to solve Balance of Payment disequilibrium issues as well as bring about balanced development of International trade.
To ensure the implementation of development programs in member states so as to lubricate the gears of change from war time to peaceful economies.
To foster investment in capital among member states through offering guarantee on private loans as well as providing loans for productive activities under considerate terms.
These are generally the objectives of The World Bank.
THE INTERNATIONAL MONETARY FUND
The International Monetary Firm was formed out of the need for an international body that could bring about monetary order. It began financial operations in 1947, though it was in existence since 1945. It is mainly a cooperative institution that seeks to maintain Balance of Payment equilibrium among nations.
The following are the functions of the International Monetary Fund.
It maintains exchange stability through keeping exchange fluctuations in check. It does this by ensuring countries declare par value of their currency in terms of US dollars and gold.
It eliminates Balance of Payment disequilibrium by selling or lending foreign currency to member states. This helps in ending short-term disequilibrium.
The International Monetary Fund offers advice regarding changing par values of currency of member states in case they encounter major economic changes.
The International Monetary Fund determined the par values of currencies of member states. According to its original articles of association every member state had to declare its par value of currency in terms of gold or US dollars. The articles of today allow members to float their currency on the exchange market while the IMF monitors to ensure proper working and balance in the international monetary system.
The IMF offers counsel to member countries largely in economic and monetary matters thus helping them develop monetary and fiscal policies that keep their economies stable.
These are generally the functions of the International Monetary Fund.
Below are the objectives of the International Monetary Fund
To maintain exchange rate stability.
To resolve issues that give rise to Balance of Payment disequilibrium.
To promote the expansion and balanced growth of international trade.
To assist in the forming of a multila¬teral system of payments in respect of current transactions between members and in the scrapping off of foreign exchange bottle-necks which frustrate the growth of world trade.
To make its general resources available to its members experiencing balance of payments difficulties under adequate safeguards.
These are generally the objectives of the International Monetary Fund.
THE WORLD TRADE ORGANIZATION
The following are the functions of the WTO
It implements international trade protocol through enforcing the rules that govern cross boundary trade among member states.
It puts in place rules and guidelines related to conflict resolution among member states.
The World Trade Organization gives member states a platform to set trade terms and tariffs.
It provides facilities for planning, designing, development, implementing and controlling as well as monitoring of multilateral and bilateral agreements of the world trade.
It ensures the proper utilization of the world’s resources.
It provides assistance to the World Bank and International Monetary Fund in the determination of a Universal Economic Policy.
These are generally the functions of the World Trade Organization.
The following are the objectives of the World Trade Organization
? To improve the standard of living of people in the member countries.
? To ensure full employment and broad increase in effective demand.
? To enlarge production and trade of goods.
? To increase the trade of services.
? To protect the environment.
? To accept the concept of sustainable development.
? To ensure optimum utilization of world resources.
These are generally the objectives of the World Trade Organization.
Factors that have hindered Integration among African States.
It requires a lot of time and financial input. Integration is a process and requires a step by step approach. This makes it a slow paced process as it requires a lot of time input and financial resources in its planning, documentation and implementation as well as convincing citizens and leaders of proposed member states of its benefits.
Foreign power intervention. The integration process is also delayed due to issues related to neo-colonialism, whereby, western countries through bodies like the World Trade Organization, World Bank and International Monetary Fund, set policies that hinder the formation of a one African common market as well as customs union. This is largely visible during periods of trade wars, where western politics largely come in to play in African affairs. For instance when East African Community states like Rwanda and Uganda imposed a ban on second hand clothes from developed nations, the United States threatened to dissolve the African Growth Opportunity Act (AGOA) with them.
Lack of political will among some African states. This could largely be attributed to the differences in style of governance. For instance some countries practice more democracy than others in Africa, differences in constitutions and Presidential term limits.
There are also differences in the level of economic growth. This is due to the differences in growth and development of financial institutions, some countries have a lower per capita income and standards of living than those in the same region. Some African states that are wealthier or more developed tend to feel insecure about the idea of forming one economic bloc with less developed countries as they feel their sole trade benefits would be diluted or shared with the less performing economies.
Regional wars. It is quite hard for some African states to form an integration due to ongoing political turmoil and power struggles in some countries for example South Sudan.
There is also lack of common understanding on how to share resources. Such resources include; Lakes, rivers, forests, minerals and other tourist attractions. An example is the dispute between Ethiopia and Egypt over Ethiopia constructing its largest Hydro-electric dam on the Nile. Egypt argues that the dam will lower the water levels of the Nile which it largely depends on and there are fears in Egypt that this could give Ethiopia more control over the Nile.
Issue related to xenophobia as the case was recently in South Africa also hinder economic integration among African states. Xenophobia is the resentment of foreigners. Over the years Africans from other countries like Nigeria working in South Africa in areas like Johannesburg where constantly being attacked and harassed by citizens of South Africa. Such cases abuse the free movement of labor that is associated with integration.
These are generally the factors that frustrate integration among African states.