The Northern Ireland Protocol
The impacts of free trade arrangements with organisation such as the EU
The Northern Ireland Protocol aims to allow Northern Ireland to remain within the trade bloc, while ensuring ties with the republic of Ireland are smooth. These new trade agreements allow some UK businesses to stay in the EU free-trade area, but are costing the governments a lot of money. Free trade agreements with organisations like the EU can increase migration flows, reduce red tape, and allow some countries to rely on imports of various goods and services.
A benefit of the new trade arrangements in Northern Ireland is that it allows some businesses to stay in the EU free-trade area. As a result, they will face lower tariffs on imports and exports, meaning they can source cheaper materials and their overall costs of production are lower, allow them to charge lower profits. This can boost profitability and allow them to expand globally.
A cost of the new trade arrangements in Northern Ireland is that it costs a lot of money. Boris Johnson has set aside more than £500 million aimed at maintaining historical trade patterns. Furthermore, imports of medicines and chilled meats have also been delayed, a cost in terms of time. As a result, there is an opportunity cost in which the resources allocated to such agreements could instead focus on expanding other parts of the UK economy, such as contributing to the ‘levelling up’ plans.
Free trade agreements give countries less control over their boarders. This allows a smooth flow of people in and out of the country with little measures to monitor it. On the one hand, this can increase migration which can benefit sectors which rely on cheap labour to drive production. Following Brexit, the UK has suffered from a lack of fruit pickers and lorry drivers due to the reduction in migration. On the other hand, less control over boarders can mean that countries can not cherry pick or select migrants based on merit, or other factors. This means they may not be able to encourage workers with degrees to enter the country. The UK’s new visa scheme allows easier flow of migrants with high levels of education, aimed at spurring innovation in the STEM subjects. While this is beneficial for advanced sectors, the loss of cheap labour has contributed to the recent fuel crisis and something must be done to encourage such workers. Hence, free trade agreements have a positive impact on migration.
Free trade agreements can increase red tape. Regulation on the exchange of food and medical supplies can be a burden for companies involved, causing delayed trade, through lengthy paperwork procedures. This is true of vaccines during the covid-19 pandemic. After leaving the EU, the UK managed to obtain quicker access to vaccines since they did not have to pass European vaccines regulation. Hence, many lives were saved and the economy could open up quicker. On the other hand, red tape can prevent companies from circumventing standards for everything from animal health to product labelling, which ensures ethical practices are used. While the UK did gain access to quicker vaccines through less red tape, the coronavirus is such an unprecedented event and came at a time just as the UK passed such laws. Hence, such coincidences are unlikely to occur again, and red tape on trade is vital in maintaining appropriate standards.
Reliance on Imports
Free trade agreement allow countries to rely on the imports of certain goods and services. Limited tariffs encourage trade, meaning nations can exchange resources freely and effortlessly. On the one hand, this allows for greater specialisation of economies, such as Germany’s vehicle production, as they can distribute them to their neighbours. Specialisation can increase productivity and lower prices, allowing members of free-trade agreements to benefit economically. On the other hand, such trade flows can reduce the importance of domestic industries. Relying on Germany for cars means that domestic car production is likely to be beaten by competition, and thus underperform. Supply-side shocks can exploit this reliance. Covid-19 has caused a lack of PPE equipment as factories that produce it in china were forced to close down. This has left many frontline workers vulnerable and has cost lives. Development of domestic firms to be able to weather such crises is vital. While the virus is an extreme example, if the world starts to deglobalize, domestic firms will need development.
To conclude, while the Northern Ireland trade arrangements allow some business to stay in the EU free-trade area, they are costing other businesses and the government a lot of resources. Free trade agreements with organisations like the EU allow a greater flow of migration and trade, and ensure ethical practices are observed. However, the reliance on foreign firms for their goods and services must be reeled-in through investment in domestic production. Brexit will allow the UK to monitor the outcomes of leaving free-trade agreements as the UK recovers from the virus.
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