Brexit 101 - Important Questions and Answers!

January 13, 2019

 

While British politicians spend so much time debating the Brexit agreement, the clock continues to tick. The chance that no deal will be reached at all seems to be increasing, and with it the chance of major economic and social chaos. But how does it all affect the Netherlands?

 

Here are some of the most important questions and answers about the political and economic consequences of this outcome for the British relationship with the EU and for the Netherlands as well.

 

Can a country leave the EU and how does that work?


Yes, according to Article 50 of the Treaty of Lisbon, a Member State may withdraw from the EU. But it has practically never happened and is therefore regarded as 'unexplored territory'. A country that wishes to leave the EU must formally report it to the European Council, the committee of government leaders, with which the conditions for departure must also be negotiated. A qualified majority of heads of government must agree with the departure. After two years, the EU treaties - after the official start of the exit process - automatically no longer apply to that country, unless an agreement on a new relationship is reached earlier, or a joint decision is made to negotiate for a longer period of time. The leader of the departing country is excluded from EU decision making during this period.

 

Does the UK get the same bilateral relationship with the EU as Norway or Switzerland with Brexit?


That is possible, but it is not necessary. The United Kingdom could also decide to trade with the EU under the rules of the World Trade Organisation (WTO), just like the US, even if it does involve trade tariffs and other barriers. The second option is for it to join the European Free Trade Association (EFTA), the union of Norway, Switzerland, Iceland and Liechtenstein, and that it joins the European Economic Area (EEA), the agreement that provides access to the internal EU market, without rates. 

 

 

Can the United Kingdom return to the EU?


A departed country can also become an EU member at any time. According to Article 49 of the EU Treaty, "any European state ... may request to become a member of the Union". It must then go through the usual procedure, including the negotiations for entry and meeting the admission requirements. In the case of the British case, it is expected that negotiations for reentry will be fast and smooth because it already meets all the conditions, but whether the country regains all its current privileges is a totally different question. EU leaders must unanimously agree to the admission of a country, and the European Parliament must also agree.

 

What does Brexit mean for the global economy?


The International Monetary Fund predicts 'severe damages', not only for the British economy, but also internationally. The Federal Reserve (Fed), the US Central Bank, also provides details of "significant" economic consequences because of Brexit. It is difficult to lay out all the details in figures but negotiations are still ongoing and the effects will be seen after the final departure of the British from the EU. Two things are clear though, first of all, Britain will suffer economic and financial damage due to the uncertainty of trade flows and direct investment in the United Kingdom will reduce drastically. This will negatively affect the middle class as many of them will suffer the consequences.

 

What does Brexit mean for the official language within the EU?


It wouldn't mean much, because English is undoubtedly the most important language of communication in EU institutions and the EU's external communication would lose its impact if it were to change it. European Commissioners almost always speak English, although the European Commission has English, German and French as official working languages.

 

What does Brexit mean for Europeans living and working in the United Kingdom?


The Brexit camp assures Europeans in the United Kingdom that they will not be deported. But what happens to them depends on the negotiations after the departure, and especially on how open and welcoming the British government will be to immigrants. The Eurosceptic UK Independence Party (UKIP), and recently Brexit campaign leader Boris Johnson, also wants to introduce visas with a points system, whereby immigrants can come into the country if their profession is in high demand.

 

 

Can the UK fall apart after the Brexit?


Yes. The Scots and the Northern Irish are barely affected by the English and their thirst for exit from the EU. Many of them feel that they were not properly consulted before the English mad the decision to leave the EU and a majority would love to remain members of the EU. Observers feel that in the near future, the Scots would ask for a referendum to gain their independence from the UK and then rejoin the EU as an independent Scotland. Due to the Good Friday agreement and its effects on the Brexit deal, there has also been talks of England uniting Ireland and letting them rejoin the EU as an independent country.

 

What are the consequences for trade relations between the Netherlands and the United Kingdom?

 

The United Kingdom is an important trading partner for the Netherlands. CPB Statistics shows that the United Kingdom is the third largest trading partner of the Netherlands, after Germany and Belgium. Of the total production of goods and services in the Netherlands, 3.7 percent is related to the demand from the United Kingdom. This creates 300,000 jobs, or 3.3 percent of Dutch employment, according to figures from Dutch ING Bank. If the British end up leaving the European Union, trade with the Netherlands will not immediately disappear because both countries can still continue to trade with each other outside the EU. The only difference is that the British will have to operate under new rules and tariffs which may not be very favourable to them. With a Norwegian model (participation in the EU internal market in exchange for the adoption of EU rules), trade can largely continue. There will then be no import and export duties. But whether all EU countries would agree with this is very uncertain.

 

Other models, such as the Swiss (a series of bilateral treaties) or the Turkish (customs union) make trade less free, especially in the area of ​​services. Moreover, the technical rules for products (e.g. safety requirements) are likely to diverge. Companies must then comply with different rules in the EU and in the United Kingdom, which will create new barriers. Brexit can also indirectly affect the trade. If economic growth in the United Kingdom falls back as a result of this shock - which many analysts expect - the British demand for Dutch products will not do well.

 

 

What does it mean for the international political position of the Netherlands?


The Netherlands has always regarded UK membership of the EU as an insurance against the dominance of larger Member States such as Germany and France. That is why the Netherlands, apart from the trade benefits in the 1970s, was one of the biggest advocates of British EU membership. With similar ideas on free trade, the Netherlands comes quite close to the United Kingdom and in that respect, they would lose an ally.

 

Will Amsterdam, Frankfurt or Paris become more important financial capitals after Brexit?


That is very much the question on everyone's lips. Firstly, it is uncertain whether, after Brexit, there will be an exodus of important financial institutions from London, which is the current financial center of Europe. Much attention was given to the threat/warning from the CEO of HSBC, the largest British bank, stating that the companies in the financial sector would move more than 1,000 jobs to the European mainland if Brexit happened. But whether HSBC will also do this is uncertain.

 

Financial institutions could still use London as a base for their operations in the EU because EU rules apply there, which means that transactions in euros can also be done there. Amsterdam is occasionally mentioned as a possible location. It is close, there is reasonable English spoken in the city and there are quite a few international companies located there. But Amsterdam lacks the scale of London and with it the 'ecosystem' of specialized financial institutions, service providers and lawyers that can be found in London. Frankfurt and Paris, the two largest financial centers after London, are more obvious in terms of scale. HSBC named Paris as a new workplace for its investment bankers, Deutsche Bank said recently that it will trade bonds in Frankfurt if the British leave the Union. French politicians are already rolling out the red carpet and in Frankfurt, project developers are hoping to benefit from Brexit.

 

Will there ever be a Nexit? What do the Dutch parties think?

 

In the Netherlands, only the PVV and the Bontes/Van

Klaveren group believe that the Netherlands should leave the European Union. Those two groups are by no means a parliamentary majority. The Dutch see Brexit as a reason for a "radical reform" of the EU, including the abolition of the European Commission.

 

 

There are of course, lots of questions surrounding Brexit and its effects on the EU, the UK and the world in general. Right now, nobody knows what's going to happen after the British are gone. Will there be a "favourable" deal for the British, like they love to talk about? Will there be another referendum? Will the British call off Brexit, swallow their pride and return to the EU?

 

If you have more questions, please email them to us and we will be very happy to answer your questions.

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