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Has the Great been put back into Great Britain?

Published Monday, June 27th, 2016

Pandora’s Box has been opened. Judging by the price movements on Friday all the evils flew out but unlike in the Greek mythology there was probably no hope left inside after the box was closed again. A historic event took place on Thursday. Voters of an EU country decided to leave the European Union. It is, however, not without precedent as Greenland, after gaining a high degree of self-government of Denmark in 1982, also voted to leave the EU. And why? Because the country’s fishermen resented being told how much fish they can take from their own waters. After the landmark vote the island’s fishing industry went from strength to strength and now its biggest fishery ranks amongst the top ten in Europe.

No such upside is expected in the case of Britain as its economy is much bigger and more complex than that of Greenland and its decision to leave the single market will have an impact on 27 other countries as opposed to just eight back in 1982. Should Article 50 of the Lisbon Treaty be invoked in which the European Council would be notified of Britain’s decision to leave the EU, negotiations on the terms of the separation between both parties will be triggered and last for a maximum period of 2 years.

During this two-year period important issues need to be resolved. These include EU laws and regulations that either will be preserved or repealed. The rights and obligations of EU citizens in the UK and UK citizens in the EU will be another dominant issue on the agenda as will be the freedom of movements which is one of the founding principles of the European project. New trade agreements will have to be put in place with EU and non-EU members before the two-year deadline otherwise the UK will have to revert to trading under WTO rules which would mean export-import taxes and tariffs. A decision to join just the European Free Trade Agreement or form a customs union with the EU would require a number of new bilateral agreements. Alternatively, it could preserve existing ties by choosing to remain in the European Economic Area.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.