The Effect of Independence and Interdependence in the Global Economy

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The Effect of Independence and Interdependence in the Global Economy

The Implications of Integration in the Light of Brexit and the COVID-19

The United Kingdom, which constitutes Wales, North Ireland, and England, has one of the major economies in the world. In 2019, the GDP of the UK was 2.83 trillion dollars. Due to the diversification of the economy, living standards in the UK are considered significantly high. The UKs economy contributes to 3.3% of the world GDP (Shah et al., 2021). UKs economy is highly globalized, meaning that there is a great interdependence with other world economies (Shah et al., 2021). According to the UK Office for National Statistics, the sectors that contribute to the UKs economy are services, tourism, construction, and manufacturing

The service sector has the largest influence on the economy, contributing to 81% of the GDP. The manufacturing and production industry also contributes significantly to the UKs economy (Vu Tran Loc, 2020). Before globalization, the economy of the UK was dependent on the countrys activities and member countries of the commonwealth. This changed with globalization as the economy got more integrated and dependent on other countries. Globalization enabled the UK to import raw materials and export finished goods, and thus the countrys manufacturing sector grew immensely (DErman, 2021). The UK was able to curb its labor shortage due to the free labor movement that came along with globalization, as immigrants had an easier time entering the country.

With time the net immigration to the UK went high, and it became a point of concern due to the stress on housing and provision of public services, and this was one of the factors that influenced the Brexit. In the event of crisis, significant tensions have been experienced due to independence and in other cases interdependence of States (Shah et al., 2021). The COVID-19 pandemic and the Brexit are not exclusions, as they posed as major crises in the UKs economy. The Brexit is a referendum of the UKs decision to quit the European Union that was passed on 31 January, 2020. The Brexit led to a fall in the British pound against the dollar, something which had not been witnessed in 30 years (Ibn-Mohammed et al., 2021). The results of this referendum were unexpected and ruined the global market.

The COVID-19 pandemic, a worldwide crisis, has also affected the UKs economy. Trends such as working from home and shopping online continue to rise with the pandemic. Both the Brexit and COVID-19 pandemic may lead to a restructuring of the economy of the UK, and this may lead to a lasting impact. The economic effect of the COVID-19 pandemic may not affect the same sectors that are most exposed to the effects of Brexit (Ibn-Mohammed et al., 2021). However, the combination of the impact of the two crises will be felt more in the UKs economy than it would have been felt in the case of a single crisis.

The manufacturing sector is likely to have a higher exposure to the impact of Brexit following the rise in non-tariff barriers. The automotive industry was greatly affected, and the production of motor vehicles fell significantly within the first quarter of 2020, which was the onset of the COVID-19 pandemic (Tien and Ngoc, 2019). The UK operations could become unsustainable due to the worsening business conditions following increased tariffs. The economic effect of the pandemic may be experienced more by sectors such as tourism, transport, hospitality, entertainment, and arts. Unemployment rates may slightly increase across all sectors following these crises, with some experiencing a greater impact than others.

Pros and Cons of the UK Stance after Brexit and Removal of Barriers

Brexit has allowed UK businesses to trade freely with markets that do not belong to the European Union. This has led to an exchange of ideas, knowledge, and culture between the UK and countries like the USA and Australia, as they engage in trading activities (Tien and Ngoc, 2019). Free trade has also led to the specialization of the UK markets due to the comparison of goods from other markets. A free market favors countries that can produce goods based on the consumers wants because failure to do that means they may not be able to thrive in the market due to international competition. Therefore, firms are forced to be constantly innovative so as to produce quality products at favorable prices.

Free trade is an enabler of full utilization of a countrys resources, as the domestic markets have to strive to compete in the foreign market. Removal of trade barriers creates a favorable environment for new firms to thrive in the market despite the competition from the existing firms (Ibn-Mohammed et al., 2021). Free trade also prevents the growth of monopolies. However, there is a negative impact posed by free trade; for example, a country may be too dependent on foreign countries, which means its economy would be greatly affected in the case of a pandemic or war. Free importation of foreign goods would lead to the underdevelopment of the home industries (Tien and Ngoc, 2019). Fighting protectionism means the domestic or local industries have no policies protecting them from foreign competition. Trade barriers such as import duties, tariffs, and subsidies are vital for protectionism; therefore, removing them leads to a trade imbalance and a lack of protection to domestic industries.

Advantages and Disadvantages of Globalization for UK Firms and Citizens

Globalization pertains to the rapidly growing integration of the global economy. There is a simultaneous rise in trading activities with globalization, and there are both pros and cons of the same. First, increased trading activities led to the specialization of firms in the UK. The UK is dominant in providing goods such as nuclear power and financial services, and its ability to thrive in the global market has increased the exports hence creating more jobs for its citizens. Globalization has amplified the growth of per capita incomes and this has aided in the achievement of faster economic growth, hence improving the living standards of the UK citizens. With globalization, a constantly developing technology enhances the communication between the UK firms and other countries. With that, outsourcing the production parts for the firms is made simpler.

The UK citizens enjoy increased job opportunities with higher wages due to industrialization. With globalization, prices of goods are likely to go down, which is an advantage to the citizens who are the primary consumers (De Witte, 2018). Domestic monopolies encounter greater competition from the international market, especially in the sectors in which the UK is an importer, such as electronics, food, and clothing, and hence the lower prices. Citizens or consumers are guaranteed to have fruits and vegetable availability in the market all year round due to the importation of food.

However, there is the ugly part of the impact of globalization on the economy of the UK. First, due to the reliance on the US and EU market to export most of its products, a recession in those regions would hurt the economy of the UK. Secondly, the growth of the global economy, which involves industrialization, may lead to global warming, which will negatively impact the state of the environment of the UK (Westmore, 2019). In addition to that, globalization has led to mass immigration to the UK, which has posed a strain on the provision of quality public services to every citizen. There has been a shortage of housing facilities due to the rapidly increasing population. Additionally, globalization leads to mechanization, which in turn causes structural unemployment to the citizens (Eggert and Hartmann, 2021). Majority of workers who provide unskilled manual labor in the industries are replaced by machines and have to look for alternative jobs. For the firms, globalization is an enabler of making more profits following the labor costs that are cut down by the invention of machines.

In conclusion, the positive impact of globalization in the United Kingdom outdoes the negative impact. Global ties played a major role in the onset of the industrial revolution in the UK as they were able to source and import raw materials and export finished products. Over time, the benefits of globalization can be witnessed across the country by UK citizens. The same is likely to be experienced among the major trading partners across the globe based on the fact that UK contributes to more than 3.3% of the world economy. However, globalization is also seen to have advance environmental effect alongside immigration due to lack housing and strained social amenities.

Reference List

DErman, V., (2021). Competing Logics of Integration: EU Trade Post-Brexit. International Studies, 58(2), pp. 219-233.

De Witte, F., (2018). Interdependence and contestation in European Integration. European Papers-A Journal on Law and Integration, 2018(2), pp.475-509. Web.

Eggert, J. and Hartmann, J., (2021). Purchasings contribution to supply chain emission reduction. Journal of Purchasing and Supply Management, 27(2), pp. 85-107.

Ibn-Mohammed, T., et al., (2021). A critical analysis of the impacts of COVID-19 on the global economy and ecosystems and opportunities for circular economy strategies. Resources, Conservation and Recycling, 164, pp.106-121.

Shah, M.H., et al., (2021). Nexus between Foreign Direct Investment Inflow, Renewable Energy Consumption, Ambient Air Pollution, and Human Mortality: A Public Health Perspective from Non-linear ARDL Approach. Frontiers in Public Health, 9.

Tien, N.H. and Ngoc, N.M., (2019). Comparative Analysis of Advantages and Disadvantages of the Modes of Entrying the International Market. International journal of advanced research in engineering and management, 5(7), pp. 29-36.

Vu Tran Loc, T., (2020). The impact of economic policy uncertainty caused by the Brexit referendum on aggregate and sectoral-level FDI into the UK.

Westmore, P., (2019). Electric cars: Taxpayers subsidize rich greenies. News Weekly, (3038), pp. 6.

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