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Brexit highlights the need to study International Business

Posted on: 25/06/2019 | Written by Klaus Meyer, Cengage Author 

The opportunities that businesses pursue across national borders depend on the rules and regulations that often are taken for granted. These rules are a combination of national rules combined with contractual agreements between nation states, such as free trade agreements (FTAs) or the European single market.

Businesses and individuals often complain about the complexity of the rules they have to respect. Yet, what would happen if these rules suddenly were to fall away?

Brexit forces businesses to consider this possibility – it is no more just an academic exercise. The EU developed its single market based on the principles of mutual recognition, harmonization and subsidiarity. Mutual recognition implies that goods approved for sale in one EU country are automatically approved for any EU country. Harmonization means that the EU can introduce rules that supersede national rules for a specific sector if this is necessary to ensure high standards. Subsidiarity means that regulation should happen at the national or local level, unless there is a strong case for moving regulation to a higher level, notably the EU level. These principles were negotiated in the 1990s with significant input from then UK Prime Minister Margaret Thatcher, and aim to secure free trade. Since then, EU rules have been extended gradually to cover more areas, for example to enable free trade in services.

A negotiated Brexit would lead to new rules for cross-border transactions by UK businesses. This would change not only trade with the EU but also with third countries because relationships with third countries are normally governed by treaties of the EU with those countries. Negotiating new agreements such as FTAs or customs unions takes many years. Moreover, businesses need time to adapt to the new rules – once they know what the new rules are.

A no-deal Brexit implies that many of the rules and procedures designed to facilitate business no longer apply from one day to the next. The rules concern not only tariffs, but also for example taxation, business travel, data protection, and rules for accreditation of safety standards. For example, businesses employing EU nationals in UK locations are concerned how new visa and residency rules affect their ability to retain key staff, and to move their employees between sites of their European operations. This is a particular concern to service businesses, an area where the UK potentially has a competitive advantage, because free trade in services requires more extensive harmonization of rules than is provided by most FTAs.

Thus, if you want to make a career in business, and run more than a local corner shop, then you need to know how national and international rules impact your businesses. Thus, you should take an international business course during your studies!

Our textbook, (Peng & Meyer, International Business, 3rd Edition) provides many foundations for a systematic analysis and discussion of the causes and impact of policy changes such as Brexit. For example, Chapter 3 explains the formal institutions governing businesses, including political and legal systems. Chapter 5 provides the theoretical foundations for international trade, including arguments for and against free trade. Chapter 8 introduces the European Union and the rules established for businesses with the EU. Chapter 9 provides a broader perspective on globalization and global institutions, including the WTO whose rules apply to trade relationships not covered by an FTAs or a single market. In addition, three integrated cases address respectively the EU-Canada FTA,the Brexit negotiations, and the challenges faced by the UK car industry after Brexit.

International Business, 3rd Edition

Drawing from the combined experiences of Mike Peng and Klaus Meyer International Business provides a comprehensive insight into contemporary business practices. Covering recent global developments and current issues such as Brexit, as well as the historical context of international business, the third edition highlights the complex nature of global business. Find out more about International Business 3rd Edition here.

Klaus Meyer

Klaus Meyer