As I write this, we are probably just now beginning to absorb the reality that Britain has voted to leave the European Union. Along with this realization come a number of questions.
There are no answers in this piece – only questions. Here are two issues uppermost in my mind:
Brexit Impact on Trade Relations with the US
For the past 40 years, transatlantic trade relations have been viewed and developed through the prism of two powerful trading blocs on either side of the ocean. US-EU trade has occupied about 30% of global trade.
What place has US-UK (British) trade occupied? In 2016, Germany was the top US trade partner in Europe (4.6% of overall US trade). Britain was second among EU countries (2.1%). Also in the top 15 US trade partners were France, Italy, the Netherlands, and Belgium. How will these figures affect US calculations going forward?
The United States and the European Union are currently negotiating the TransAtlantic Trade & Investment Partnership (T-TIP) Agreement. T-TIP negotiations are aimed at further cementing US-EU trade ties. Already low tariffs will be eliminated. Divergent rules and standards on the two sides of the ocean will be harmonized and standardized.
- Will Britain choose to participate in the ongoing T-TIP negotiations?
- If so, on what terms will Britain want to participate?
- Will Britain be allowed to set the terms for its participation?
- How will the EU and the US react?
- Will the US be willing to negotiate separately with Britain?
- Will T-TIP negotiations have to be suspended while they figure this out?
Brexit Impact on Trade Relations with Britain’s Former Colonies
Britain’s trade relations with its former colonies have also been shaped through the prism of its membership in the EU. Supporters of the “leave” Brexit vote may be waxing nostalgic for the days when the “sun never set on the British Empire”. (The Spanish Empire first held this title until most of its colonies in the Americas fought for and won their independence in the early 19th century.)
By the early 20th century, the British Empire comprised one-fifth of the world’s population and a quarter of the Earth’s total land area. Belgium, France, Germany, and the Netherlands were the other major European colonial powers.
After attaining political independence over the course of the 1960s and 1970s, the former colonies established the African Caribbean and Pacific Group of States (ACP). The Cotonou Agreements, otherwise known as the “ACP-EC Partnership Agreement” set the framework for trade relations between the EU and the 79 ACP members. And the ACP-EU framework is the prism through which Britain has shaped its trade relations with its former colonies in Africa, the Caribbean, and the Pacific.
Currently, these relations have focused around negotiation and implementation of Economic Partnership Agreements (EPAs) with seven (7) regions. EPAs are replacing the unilateral access for a limited range of goods by ACP countries to EU markets with reciprocal access in goods and services. EPAs also include provisions for development cooperation and assistance to help countries make these transitions.
The seven (7) regions negotiating EPAs with the EU are:
- West Africa (16 countries)
- Central Africa (8 countries)
- Eastern & Southern Africa
- East African Community – EAC (5 countries)
- South African Development Community – SADC (6 countries, including South Africa)
- The Caribbean (14 countries)
- The Pacific Islands (14 countries)
The EAC, SADC, and the Caribbean have concluded EPA negotiations. The other regions have ongoing negotiations. Furthermore, the EPA provisions on development cooperation and assistance require ongoing engagement and discussion by the parties.
For a number of ACP countries their former metropolis remains a major export market. The size of the former British Empire makes Britain a key market for many ACP countries.
- Will Britain decide it wants to renegotiate the terms of the EPAs already concluded?
- Will Britain continue to participate in the ongoing negotiations with the other regions?
- Will Britain want to change the terms of its participation in the program for development assistance and cooperation?
- What will the EU position be toward any attempts by Britain to change EPA terms?
- How will ACP countries respond?
- What is the future of the EPA negotiations and implementation process?
As we promised, just questions – it’s too early for answers. But these are just a few of the ones that will need to be addressed over the next months and years as Britain absorbs the impact of its Brexit vote.