Published On: Tue, Jun 13th, 2017

Common Wealth nations seek opportunities with the UK Post Brexit

THE SHOCK result of the UK’s snap general election on Thursday may have further complicated the future of Brexit negotiations and its attendant implications for small and vulnerable Commonwealth countries.

The UK electorate voted to leave the EU in June 2016, triggering a process to end more than 40 years of close co-operation with Europe. In line with the guidelines of Article 50 of the Lisbon Treaty, triggered in March 2017, the British government was preparing to embark on negotiations to exit the EU and agree a framework for a successor arrangement.

It states that EU treaties will cease to apply in the UK ‘..from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification.’ This implies that ‘Brexit’ will become a reality from April 2019, unless the European Council and the UK government unanimously decide otherwise.

An analysis from the UK Department for Exiting the European Union (DExEU) suggests that an agreement which results in the UK leaving the EU common market will inflict a permanent cost of £25billion on the UK’s GDP. An alternative measurement of costs shows a nominal cut of 5.03% on 2017 Q1 GDP. These figures may now need to be revised in the new post-election uncertainty.

MOURNING PERIOD: A artistic depiction of Prime Minster Theresa May

Any contraction of a major global economy in the current economic context will affect countries around the world, particularly Commonwealth African and the Caribbean countries, which trade significantly with the UK and the EU27. For example, for Kenya, five countries – UK, Netherlands, Germany, Belgium and Italy – make up more than 80% of the country’s exports.

A wide range of low and middle income countries that negotiated and signed Economic Partnership Agreements (EPAs) with the EU, especially in the Commonwealth, did so primarily to maintain access to the UK. The implications of Brexit on EPAs remain more unclear in this current context. The small and vulnerable states that depend on the UK for more than 50% of their exports are worried about losing out on their preferences and having to compete with larger economies.

This uncertainty extends to the effects of Brexit on the UK economy, crucially, whether it will continue to create jobs and generate remittances that are an important contribution to peoples’ livelihoods in many small, low and middle income countries such as Jamaica, Kenya, Uganda, Nigeria and India.

Once the UK officially leaves the EU, the existing EPAs will no longer apply. This will result in African and Caribbean countries losing their duty free and quota free access to the UK market in many of their key sectors.

VALUE: The pound’s strength hangs in the balance

In the transition period, the UK is trying to minimise disruption to trade by rolling over the EU regime for trade into its domestic law. While this guarantee is welcome, it should be noted that, as the UK will no longer be a party to these agreements, this transition is unilateral and therefore subject to change according to the UK’s own domestic legislative processes. This decreases the level of certainty around the preferential treatment that guarantees markets for their goods, especially in light of the fact that the UK has made it clear that this rollover will occur “wherever practical and appropriate”. Further, this treatment is not legally binding within the World Trade Organization, which requires countries to notify them and seek approval for such arrangements.

Many Commonwealth African and Caribbean countries have started to prepare for their future trade agreement negotiations with the UK, post Brexit.

Any uncertainties or delays in the Brexit negotiations due to the UK’s internal politics can lead to further delays in these agreements, adversely impacting the countries’ trade, investments and growth.

The Commonwealth Secretariat is currently working with some African countries such as South Africa, Kenya, Nigeria and Caribbean countries including Jamaica, to identify opportunities and challenges for these countries in future trading relations with the UK, post Brexit.

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Common Wealth nations seek opportunities with the UK Post Brexit
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