Posted on August 19, 2016
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Some experts consider that “Brexit” could have adverse impacts on African economies, in terms of the type of preference schemes the UK may grant, knock-on trade and investment impacts of economic slowdown and tumbling British pound, as well as potential changes in EU policies in light of London’s role in the formulation of international development policy in Brussels.
Others, however, are of the view that the vote could actually open a new chapter in UK-Africa economic relations with fresh opportunities for African exports and foreign direct investment inflows, and a more focused and independent approach to development aid. This could, for example, involve a deepening of ties between the 53 members of the Commonwealth of Nations, which span across Africa, Asia, the Americas, and the Pacific.
For the time being many have nonetheless noted that nothing is certain given that the UK will in the coming months and years need to negotiate its future relationship with the EU, normalise its status at the WTO, and craft a programme of trade relations with the rest of the world.
“The only certainty in all this is uncertainty. Uncertainty on the markets and uncertainty over the future of trade relations between the UK and Africa,” said Matthew Davies, editor of the BBC’s African Business Report, in a recent article.
Trade agreements: Substantial renegotiation?
Having entered into numerous trade deals as part of the EU, the UK may now renegotiate and/or potentially start negotiations on over 100 different types of preferential trade agreements globally, many with African trade partners.
An area likely to be closely watched relates to the Economic Partnership Agreements (EPAs) negotiated between the EU and the seven African, Caribbean, and Pacific (ACP) regions – including five African regional groupings. Once signed and implemented, these trade agreements are expected to become the cornerstone of trade relations between the EU and the African continent.
Last June, the Southern African Development Community (SADC) became the first African region to sign its EPA with the EU. Other regional groupings, namely the Economic Community of West African States (ECOWAS) and the East African Community (EAC), have concluded EPA negotiations, but are still awaiting signature and ratification. (See Bridges Africa, 14 June 2016)
For these EPAs as with other trade deals more generally, experts have indicated that a potential option could consist of turning any agreement concluded by the EU into a UK trade deal with the same partner, essentially replicating existing arrangements.
According to Richard Baldwin, professor of international economics at the Geneva-based Graduate Institute, this approach would constitute the “…best outcome. When it comes to agreements with most developing nations, this may be possible,” said Baldwin in a recent blog post.
This conclusion has been shared by others. Moreover, Steve Barrow, Head of G10 research at Standard Advisory London, has highlighted that African and British firms are mostly not competing with each other, making this approach all the more plausible.
Some commentators say, however, that the uncertainty likely to continue as deals take time to unfold could be a potentially damaging factor for African exports.
“Although it is unlikely that the UK will effect drastic departures in terms of trade deals with African countries, the process of re-negotiation will take a period of time during which African exports to the UK will be negatively affected due to the uncertainty in the limbo period,” trade economist Anzetse Were wrote in a blog post last month.
UK-Africa trade in unchartered waters
Several experts have cautioned that an economic slowdown within the UK could reduce the volume of imports from African countries as consumer demand decreases. Some have also said that, given the UK’s role as an entry point for African products into the EU single market, various businesses might need to adjust their export strategy should different rules, standards, and relevant regulations emerge as a result of the exit model eventually selected by London.
However, the UK is not the continent’s biggest trade partner considering it only represents about five percent of total African exports, according to Harvard University postdoctoral fellow Grieve Chelwa. Some countries and sectors might also be more impacted than others. A few analysts have said that the African economies which could be the most affected are those who depend heavily on the export of some specific commodities.
Others suggest that uncertainty might impact investment flows from the UK to the continent. “From an African point of view, the immediate aftermath of Brexit has exacerbated problematic trends in international markets which have already hit the continent’s growth prospects,” writes Were.
However, some commentators tending towards seeing the glass as half-full suggesting that many African economies have already demonstrated the ability to adapt to global economic fluctuations, such as a recent slow down in some emerging economy trade partners.
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**Disclaimer** This article was initially published by the International Centre for Trade and Sustainable Development (ICTSD)