UK and EU trade treaties in the balance?

The socio-psychology
of Brexit is that it
is likely to lead to
increased bitterness,
frustration, cynicism and
self-interest in both the EU
and the UK.
And the outcome for
both of them, and their
international partners like
SA, will almost surely be less
stable, less efficient, costlier
and less secure in overall
political, economic and
security terms.
Brexit’s immediate
fireworks lit up market
volatility and financial
uncertainty that rapidly
spread globally. This
battered the international
finance markets in trillions
as uncertain investors pulled
out or moved their monies.
But everything is still at a
transitional stage, awaiting
the increasingly
infamous decision to
withdraw from the
Union when Article
50 of the 2009
Treaty of Lisbon is
presented – after
which will be the
battle to define how
and when Britain
will exit the EU and
what the UK/EU
relationship of the
future will be.
And this is going
to be a pretty timeconsuming
study,
and years rather
than months are the
timespan.
Given that, the
irksome problem
is all the UK and EU trade
treaties, where and when
are these going and what
changes will there be?
It also adds to the
uncertainty that trade
partners, again like SA,
are already suffering
from as a plunging GB
pound makes exports to
the UK more expensive
at the destination and
slows, if not stops,
repeat orders. And,
throw in this treaty
problem, and the
exporters get touchy
about promising import
duty benefits even in the
middle term future.
Also, as the EU and
the UK grind their
weary bureaucratic way
towards adjusting all
their agreements, the
global export industry
will have to sit in hope
for years to come.
And, as an importer,
Britain is becoming poorer
as it anticipates losing a lot of
subsidies and other benefits
from the EU – and no
promise as yet whether and
when the UK government
will assume this funding.
Just some of this shows
just what sort of sums
are involved. According
to a new report by Metro
Dynamics, in each of the
past two years, the UK has
received the equivalent
of almost R34 billion
in European Structural
and Investment Funds –
investments in innovation,
business development,
skills, and employment –
all meant to equalise wellbeing
across regions.
Support for major
infrastructure will also
evaporate. In the past,
according to the report,
the European Investment
Bank has contributed more
than R752.5 billion of
financing to the UK. But,
with 55 major infrastructure
projects in the UK
currently still under EIB
consideration, “the possible
loss of financing may spell
an interminable pause for
many important urban
transportation, energy,
and economic development
projects”.
Also, Britain has been
in the happy position of
receiving a net surplus
of EU research funding
– punting around R34bn
into research projects.
Job losses are likely in
trade-intensive and service
sectors, particularly financial
services, that are integrated
with the EU. Regional
economies will also lose
access to talented foreign
nationals from other EU states.
And a reported quote says
a lot. “When the available
labour pool for cities
shrinks from a continent
to a small island, global
competitiveness will suffer.”
Meantime, the
new Theresa May-led
government has said
little about whether it
will assume these various
fundings and employment
responsibilities.
The worldwide impact of
Brexit is that it is expected
to reduce global growth
from 2.5% to 2.4% in 2016
and from 3.1% to 2.7% in
2017, according to business
intelligence outfit, IHS
Markit.
On the UK local front,
its intelligence showed the
composite output index
slumping to a more than
seven-year low of 47.7 in
July (52.4 in June). The
services sector took a bigger
hit than manufacturing,
with activity and orders
also falling at the fastest
rate in more than seven
years. Along with that it
slashed its UK real gross
domestic product (GDP)
growth forecast from 1.9%
to 1.6% in 2016 and 2.4%
to 0.2% in 2017, followed
by the International
Monetary Fund (IMF)
also downgrading it GDP
growth forecast for 2017
by 0.1% to 3.4%, with 3.1%
expected for 2016.
All this will seriously
throw the brakes on
SA trade to the UK, as
available cash for imports
to the UK declines, or
is about to decline, and
future orders become
uncertain.
The EU suffers no benefit
losses, but it is entrenched
in and somewhat distracted
by its emigrant problems,
and is also tightening its
belt as the euro weakens in
the face of nations’ debtdefaulting,
and the fears
of a non-UK Europe. So
its trade patterns are also
showing signs of weakness
even in this short term since
the Brexit vote was cast.
And, with the latest
updates suggesting that
the effect of Brexit could
be worse than the 2008
financial crisis, the
implications for trade will
be severe.