I apologise for the wall of text. Got a lot on my mind.Emerging Economies
'Brexit Britain can negotiate trade deal with China' - 'Britain is more likely to strike a trade agreement with China' - 'officials claim Brexit makes a UK-China trade deal more likely' et cetera, et cetera.
All this talk of opening up trade with China and other emerging economies (looking at you, Vietnam) really makes me question what Brexiters had in mind.But surely, you say, that China -with its massive middle class and huge bank deposits- is ready to be harvested by British financial services once we agree upon an FTA? Well, if we do assume that we have managed to agree upon an FTA that does cover the free trade of financial services (unlike the Sino-Swiss FTA), will firms be willing to significantly increase their activity within China? From experience, trade within China has never been easy: the Chinese government maintains strict control over every aspect of financial services, including currency valuation, interest rates, capital flows, and foreign investment. These realities can dissuade even the most aggressive companies from investing in China. Forgetting the pre-existing issue of the language barrier and the poor reputation Chinese business has built for itself, are we right to assume that trade with China could replace any loss of trade with the EU?
Because, put simply, there is no emerging market paradise for a services exporter. There is no single or group of economies that can readily, nor in the foreseeable future, replace our market interactions with the EU.
India then. The Indian insurance sector is among the fastest growing in Asia, that'll work for us. Again, not quite. State-owned financial institutions will forever dominate India’s banking industry and capital markets: FDI is restricted and private firms are forced to enter the market through mergers will local insurers. Indian market regulations remain the biggest barrier to trade for foreign insurers (as they are the most highly regulated market in the world) and only through time can links with domestic firms be developed to such an extent as to actually provide a sustainable replacement for EU trade.
South Korea? Already had an FTA with them inside the EU and post Brexit Britain will have to write a new agreement as the current EU-KOR agreement is more complex than a common commercial policy. Indonesia? High premiums and FDI is essentially strained through dense levels of bureaucracy and corruption. Thailand? Financial services sector is still in recovery from 2011 floods. Brazil? A new president and a hugely divided populace rearing for change definitely breeds confidence. Turkey? Same issues as Indonesia.The only real option for trade is to shift the UK's focus to North America i.e. shift our trade pattern from the current EU bias to an American one. Forgetting all the other issues surrounding TTIP, are we willing to replace having to follow EU regulations with following US rules? Double compliance will drag on our economy and without the negotiating power of the EU behind us, are we sure that any talks over TTIP will move in our favour?
With this in mind, where do you think the UK should look to sustain economic growth? And where are the magical growth markets that were promised to us?
I've been sort of arguing from a straw man that all trade with the EU will stop and needs to be made up for, so let's correct that.
So what happens if we continue trade with the EU (they do still make up 44% of our exports) but don't have access to the single market? Well, the UK will have to regularise its position within the WTO to begin trade with the EU. To which the WTO's director-general, Roberto Azevedo, said that as there is no precedent for a WTO member extricating itself from an economic union while inside the organisation, negotiations that will likely take years. Not least because all other member states would have to agree to allow us access.
After we finally join the WTO, we will begin trading under the EU's MFN tariff, which averages at 2.3% for non-agricultural goods with some goods, like cars, facing tariffs of 10%. The estimated cost of these tariffs ranges from £7.5bn (Business for Britain, pro-Brexit) to £40bn (CER, http://goo.gl/GAMhPf); negating any kind of saving made from the reclamation of our membership fee and leaving nothing to 'help the NHS and our public services'.
We'll have to continue trading under WTO standards until (or if) we agree upon a free trade agreement with the EU:
Any deal must be approved by all 27 member states. Some of which do very little trade with the UK. Germany cannot offer the UK anything on its own, no matter how hard the auto industry whines and as countries like Romania and Belarus, who will see little gain in accepting a free trade agreement that lets Britain block immigration, hold what is essentially veto power in negotiations, good luck signing that FTA within the next 10 years. The Canada-EU Trade Agreement began negotiations in 2007 and still needs to be ratified by at least 36 parliaments, both national and provincial. Romania and Bulgaria are unlikely to sign it out of upset over their citizens still needing to apply for visas to visit Canada. An EU-UK trade agreement would face the exact same struggles as the agreement with Canada.
So from here, after we've somehow negotiated and agreed upon trade agreements with both NA and the EU, we can finally (in over a decade) start going after the low hanging fruit of the WTO. People are throwing around the idea of a Commonwealth free trade area, which, given geography and an infrastructural gap that is not conducive for competitive pricing, seems far fetched. We will have to re-write our trade agreements with all nations the EU has agreements with to maintain any sense of relative, and this is all assuming we solve our lack of experienced trade negotiators.
So, given the above, what exactly were the potential gains in trade from leaving the EU?
[Brexit] - Emerging Economies, Trade, and the UK. Watch
- Thread Starter
Last edited by Petrue; 03-09-2016 at 18:49.
- 03-09-2016 18:46
- 03-09-2016 19:23
May vision is to be a global trade power once again, watch and see.
- Thread Starter
- 04-09-2016 12:41
- 04-09-2016 13:05
I think the main view is that the UK will be seeking for an alternative solution that is not within the current framework. You are right, it is not simple but this is what the new Brexit department is for. Your thread simply just outlines the current framework which, to be frank, doesn't add much to the counter argument.
It is also not just about trade and the economy. Let's be honest, the economy was not the only factor for Brexit. People also value sovereignty, democracy, government accountability, national security, public services amongst many other issues.
- 04-09-2016 13:44
- 04-09-2016 18:36
Well yes. There is no reason why UK firms cannot enter the Chinese market. it's win win for us and them. WHy? THey can sell us smartphones without tariffs from Foxconn. We can sell them banking, chemicals, pharmaceuticals, and all other stuff we produce. This includes too fashion items, since there was no Chinese Burberry in the day.
Most high-end consumer goods are of UK origin in the world anyhow, and developed country markets are mature. CHina, INdia, Africa, are the future, and we should put them at the front of the queue and maybe the USA at the back.