How Will No-Deal Brexit Chaos Affect Developing Economies?

Developing economies could face disruption from the shock waves of Britain crashing out of the European Union with no deal, according to analysts.Brexit will affect not only Britain’s relations with the European Union, but also with hundreds of other countries with which Britain currently trades on EU terms, as Brussels sets trade policy for the entire EU bloc.London has negotiated new post-Brexit trade arrangements with several countries, including Central American nations, Switzerland and South Korea, among others. That leaves hundreds of states — from smaller economies to relative giants like Japan and Canada — with whom trade would revert to World Trade Organization terms after a no-deal Brexit.Striking new trade deals won’t be easy, said professor Anand Menon at a “Changing Europe” program at Kings College London.FILE – A fruit stall displays fruit at a market in London, Aug. 7, 2019. Among Kenya’s exports to Britain are fruits and vegetables.”Many countries with whom we try and do trade deals will say to us, ‘Yes, that would be great. We’d quite like to know what your relationship with the European Union is going to be before we sign anything with you, though.’ So, all roads lead to Brussels,” Menon said.Such uncertainty doesn’t help countries that sell goods to Britain. For example, Kenya exports cut flowers, fruits and vegetables, with total exports to Britain estimated at $400 million per year.Bangladesh exports nearly $4 billion worth of goods to Britain, which are currently traded under the EU’s preferential rules of origin that allocate zero or low tariffs on goods from developing countries. A no-deal Brexit will likely mean disruption, said Max Mendez-Parra, a trade expert at the Overseas Development Institute.”The problem is that that will erode the preference that some of these countries receive. So for example, the advantage that a country such as Bangladesh and Cambodia have on certain products because they have access with a lower tariff, that would be removed.”Speaking last month, Akinwumi Adesina, head of the Africa Development Bank, warned that the combination of a no-deal Brexit and the U.S.-China trade war were hitting African economies.FILE – African Development president Akinwumi Adesina gives a press conference in Ouagadougou, Sept. 13, 2019.”The industrial capacity has fallen significantly, and so the demand, even for products and raw materials from Africa, will only fall even further. So, the effect of that could have a ripple effect on African economies as the demand for their products weaken from China,” Adesina said.Britain, meanwhile, is stepping up its search for new trade deals. International Trade Secretary Liz Truss is visiting New Zealand, Australia and Japan this week. Many of these nations’ companies have large investments in Britain and fear the chaotic fallout of a no-deal Brexit.For smaller economies, the impact is likely to be less severe, Mendez-Parra said.”African countries seem to be more relaxed, developing countries are more and more relaxed — except some specific countries that trade a lot with the U.K. — about the prospect of a no-deal [Brexit]. And this is because the U.K. has lost over many years the sort of importance as a destination of exports for many of these countries.”A no-deal Brexit would hit the economies of many EU states like Ireland, Germany and the Netherlands. But it is in Britain where the impact will inevitably be hardest-felt.
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