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Brexit and Asia

The Implications of Brexit for Asia

27 June 2018

The implications of Brexit for Asia

 

Opening the panel discussion,Fraser Cameron, Director EU-Asia Centre, said that Brexit will have major implications for Asia and for EU-Asia relations. It will be felt most immediately on the trade side but will also have an impact on the resources that the EU brings to the table in dealing with Asia.

Michael Reilly (Senior Fellow Nottingham University and editor of a new book on Brexit and East Asia), outlined a number of Asian reactions:

o   China sees UK as going backwards and EU as being possibly in decline. Concerns that China has lost its most active advocate within EU and is worried that EU will become less stable, more protectionist, more conservative; also concerned about impact on global order.

o   South Korea is worried about its exports and investments in UK

o   Singapore is concerned about the political consequences and potential rise of nationalism

o   Brexit has ended any Japanese hopes of building stronger political relationships with EU and Japan will draw closer to US and/or might become more isolated

o   ASEAN is worried that Brexit would mean a more inward looking EU just when it is looking for moral support of EU on China’s assertiveness.

-      The whole region has benefitted hugely from globalization and Brexit is seen as being against globalization.

-      EU offers a high degree of stability and security for Asia with UK as a driving force behind this. It played prominent role in East Asia guidelines and Myanmar. 

-      What is driving the reactions of Asian countries?

o   Fear that without the UK in the EU, the EU will become more protectionist

o   Fear of rise of populism and nationalism

o   Fear that without the influence of the UK, the EU will become less interested in Asia and more inward looking

-      China is set to be the biggest winner (investments in UK are bilateral), unless the EU can respond with one voice and robustness. 

-      EU needs urgently to show engagement in Asia will continue

-      Taiwan should use this opportunity to negotiate a comprehensive investment agreement with the EU. However, will the EU stand up to the Chinese on this?

-      UK will have to work much harder to maintain its influence within East Asia but does it have the resources and appetite?

-      Lars Brückner (Co-Leader of JBCE Brexit Task Force and Director EU Public Affairs Office of NEC Europe Ltd) said it was an illusion that the UK could quickly strike trade deals with Japan and other Asian countries. Ministers seemed unaware of how interlinked were supply chains across the EU and UK. Asians were also concerned about human resources, access to talent, university cooperation, etc.

-      UK has always been the most popular destination of European companies of Japanese parentage -  with the view that UK is key element of the EU

-      Importance of the global aspect of the European data economy.  Data travels globally and the EU and Japan have understood that it is important to work on this together (framework for the rest of the world; promoting a liberal arena)

-      James Moran (Senior Advisor EU Asia-Centre and former Director for Asia in the EEAS) agreed the UK will not find it easy to negotiate bilateral agreements if they do not make major concessions (e.g. India – more liberal approach on visas). Not only the EU has problems with coordination (with EP and Council), individual countries have problems too.

-       Average time for negotiating a bilateral FTA with big countries is 6-7 years.

-       Agreements cannot be cut and pasted from the EU to the UK. Asian partners will not accept what was given up to the EU when they are negotiating with the UK.

-       UK does have inbuilt advantages (history, language, law, political security player)

-       Conclusions of impact of Brexit:

o  UK relations with Asia will be a loss for UK, loss for Asia and loss for EU

o  Dilution of democratic values – less conditionality

o  Worsening of terms of trade (UK will miss out on things)

o   Reduced credibility as security player (UK will lose its EU dimension)

Stefaan de Ryck (Brexit Task Force) said that the EU would not be protectionist. It was giving signals to the outside world that it is open to conclude new bilateral FTAs (Australia, NZ, Mexico)

-       Some relocations from London are going on -  no problem for investors to do so since UK is still part of the single market. We will treat the UK as it is a MS during the transition period.

-       EU is working towards a political declaration in October hopefully and is looking forward to a UK White Paper in July (hopefully clarity on which way UK wants to go, taking into account Council guidelines + realistic proposals).

-       Find common language to talk about the future (UK cannot have the same rights as today when it wants to extract itself)

-      EU will notify third countries that UK will be part of EU FTAs until the end of 2020. As of 2021, EU trade policy is only for the 27 Member States since the UK is not giving in to any common trade policy right now.

Q&A session

-      China is better off than Japan because China invested in Central/Eastern Europe while Japan invested in UK.

-      Comprehensive investment agreement with Taiwan? Doubts that EU will move past China and first go to Taiwan.

-      Why was business slow to react? Concern at upsetting the government but this now changing fast.

-      Why will third countries only be notified from October 2018 of the continuation of FTAs till 2020?  The EU needs something signed before it can officially send something but this does not prevent the EU delegations from talking to these countries.

-      What is going to happen if there will be no deal next year? The EU is focused on preparedness, not on contingency planning. Customs departments of MS are very well prepared. Big companies can help smaller ones by mobilizing their suppliers.

-      Given what appears to be a wide consensus in Asia that Brexit is a lose situation, is there any pressure coming from Asian countries saying to both sides to stop Brexit? It is not the Japanese style to be so blunt but maybel this will change as a hard Brexit comes closer. Some countries (especially in East Asia) do not know what Brexit is all about or what message to send. 

-      Are there any possibilities to prolong Art. 50 or the transition period? No need for more time but instead a need for some choices. Should not prolong the uncertainty. UK would need to ask for prolongation and need unanimity on EU27 side (right before elections). From a legal standpoint, transition prolongation would have to be in withdrawal agreement (EU closed that chapter and no mandate from MS).