How GCC will gain from Brexit
Brexit is bound to bring positive results for trade between the UK and Gulf countries, resulting in an increase in both exports and gross domestic product, says a new report from the United Nations.
Exports of GCC countries to the UK will grow between 1.4 per cent to 3.9 per cent in the post-Brexit period while the impact on Gulf countries' GDP will also be positive, increasing marginally between 0.003 per cent to 0.006 per cent, according to the United Nations Conference on Trade and Development (Unctad).
The GCC is the UK's second-largest export market after the US outside the European Union. According to British government figures, trade between the UK and Gulf region totalled $54.8 billion in 2019. Trade between the UAE and the UAE grew 7.4 per cent to $6.66 billion in the first half of 2019.
The UK government has already approached the GCC countries for post-Brexit trade deals, said Sultan bin Saeed Al Mansouri, UAE Minister of Economy. But he said such agreements take years to negotiate.
The UK is looking forward to a free trade agreement also with the GCC, Liam Fox, the UK state secretary for international trade, said during his visit to UAE.
In June 2016, the British public voted for Britain's exit from EU. As UK Prime Minister Boris Johnson promised in December last year, Brexit was done on January 31, 2020, but its uncertainties will continue to cloud the UK's economic horizon for the foreseeable future.
Britain left the EU in January and will apply the bloc's rule until December 2020.
The Unctad report said that non-tariff measures (NTMs) could cause major fractures in post-exit trade relations between the UK and the EU, knocking up to $32 billion, or 14 per cent, off of UK exports to the EU.
NTMs are policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices, or both. They are the key factors mediating market access in the world economy.
Potential losses under a no-deal Brexit from tariffs that may be imposed by the respective parties are estimated at between $11.4 billion and $16 billion or 5-7 per cent of current exports. The study says NTMs would double those losses.
"EU membership has its advantages to deal with non-tariff measures that even the most comprehensive agreement cannot replicate. This offers important lessons to other regions trying to deal more effectively with such non-tariff measures," said Pamela Coke-Hamilton, director of international trade at United Nations Conference on Trade and Development (Unctad).
Stéphane Monier, chief investment officer at Lombard Odier, said despite the complex trade-offs, the likelihood of the EU and UK failing to reach some sort of agreement now looks lower than before December's general election.
"Still, we believe that the possibility of another cliff-edge, year-end, no-deal scenario will keep enough pressure on sterling to cap any rallies in the UK's currency. In the near term, we expect pound-dollar to trade in a narrow range between 1.28 and 1.32," Monier said.