News & Publications

Brexit:  A Brave New Global World?

The vote on June 23, 2016, known as Brexit to most, but what many hail as, “British Independence Day”, has left a vacuum of uncertainty and dissolution demonstrated by the plunging world markets and a decrease in the value of the British pound not seen in three decades.  What does this move mean for the global trade business?

It is difficult to predict long term implications of this vote as Britain will have two years to decide their fate and make arrangements that best suit their political and economic needs once Article 50 of the EU treaty is invoked.  The immediate, panic induced response is a natural occurrence following any major change with a far reaching global ripple effect, but when will things calm and what will be left in the wake of this transition?  Currently the news is filled with theories and conjectures, everything from bankrupt markets to Civil War. Rather than viewing this event through dismal colored glasses in a seemingly disastrous defeat, let’s approach this with common sense as we cover some potential happenings that may affect global trade.

Once Britain declares its desire to formally withdraw from the EU by invoking Article 50 of the Lisbon Treaty, there will be a two year period of divorce negotiations, whereby all terms must be accepted by a majority of EU leaders.  During this interim, Britain will maintain EU customs and trade laws.  Once this time concludes and the terms are agreed upon, Britain will need to negotiate free trade agreements with EU-27 and as well as non-EU countries.  Until these agreements are reached, which some argue could be a complex and arduous process, Britain will cease to enjoy current benefits of the EU such as duty free status under EU FTA’s.  Businesses that deal with imports and exports to and from the UK need to keep this in mind and make decisions to offset likely increase in duty costs during this compromising phase. 

Britain will remain a member of the World Trade Organization (WTO) upon completion of withdraw, but as stated by the WTO director General, Robert Azevedo, “The UK would be the only WTO member without a list of commitments… it’s a legal uncertainty.  I don’t have a crystal ball and the message I am bringing to you is that nobody has that crystal ball.”   The fact of the matter is the future of Great Britain’s role in the global trade arena is unknown.  There will be changes in export control, quotas, subsidies, customs procedures, and sanction and embargo programs, but there is no way to predict what these changes will entail.  There is little doubt that Britain faces many challenges in the future.

As the initial shock of the Brexit vote wanes, expect the markets to stabilize, the currency to rebound, and cooler heads prevail as negotiations commence.  Allyn will continue to monitor new developments in the Brexit aftermath and keep you abreast of any changes that could affect your business. 

 

This website uses a variety of cookies, which you consent to if you continue to use this site. You can read our Privacy Policy for details about how these cookies are used. Manage Cookies