The UK’s departure from the EU has created fear and anxiety over its economic impact. Responsible for 43 percent of UK exports and 53 percent of its imports, the bloc constitutes a key trading partner for the country. Their parting has, however, invigorated London’s efforts to strengthen ties with emerging markets just beyond Europe, including Turkey, Egypt and Morocco.
Such trade relationships have existed for centuries and, to many, represent a reversion to a buccaneering and internationally geared Britain that has always sought trade beyond Europe. Where such trade may have historically been exploitative and one-sided, the Brexit phenomenon has made a new relationship an imperative for all parties.
Turkey began its accession process to the EU 25 years ago but it seems no closer to achieving this goal than it was at the beginning. Despite the accession of states with lower levels of development to the EU, the admittance of a Muslim-majority country to a club of European states remains improbable. The UK, however, is no longer bound by the EU’s convoluted Turkey policy and can build a relationship that complements the fact it is the second-largest export destination for Turkish goods. Turkey and the UK signed a free trade agreement on Dec. 29 last year, just before the end of the Brexit transition period. Under this deal, Turkish and British companies can continue to export and import under preferential tariffs. According to Turkish trade analyst Mustafa Oguz, “Turkey is the UK’s 19th-largest trading partner, accounting for 1.3 percent of its total trade in 2019. There is a real opportunity to explore ties with the UK whilst trade contracts with the EU.”
Egypt, with a population a quarter of the size the EU’s, is an important market for the UK. As Europe ages, young nations like those in the Arab world will become critical to international trade, especially for the UK. Bilateral trade in 2019 reached £3.6 billion ($5.05 billion) and UK exports to Egypt accounted for £2.3 billion. This foundation was essential to the association agreement signed by the two nations in early December to replace the Egypt-EU Association Agreement that previously governed relations.
The accord was an important proof of concept for the UK, which would have otherwise reverted to World Trade Organization most-favored-nation terms of trade, under which Egypt would have imposed tariffs of up to 19 percent on UK goods. In not only providing a market for Egyptian goods, but also the opportunity to grow the export of UK services to Egypt, which most recently were valued at £826 million, the agreement will reintegrate the UK with a nation it has a long-standing association with. Having neglected relationships “East of Suez” in the late 1960s as it pursued the European Common Market, the UK can now benefit from more widespread international relationships in key growth markets like Egypt.
Arguably among the most exciting prospects for UK trade just outside the euro zone is with Morocco. Not only have the two countries had diplomatic relations for more than 800 years, but they are also neighboring countries through the British Mediterranean possession of Gibraltar. Geographic proximity and trade complementarities provide a strong basis upon which to build trade. Most importantly, however, the growth of integral Moroccan infrastructure has the potential to provide an important hub for UK trade in Africa.
Though Spanish ports have traditionally dominated the freight traffic between the Mediterranean and the Atlantic, the thriving new Moroccan rival at Tanger Med last year processed 20 percent more cargo than in 2019, making it the area’s busiest container port. Though Morocco has done a great deal to integrate itself with the European single market, trade with the UK requires a greater focus — despite their historic ties, the UK is only the eighth-largest investor in Morocco. The Gibraltar-Tangier tunnel plan, which is now being given serious thought, has the potential to connect two continents and provide a conduit for trade that would greatly offset the UK’s short-term costs of leaving the EU. As in the case of other long-standing relationships London has, its ties with Morocco require a review in light of Brexit. A trade partner with cheaper labor costs and an increasingly high-quality infrastructure network can contribute as a key hub for UK business in Africa.
The historian Niall Ferguson described the Victorians, who escorted the world into a British vision of free trade, as being advocates of policies that could have been “just published by the International Monetary Fund, if not the World Bank: Free trade, balanced budgets, sound money, the common law, incorrupt administration and investment in infrastructure financed by international loans.” His analysis, though coy, does highlight that the UK’s post-Brexit policy is far more aligned with the country’s traditional internationalist outlook than the constraints of the EU allowed. Though cooperation with Europe was no doubt transformational, Britain’s worldview was under-exercised while a member of the EU. Developing trade with traditional partners in the Middle East and North Africa region is a great opportunity for the UK to both reconfigure its economic policy and to pick up the thread as a go-to international partner for emerging markets.
- Zaid M. Belbagi is a political commentator, and an adviser to private clients between London and the Gulf Cooperation Council (GCC). Twitter: @Moulay_Zaid
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