Impact of Brexit

by Manjula Fernando

The decision by the British to withdraw from the European Union have caused major ripples in the world economies, with the Sterling pound and the Euro plunging to a record low with the US dollar and Japanese yen gaining on their loss.

H.M.G.S. Palihakkara	Harsha de Silva	Rohitha Bogollagama

While foreign affairs experts expressed mixed reactions, as to how Brexit will affect Sri Lanka’s foreign policy and trade relations, it was highlighted that Sri Lanka’s strong bi-lateral relations with the UK will somehow cushion the effects.

Last week, British Prime Minister David Cameron, a strong advocate of ‘remain in the EU campaign’ allowed the British citizens to decide if Britain should exit the EU or not. In a landmark referendum the people on Friday made a historic and an unexpected vote. ‘To leave’ camp won by 52% to 48%.

On Friday, Deputy Foreign Affairs Minister Harsha de Silva in parliament said, in this backdrop Sri Lanka may have to negotiate a fresh Free Trade agreement with Britain. A delegation led by him was in London recently to campaign for the ‘to remain camp,” among the large Sri Lankan diaspora.

The Deputy Foreign Minister had articulated to the Sri Lanka community on Prime Minister Ranil Wickremesignhe’s view that if UK leaves the EU it will certainly have a significant negative impact on Sri Lankan exports to the EU.

He also said, Sri Lanka has formally applied for GSP+ and if Brexit happens it will see a serious dilution of the benefits the country will receive from winning back the GSP+ trade concession.

Former Foreign Minister Rohitha Bogollagama, said a new economic agreement will, however, have to wait until Britain recovers from the impact and the British parliamentary elections early next year.

He said the EU- Britain divorce procedure will consume time, then there will be a general election under a new Prime Minster of the Conservative Party, Boris Johnson. To top it all, Scotland wants to separate from England and retain their status as a separate country within the EU. “This demand for a separate state will be the most damaging one for Britain,” he said.

EU is registered to be the biggest world market. Now without Britain - a member with a strong economy, the EU has to look at trade relations with the world afresh. The former Foreign Minister said, Sri lanka will have to look at the ground reality. Of Sri Lanka’s total apparel exports to EU, 35% goes to the UK. We are complying with EU standards and UK has been happy with that.

“We will get caught up in these trade convulsions. The GSP is sought by Sri Lanka and is on the verge of making a fresh bid but the regional block cannot afford anymore concessions with the outside world, in the absence of a strong EU economy. This is something we have to watch, now,” he said.

According to the latest data, Sri Lanka exports 10% of products - around $ 1 billion- to the UK and 28.8% of exports -around $ 3 billion- to the EU. (Ceylon Chamber of Commerce)

The former Foreign Minister said, nevertheless, there might be a better scope for integrated migration. With the closure of free access to the Far East, soon Britain might have to open doors for more migrants from Asia.

One of the things the British have resisted was the non English speaking migrants coming into the UK from East European countries.

“Already there are 200,000 Sri Lankans in the UK. We have a greater say now because there is less competition for our migrants,” he said.

He also opined that Job opportunities for Asian migrants will be greater, now that they will have no more cheap labour from the Far East. But we may have to compete with India and Africa, “it is not an opportunity that will be offered on a platter but something that we have to work towards,” he said.

The medical profession stands to benefit greatly. Before Brexit, they had to fill such vacancies from the EU’s 28 states before looking at other regions. He said, we could also revive bi-lateral defence cooperation, which was restricted earlier due to EU restrictions.

Former Foreign Secretary H.M.G.S. Palihakkara said he did not see a major effect of Brexit in terms of foreign policy and our national interest. “Sri Lanka has strong bi-lateral relations, especially, economic relations with EU as well as the UK.” He said Sri lanka can use its strong bilateral relations to negotiate separately with the UK on trade and international relations Brexit will not directly impact our relations but in terms of the Fisheries and GSP plus trade concessions, we may have to deal with UK separately. The EU’s collective deal will no longer be binding on the UK ,after Brexit.

Still, he said, these will not be major issues that cannot be ironed out bi-laterally

A former diplomat opined that on a larger context, Brexit undermines that integration is the solution to international issues. The UK’s decision to exit the regional grouping, sends a signal that countries were ready to move away from inter-dependence to independence.

“This will have a cascading effect on other regional groupings, such as, the African Union, ASEAN and the Organisation of American States,” he said

For example, the members of the African Union, a union of diverse nations, more like the EU, might also think in terms of the Brexit. The African Union, just like the EU sets its foreign policy and international outlook for the region.

However, he said, for SAARC, it might be a bit too far fetched to think the eight South Asian nations will think in the same lines, in the near future. Unlike other groupings, SAARC is a union of historically and culturally interrelated nations.