ASEAN countries might have a lot to thank the United Kingdom for if the UK decides to leave the European Union. That’s because the UK could become unwitting allies in ASEAN’s goal of negotiating more international trade agreements.
The UK public will soon vote to decide if their country stays in the European Union (EU) –as early as this summer, or by the end of 2017 at the latest. The decision to vote depends on whether British Prime Minister David Cameron persuades his European colleagues to agree to his proposals for EU reforms.
The UK government has consistently said it wants to stay in the EU, but needs a few changes. They include restrictions on EU migrants’ access to welfare benefits, protection of local currency markets in the UK and other EU nations not using the Euro, reduced EU bureaucracy and a UK exemption from the EU’s goal of an “ever-closer union.” If EU leaders don’t agree to the changes, the UK plans to hold a referendum where citizens can decide whether Britain should exit the EU, or “Brexit” (British exit).
If UK voters endorse the Brexit, the split will become a reality and Asia could benefit.
This is because Cameron wants to adopt a trade strategy that includes unrestricted trade deals with China, Japan and ASEAN. One of the main reasons he visited Southeast Asia last August – featuring the first visit by a British prime minister to Vietnam and the ASEAN Secretariat in Jakarta – was to strengthen trade links with that part of the world.
If it leaves the EU, Britain will need to update its trade relationships with Europe, in the European Free Trade Area (EFTA) and the European Economic Area (EEA). Brexit supporters say that any difficulties in renegotiating those trade agreements would be offset by stronger trade with other regions, especially the massive Asian market, including ASEAN. The supporters also believe eliminating the EU’s bureaucracy and red tape would make it easier for Britain to sign trade deals around the world, a no-lose situation for them.
If this happens, the UK’s relationship with ASEAN will get stronger. Singapore is already the UK’s largest trading partner in Southeast Asia, its fifth largest outside the EU, according to UK Trading & Investment (UKTI), and the UK’s fifth largest export-service market outside the EU – not only for financial services, but also for heavy machinery, manufactured goods and electronic components, much of it re-exported. In addition, 75 percent of Singapore’s EU investments are directed towards the UK, not just for its market, but likely as a springboard to the rest of Europe.
If the UK leaves the EU and strikes out on its own, direct trade ties with Singapore and other Asian countries could get stronger as they and the UK negotiate more bilateral trade deals separate from the EU’s. That is particularly so for Singapore, since it focuses investment more on the UK than the broader EU.
Opponents of Britain’s EU exit have not been helped by suggestions from Chinese officials that they are not concerned by Brexit. Wang Hongzhang, chairman of China Construction Bank, said the vote would not do any harm to trade, economic ties or financial relations between the UK and China. While China views the EU as better off with Britain a part of it, it also believes Brexit would not affect its greater focus on the far bigger EU market.
Brexit opponents, led by economists, overwhelmingly believe a split would have immediate negative consequences for the UK. Although it could destabilize Europe as a whole, the UK would feel the consequences the most, they say. Business leaders are worried that Brexit would make investors nervous and, in turn, affect the UK’s economic growth.
The City of London, the financial hub of Europe, could lose a significant amount of business if Brexit causes banks to relocate their main European offices elsewhere. Long before talk of a split, British financial services and banking giant HSBC Holdings indicated it was thinking about moving its head office out of the UK. Brexit could force the issue, with former British colony Hong Kong HSBC’s natural destination.
Asia will have to sit and watch as the EU tries to keep its union together. If Britain does leave, expect pound sterling-denominated investments to become volatile as speculators digest Brexit effects on the UK’s currency. On a broader scale, however, Brexit would mean that a major world economy and power is seeking to redefine its trade partnerships – something that could benefit ASEAN and the rest of Asia.