Brexit was among the hottest topics on the table at the G20 meeting in China last week, and the looming uncertainty surrounding Britain’s decision to leave the U.K. won’t be letting up anytime soon.
In an interview with Sky News, U.K. chancellor Philip Hammond said since markets and businesses weren’t expecting the surprise exit, the resulting reactions haven’t been unfounded.
What’s more, because the process of Britain removing itself from the union will take time, the global economy won’t exactly be resting assured in the immediate future.
“There is going to be uncertainty about the outcome hanging over the world economic outlook for perhaps the next couple of years,” Hammond told Sky News.
And because businesses tend to hold off on decisions in periods of uncertainty and consumers delay big purchases, the economy likely will slow.
To keep things going, Britain will have to more actively engage the rest of the world in potential trade opportunities, starting with China—already one of its biggest investors.
“We already have a global partnership arrangement with the Chinese, very strong Chinese investment into the U.K., very strong British business penetration into China—particularly in financial services—very strong growing trade and all of those things will be reinforced.
Both Britain and China have expressed interest in pursuing a free trade agreement that could amount to a multi-billion pound deal.
Brexit may ultimately mean greater opportunities for other countries besides China to do business with Britain, too.
Though Britain can’t enter into any new trade agreements until the tie-severing period with the EU is complete, Hammond says the timeline gives Britain a couple of years to consider new agreements and discuss terms for entering into existing deals.
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One of which could be the Trans-Pacific Partnership (TPP) that the U.S. is crossing its fingers Congress will approve.
While Hammond didn’t say anything concrete about Britain joining the TPP, when asked about it specifically, he agreed that the possibility was on the table.
“There are very exciting opportunities opening up around the world with China, with Japan, with the United States, with India and with many other countries,” Hammond said.
With TPP being an open platform agreement, which means other countries can apply to be part of the deal once it has been completed, Britain could attempt to join and—if Congress and the other member nations agree—gain trade access to the 11 other Pacific Rim nations.
According to an article in the Economist, “The idea is sufficiently ingenious that the same voices in Washington [questioning how the U.S. could conduct concurrent talks with Britain and the EU] suggest that—should it tempt a future British government—they should take care in talks with the EU about single-market access to avoid deals on video content, labor laws or other contentious issues that might obstruct TPP access.”
Because it remains to be seen what type of trading relations Britain will have with Europe, it’s difficult to determine from here what its relations with other nations might be. Britain will have to consider how its supply chains would work with other trading partners, what regulations and tariffs foreign-owned factories would face in Britain and if it will have sole control over its trade laws or collaborate on some of those things.
Gaining clarity on how Britain will deal with the EU has to happen before major trade moves with the U.S. do. Add to that, it could prove problematic for the U.S. to be negotiating trade deals with the European Union and Britain concurrently.
“While Britain is trying to resolve its relations with Europe, its largest market, it could be hazardous for British officials to offer concessions to America that are seen as undercutting European talks on TTIP (Transatlantic Trade and Investment Partnership), a move likely to trigger a backlash,” the Economist noted.
The U.S. has been working on the TTIP with the EU for the last three years and talks had been slated to wrap this year before Brexit happened, though EU trade commissioner Cecilia Malmström said recently that negotiations would carry on, Brexit or not.
And even though President Obama said earlier this year that a post-Brexit Britain would have to wait as long as 10 years for a trade deal with the U.S., House Speaker Paul Ryan (R-Wis.) is already urging the administration to start talks with the U.K. about a new trade agreement that would ensure what he called a “smooth” relationship with the nation once it separates from the EU.