After more than three years of negotiations, the UK has finally split from the EU.
In February this year, the Foreign Secretary of the UK Dominic Raab finished his Asia-Pacific tour. This was his first overseas diplomatic journey since the UK left the EU in January. Having visited Japan, Australia, Malaysia, and Singapore, progressive free trade deals and deeper economic ties were promoted. This tour has reflected the vital role of the UK’s post-Brexit trading strategy that is being placed on Asia.
Brexit positively influences trade relations of Commonwealth members with the EU and the UK, putting them at a crossroads. Many of the member countries are worried about their market access to Europe and the UK getting jeopardized by new shifts in trade policy. Simultaneously, there are fresh opportunities for mutual investment and trade to be pursued by Commonwealth members. Brexit will possibly result in that kind of more vital internal co-operation, that will harness and augment the new “Commonwealth trade advantage”.
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Many Asian and Pacific countries expect a lot from the EU – as a sort of a counterweight to the US and China – to support the open economic system and continue its presence in the region through investment, trade, and financial aid. But Brexit will also reduce the EU’s importance in global affairs, namely in the negotiations regarding international trade, which will have its implications in the Pacific region, including some Commonwealth countries too.
In the future, Brexit will possibly influence developing Commonwealth countries in different ways. That includes a weaker Pound Sterling, the possible delayed and decreased economic performance of both Europe and the UK, as well as some potential disruption of trade, which could occur as a consequence of post-Brexit shifts in trade policy and the currencies. Some attention should be paid to specific actions that could aim at these concerns.
GBP (Pound Sterling) has now risen against AUD (Australian Dollar) for two consecutive weeks. That is happening amid current claims by London about the advancement of the Brexit trade negotiations, calling for some readdressing among the investors who had been laying odds against GBP.
Brexit has encouraged and stimulated a real GBP/USD rally to the rate of 1.36. That alone could lift the GBP-to-AUD rate as far as 1.915, mainly if AUD/USD stayed around 0.71 in the following weeks, which was its measured Tuesday level.
Nevertheless, there is a risk for AUD to fall below 0.70, given the current policy, which could lift GBP/AUD even further.
If a Brexit trade deal happens in November, it could contribute to a favourable wind to the GBP-to-AUD rate. Meanwhile, the rising coronavirus numbers in Europe and its restored restrictions on different activities threaten the economic and financial recovery throughout the continent, including the UK. That poses a real risk for GBP to come undone even more.
The UK, as the world’s 5th largest economy and one of its global financial leaders, indeed remains a vital partner for many countries in the Asia-Pacific region. And Commonwealth countries especially have strong historical, linguistic, and cultural ties to Great Britain.
Brexit will continue to reduce the prominence of Asia-Pacific in various EU’s aspirations. The UK’s departure will make it more difficult for the remaining EU member states which have their interest in the Pacific, namely France, to preserve the EU’s interest in this region of the world. The British pound and Australian dollar are traded widely despite the fact that economically Australia has more relations to the Asia-pacific region.
Parallelly with the current concerns, the “Commonwealth trade advantage” can be utilized even better in the post-Brexit terms, making sure more significant trade gains. The Commonwealth has always been a vital global force, fostering a free, fair, and inclusive global trade system. That role is expected to rise even more in the future.
Trade connections between Commonwealth countries and the UK certainly are and will remain strong. Quite a few developing countries of the Commonwealth depend on the UK market when it comes to their exports. There are many opportunities to expand these trade links further. How to achieve this will be a significant question in the discourse of post Brexit within the Commonwealth.