BRICS Information Centre
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BRICS Information Centre |
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The BRICS Summit and Brexit:
Trade and Investment Prospects
Sarah Richardson, G7 Research Group
October 18, 2016
BRICS leaders met at their annual summit in Goa, India, on October 15-16, 2016. On their agenda were trade and investment, which have taken on renewed importance in the wake of the protectionist rhetoric in the U.S. election campaign and the economic uncertainty stemming from the British voters' decision to leave the European Union. BRICS trade ministers called the Brexit outcome of the UK referendum a "shock." The leaders noted it contributed to "uncertainty in the global economy." Depending how Brexit unfolds, it will present both challenges and opportunities for BRICS's trade and investment. But any consequent unravelling within the United Kingdom or a united Europe will detract from the BRICS's efforts to encourage growth.
One opportunity is improved market access for goods on a bilateral basis for BRICS countries to the UK market. During British prime minister Theresa May's forthcoming November 2016 trade mission to India, leader-level discussions are expected to touch on the possibility of an UK-India deal. The BRICS represents an area of economic growth. Some members, led by India, could be in a strong position to use their historic relationships with the UK to their advantage. They could negotiate bilateral agreements with the UK on more favourable terms than they could have achieved by negotiating with the single market as a bloc.
Comprehensive trade agreements that include broader issues, deeper integration and behind-the-border measures (such as non-tariff barriers) might be possible in the longer term. Services sectors, particularly financial services, are strong performers in the UK and could benefit most from British-BRICS trade agreements when services are liberalized. Similarly, BRICS leaders consistently emphasize the importance of foreign direct investment and large British brands increasingly depend on access to the developing world to expand. However, it might be a challenge in the short term for BRICS countries to improve their business environments and create conditions that attract such investment. Likewise, the investment market in the UK could become more difficult for Chinese and other BRICS investors once the UK leaves the EU, as its open gateway to continental Europe would be gone.
An additional consideration involves the Goa Declaration's emphasis on the importance of sustainability. It includes a commitment to work closely with G20 members to strengthen, "robust and sustainable trade and investment." This suggests that any new trade agreements should be crafted so as to enhance environmental and social as well as economic well-being.
After Brexit and its redefined trading relationship with the EU, the UK will likely begin to build free trade arrangements with other countries, including the BRICS ones. It is thus worth asking what the leaders can do at their 2017 BRICS summit in China to address the challenges and capitalize on the opportunities associated with Brexit.
BRICS leaders could:
Sarah Richardsonis a senior research associate and the director of the Montreal office of the G7 Research Group. She has worked with international organizations, national governments and international non-governmental organizations on law and policy issues in the areas of international trade and sustainable development, including the linkages between the two fields. Sarah holds degrees in international relations (B.A. Hons., University of Toronto), law (LL.B. Dalhousie University) and a Masters of international law (LL.M. Columbia University).