The economic implications of the Brexit for the UK, the European Union and all third world countries are difficult to tell as long as the details of the exit agreement are not available. This is according to Alexander Baum, the Head of Delegation of the EU to Botswana and SADC speaking at an investment symposium this week. But based on the preliminary statements made by different parties, Baum said it is clear that one of the key issues will be the access to the single market, which by extension affects all third parties trading with and investing in the EU. “PM (Prime Minister) May has made it clear that the UK wishes to regain full sovereignty over its legal and regulatory framework while the EU-27 have made it clear that the four freedoms associated with the Single Market, the free flow of goods, services, capital and labour are indivisible and that there cannot be a picking and choosing,” Baum said. He said this would in essence mean that the UK will not have access to the single market, but will obviously aim for a comprehensive Free Trade Agreement with the EU, which is by itself to be negotiated and can only be concluded after the exit agreement enters into force. By exiting the Union, Baum said UK will exit from all agreements the EU had concluded with third parties and which include all trade agreements. As a result, he said, all exports to the EU through the UK will no longer be covered by those agreements and will no longer be able to enter the single market via the UK as is currently the case. “However, the actual economic implications of that depend on the future trade relations between the UK and the EU. In turn, the UK will have to renegotiate its own trade agreements with all those third countries with which its trade relations were governed as part of the membership in the EU,” he said. The EU head of delegation said it is unlikely that third countries or blocs will give the UK the same concessions in the negotiations that they were willing to give the EU being the largest or second largest economy in the world.
Even in the absence of the UK, Baum said the EU imports USD6.7 trillion in goods and services, which makes it the largest export market for a large number of countries. He said the EU will remain the largest destination and the greatest source of FDI flows in the world. On the implications of the departure of the UK from the EU for Botswana, Baum said the trade statistic for Botswana and the EU is by itself not easy to read. This, he said, is because many products that come to Botswana through South Africa are not recorded as trade between Botswana and EU. “Botswana imports from Europe mainly semi-manufactured and manufactured goods, transport equipment and machinery including electrical machinery and chemicals including pharmaceuticals; Botswana exports essentially diamonds, other mining products and beef,” he said. Baum said beef represents only 1.7 percent of Botswana’s exports in 2015; referencing data provided by Bank of Botswana and is exported to Europe mainly through the UK and Norway. Baum said he does not see any reason to be concerned about the economic impact of Brexit on Botswana. “I would, however, recommend looking at exports to the EU market irrespective of the UK being a member of the EU or not. Trade relations between Botswana and the EU are now governed by the recently signed Economic Partnership Agreement (EPA).” Under the EPA, Botswana enjoys duty free – quota free access to the EU market.