Brexit Impacts in Asia

Brexit inevitably impact in Asia

Britain's withdrawal from the European Union, Brexit, is scheduled for March 29, 2019. The United Kingdom joined the EU in 1975 with 65% of the vote, but the 2016 referendum confirmed the withdrawal from the EU.

The background of Brexit generally cited the increase of immigrants in the UK (37,000 immigrants in 2015 alone), infringement of sovereignty, and contributions from the EU (the second largest amount after Germany, which costs 11 trillion won). In order to solve this problem, the voice of domestic expectations has risen that the economy will be revitalized if the UK leaves the EU. This eventually led to Britain's decision to withdraw from the EU through a referendum.

In principle, the EU and the UK agreed on a transition period of 21 months. By agreement, Britain must remain in the EU's single market and customs union by December 31, 2020. However, the UK's withdrawal from the EU, including the transition period, must be ratified before March 2019. Otherwise, the UK will have to start a new trade-in accordance with the rules of the World Trade Organization, where customs and tariff checks apply.

If the UK leaves the EU as expected, the UK is currently in deep negotiations with the EU, not just as a member of the EU, but because it has to deal with everything on its own and carry the enormous economic burden and risk. However, it is unlikely that the UK's demand to withdraw from the EU but retain its benefits in the EU will be accepted.

When the British Brexit came into effect on March 29, we looked at the media's prospects for how this would affect Asia.

Since the Brexit decision in 2016, the BBC has consistently reported on the impact of Brexit on Asia. The BBC mentioned the implications for markets and currencies in an immediate sense, but policymakers in South Korea and Japan insisted that there would be no direct impact of Brexit on the Asian economy in the long term.

The overall analysis is similar to the BBC's article. The reason for the forecast is that OCBC Bank's Wellian Wiranto said, “Hong Kong or Vietnam exports to the UK are 2 to 3% compared to GDP, and other countries including Indonesia and Malaysia are about 0.2 to 1% less.” heard.
  

However, "Asia needs to worry about the instability of the Brexit scenario, as Asian consumers may be affected by reduced exports to the UK and the EU," said Fraser Cameron, EU-ASIA Center Director, Post (SCMP)> article.

SCMP published in an article titled December 11, 2018, "Volatility, uncertainty: what Asia has to fear from Brexit turmoil". British Prime Minister Teresa May is planning to withdraw from the EU. After postponing the schedule for voting, it reported that governments, businesses, and consumers across Asia began to take a new interest in preparing for Brexit withdrawal.

The pound's value fell sharply after Prime Minister May's decision to suspend voting. The Asian market plummeted and even the UK's political future was in doubt.

Analysts said, “Asia is a new trading region in the West where 'variability and uncertainty are the new standard'. The disruption will continue with Brexit. In particular, the economic growth of India and Japan will be shocked. ”

Eversheds Sutherland's partner lawyer, Ros Kellaway, said so far Asian companies have long considered the UK as the 'entrance point' for entry into the European market, but now 'entrance point' can be at risk.

For example, more than 800 Indian companies are operating in the UK, according to global accounting firm Grant Thornton. India is investing more in the UK than the rest of the EU. The British Guardian also reported that since the 1980s, Nissan and Hitachi in Japan have invested more than 40 billion pounds in the UK, and more than 1,000 Japanese companies in the UK's manufacturing, pharmaceutical, and financial services sectors.

Indian and Japanese companies will not leave the UK after Brexit. However, since the UK is not the starting point for entering the EU, it is necessary to develop a new channel for entering the EU countries.

"It will have a serious impact on the UK manufacturing industry," said Nissan, concerned about concerns over the UK's no-deal Brexit: Britain's withdrawal from the European Union on March 29th. Toyota also commented similarly.

Korea is also worried about Brexit, as the UK is the second-largest trading partner in Europe for Korea. According to data from the British government, the UK trade volume increased from $ 8.77 billion in 2011 to $ 1.36 billion in 2015, and exports of crude oil, automobiles, and cosmetics to the UK have increased significantly over the past seven years. In particular, the auto industry in Korea gained the most from the FTA with the EU.

The government has begun new negotiations with the UK on free trade agreements after leaving the EU so that trade with the UK after Brexit can be maintained and solidified. Above all, this negotiation aims to ensure that the Korea-English Free Trade Agreement (FTA) takes effect as soon as possible in preparation for the uncertainty related to the 'Nodal Brexit'.

Already at the EU summit in Brussels, Belgium on October 18, last year, President Moon Jae-in and British Prime Minister Teresa May have mutually agreed to promote trade between the two countries after Brexit. It also agreed to work closely to convert the existing trade agreements between Korea and the EU into a smooth transition after Brexit, Reuters in the UK reported.

Hyeon-jong Kim, head of trade negotiations with the Ministry of Trade, Industry, and Energy, also met with British International Trade Minister Liam Fox at Switzerland, where the Davos Forum was held on January 23rd. On the 28th, the Korea Trade Insurance Corporation held the 11th Trade Promotion Committee and discussed Brexit countermeasures. The government has announced that it is planning to promote the Korean-English FTA to take effect as soon as possible after completing the domestic procedure to start the Korea-English FTA negotiations as soon as possible.

Of course, not all Asian countries are concerned. Most Southeast Asian companies are waiting and paying attention. The industry in common believes that the problem will not be solved in the short term.

Uncertainties such as the global economic slowdown are growing. Brexit is another factor. If the country prepares to reduce these uncertainties through rapid trade treaties and support domestic business activities, it will be able to adapt to change without much confusion even after Brexit.