Brexit opportunities

Sri Lanka, which exports a significant amount of its apparel to the UK, should be keeping a close eye on the latest breakthrough in Brexit talks and move early to secure its trade interests both in the UK and within the European Union (EU).   

The UK and the European Union struck a deal to unlock divorce negotiations, opening the way for talks on what businesses are keenest to nail down -- the nature of the post-Brexit future, reported Bloomberg on Friday. The effort, which took the better part of 2017 to thrash out, has many analysts wondering what challenges the fine print will throw out in the future.  

The deal, made before dawn on Friday after rushed talks through the night, clears the path to the start of trade talks between the UK and its biggest commercial partner. The EU was quick to put down a marker of where it thinks those talks are headed and it’s far short of what British Prime Minister Theresa May wants.

The agreements outlined on Friday, including a 45 billion-euro ($53 billion) divorce bill and vague promises on the sensitive issue of the Irish border, will come back onto the table if trade talks turn sour. EU officials were already warning that the second phase will be harder than the first, and time is running short before Brexit day in March 2019.

But EU officials warned that the hardest part lay ahead. Trade deals don’t usually cover the service industries that make up about 80% of the UK economy. May has agreed to pay the bill and make other concessions in order to secure a good trade deal, but the country wants that deal to include its crucial financial services -- known as the City.

The risk is that if trade talks run into trouble, political support at home for those concessions might drain away. May has already faced down one attempted coup and there’s a sense she’s one crisis away from losing the top job, Bloomberg analysts reported.  Her Cabinet, fiercely divided over Brexit, has yet to have a formal discussion of the trade deal it will even seek. All this will mean that the UK and EU’s smaller trading partners will have a few more anxious months to wait before they can fully understand the repercussions of the split. 

Apparel exporters, however, have already expressed their concerns and have urged the Government to focus on both sides. The apparel exporters association feels that with the return of GSP+ Sri Lanka would do well to expand its exports to other EU countries, particularly Germany, which would reduce impact of a potential reduction of purchases from the UK. However, the local industry also feels that Sri Lanka’s Foreign Ministry, Commerce Department and other offices should move to keep links with the UK open. The fact that UK is preparing to host the Commonwealth Heads of Government Meeting (CHOGM) next year might be a welcome opening to trade-related talks between the two parties. 

Trade relations and foreign relations go hand in hand and with Sri Lanka focused on improving exports and investment it would do well to protect sectors that are already flying high.