Brexit abacus WP

Ever since voters elected to leave the EU in June 2016, the debate over Brexit has posed fundamental questions about the future of the UK and multilateral institutions around the globe. While both Britons and Europeans alike are pondering what their new futures will look like, observers from Southeast Asia are concerned about the impact of Brexit on the region.

One such impact is the renovation of UK diplomacy in Southeast Asia, which aims to boost the UK’s profile and role in the region in the aftermath of officially leaving the EU on January 31. The creation in November of a UK Mission to ASEAN with the aim to “deepen engagement” is perhaps the clearest signal that the government of Prime Minister Boris Johnson is preparing an ASEAN pivot. Also in 2019, the UK government initiated the ASEAN Economic Reform and ASEAN Low Carbon projects funded from the government’s Prosperity Fund.          

The initiatives appear to anticipate a need to engage with ASEAN at a moment when UK participation in EU projects in the region will come to an end. Similarly, while the UK is relatively late in establishing its Mission to ASEAN, it will certainly signal to the region’s leaders its desire to give more attention to the relationship, while also indicating that the UK could try to push for a free trade agreement (FTA) some way in the future.

The last concerted effort to bolster Britain’s position across Southeast Asia came under former Prime Minister David Cameron’s government. This resulted in his 2015 visit to Vietnam, Malaysia, Singapore and Indonesia, a trip in which he advocated for an ASEAN-EU trade deal, and where he commented that he was “delighted to be taking British businesses to this vast and dynamic market”.

Fast forward to post-referendum Britain in April 2017, when then-International Trade Secretary Liam Fox visited the Philippines – the first trip he had made since Article 50 was triggered a month earlier – at the height of president Rodrigo Duterte’s drug war. The engagement, in which Fox heralded the two nations “shared values”, was dismissed by an opposition leader in the Philippines as an indication of “just how low this government is willing to stoop in order to secure even a minimal trade deal in the future”. 

This apparent eagerness to affirm ties even in the worst of circumstances extends to another troublesome case in the form of the UK’s textile imports from Cambodia, worth £280 million in 2017.  

On February 12, the European Commission announced a partial suspension of the Kingdom’s Everything But Arms (EBA) trade preferences that will result in 12% tariffs being applied to apparel, luggage, and sugar imports to the EU worth approximately ($1.1 billion). During the Brexit transition period the UK will be required to enforce EU trade policy, including abiding by this partial suspension, yet long-ruling prime minister Hun Sen announced in December promises made by the UK to maintain Cambodia’s preferential trade status after Brexit.  

Will the UK reapply EBA-style trade preferences after the transition period expires at the end of the year? The answer will clearly indicate how far Boris Johnson’s government will go to secure cheap imports for UK consumers.

The direction taken in new trade and foreign policy under Johnson’s government will be the biggest determinant of the UK’s profile and role in Southeast Asia in the post-Brexit years. Trade deals have become a political priority in British politics since 2016, when they became the cornerstone for arguments about Brexit’s merits in the eyes of its supporters.

No doubt, these foreign trade deals will increasingly become a metric for the success or failure of Brexit, but will Southeast Asia provide the opportunity for early symbolic victories for UK Prime Minister Boris Johnson’s Brexit scorecard?

This seems unlikely for two reasons.

First, it’s still unclear how much diplomatic capacity the UK will have when demand for FTAs will be high in the near future, with various UK officials indicating that signing new deals with more higher-value trading partners like the EU, US, Japan, Canada and Australia will be the priority.

This means that even replacing the already existing EU-Singapore and EU-Vietnam FTAs with bilateral deals will take some time. So while the EU-Singapore agreement is already in effect, these benefits will be lost when the transition period expires at the end of 2020 as there will be no bilateral trade deal to immediately replace it.

Second, ASEAN regional interest in trade deals is complex. While enthusiasm among Southeast Asian leadership for signing multilateral trade agreements is currently remarkably high in light of trade tensions between the US and China, there is substantial resistance to signing bilateral FTAs with individual countries. 

For instance, the UK will face a wide range of local political obstacles, from Indonesian business concerns over the impact of an FTA on its industrial competitiveness, to well established grassroots opposition to FTAs in Malaysia and Thailand inspired by nationalist sentiment. 

With these developments, a key question remains in how much the UK will attempt to differentiate itself from the EU when pitching itself as a potential trade partner post-Brexit. 

In recent years, trade and diplomatic relations between the EU and Southeast Asian countries have reached a nadir as a result of the EU increasingly emphasising human rights and the environment in its trade policy. 

Most prominently, the EU sought to pressure Thailand’s previous military government over human trafficking and illegal fishing concerns, issuing a “yellow card” warning in 2015 for the latter issue that was only lifted last year. Similarly, concerns last year over deforestation and carbon emissions resulted in new EU biofuel mandates that will prevent palm oil exports from Malaysia and Indonesia being used in biofuel production. 

While as mentioned above, in the wake of the suppression of Cambodia’s opposition in the run-up to the 2018 general election, the European Commission began the procedure to suspend the Kingdom’s aforementioned EBA preferential trade status.

These developments in EU-ASEAN relations have taken place against a backdrop in which the US’ Trump administration has developed an erratic foreign policy towards the region – an approach that combines direct confrontation with Beijing in the South China Sea, with an aggressive and punitive response to trade imbalances with traditional Southeast Asian allies.  

Worsening ASEAN relations with the EU and US potentially allows the UK to step in to this void and broaden its diplomatic and economic ties to the region. But if Boris Johnson and his cabinet view Brexit as an opportunity to pursue independent foreign policy priorities, it will be necessary for the UK to craft diplomatic positions distancing the UK from the EU’s firm positions on the environment and human rights.

It is unclear, however, where Johnson’s government could do so without sacrificing its image on the international stage.  

Any move to provide a new market for Southeast Asian palm oil, for instance, would result in opprobrium from EU leadership and come at a time when the UK public is becoming more sensitive to environmental issues related to climate change. Moreover, trying to find a new ally in Malaysia’s Mahathir Mohamad or Indonesia’s Joko Widodo by immediately playing the palm oil card is impossible as the UK will be bound to follow EU single market rules throughout 2020.

While any move to court Cambodia’s Hun Sen by extending EBA-style trade preferences to fill the void that left by the EU’s punitive trade recalibration could be politically difficult.  Although given the government’s majority in parliament, it is possible that the political costs of this strategy could be limited.  

Will the UK government place the same priorities on human rights, democracy and the environment as the EU when seeking new trade deals or grappling with the region’s geopolitical challenges? Moreover, what leverage will the UK have outside of the EU in pursuing these priorities? The uncertainty here lies primarily in the fact that the Johnson government has yet to fully articulate its foreign policy vision for the region, leaving these questions unanswered. 

Just as likely, it seems, is that the newly unshackled “Global Britain”, the UK government’s post-Brexit branding of a deal making nation, will be aligned very closely to the EU in its foreign policy towards Southeast Asia.

Beyond trade, the greater impact on Southeast Asia from Brexit could come from a reduction of future European development assistance. The UK is the third largest contributor to the EU’s development assistance budget and it’s possible that Brexit will result in a €2 billion shortfall. It’s unclear what this will mean for the funding of EU initiatives in Southeast Asia – likely to be among the first trimmed back should the purse strings be tightened.  

Currently, in addition to development assistance from EU countries to the region, the European Commission has committed €255 million to economic and social development projects formally tied to ASEAN integration. While the UK co-financing projects with the EU after Brexit remains a possibility, with the end of the UK’s contribution to development assistance funding it is likely that there will be some reduction in funds to ASEAN from the European Commission after this year. The impact of Brexit induced budget shortfalls on these projects, however, is unpredictable. 

The UK’s post-Brexit outlook towards Southeast Asia cannot merely be about scheduling trade talks or diplomatic references to “sharing values” while engaging with strongmen.

In terms of the UK’s assistance to the poorest of Southeast Asia’s citizen’s, however, perhaps the greatest uncertainty comes not from Brexit directly, but from the potential of a restructuring of British government agencies after Brexit takes place. The Johnson government has indicated that the Department for International Development (DFID), traditionally a more de-politicised institution, will be integrated into the UK’s Foreign Office to align foreign assistance more closely with foreign policy goals and the “national interest”.

The foreign aid funds to Southeast Asia that are therefore up in the air are no small sums. The UK’s on-going aid projects to the region last year totalled £450 million – with the country the top contributor of development assistance to Myanmar last year (£163 million).

Among European countries, from 2007-2017 the UK was behind only Germany as the second largest provider of development assistance to South and Central Asia – including $1.3 billion to Southeast Asia – with both countries contributing greater sums than the European Commission to the region. 

While the UK’s internal restructuring will not necessarily reduce foreign aid spending overall, where it is spent and why will most definitely change with the UK government’s changing diplomatic priorities – the effect of which is yet to be seen. 

So while Southeast Asian governments could benefit in the short- to medium-term from the UK’s efforts to raise its profile in the region after Brexit, the UK’s post-Brexit outlook towards Southeast Asia cannot merely be about scheduling trade talks or diplomatic references to “sharing values” while engaging with strongmen.  

Without establishing meaningful priorities for the UK’s role in the region – whether that be labour protections, institutional reform, or environmental concerns – it will be clear very quickly that the new Global Britain is, in fact, nothing other than a brand name. 

The problem facing Boris Johnson’s government is that current trade tensions between the EU and Southeast Asia will force it to take positions that could either betray its core values and or antagonise potential ASEAN trading partners. The UK could capitalise on these tensions, but at what cost to Global Britain’s reputation?   

Dr Carlo Bonura is a Senior Teaching Fellow in Southeast Asian Politics at SOAS, and his research spans the fields of comparative political thought and Southeast Asian politics.

This article was initially posted on the South East Asia Globe.

 

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