On 23 June 2016, the UK voted to leave the European Union (EU) after 43 years of membership. A referendum was held to decide whether the UK should leave or remain in the European Union. Leave won by 52% to 48% with more than 30 million people voting. Great Britain’s withdrawal from the European Union would not only change the internal political climate, but it could have important political repercussions within the EU and also on its relations with other European Community’s countries.
The UK’s decision to leave the EU could have far-reaching macro economic consequences harming the growth prospects for emerging and developing countries. In the aftermath of the vote, roughly $3 trillion was lost in global equity markets. In the short-term, financial risk aversion may mean that emerging and developing currencies could weaken. In the long-term, as investment decisions are likely to be postponed, both demand for exports and outbound investment could decline. The UK’s vote to leave the EU comes at a time when many developing economies are already facing multiple shocks: lower oil and commodity prices, a stronger US dollar and a slowing Chinese economy.
The UK and EU are linked through European supply chains (trade and investment) where components and intermediates products are traded, forming a big ‘European factory’. It is likely that there will be disruption in these value chains. The fall in the pound may generate adjustments that could affect developing countries, particularly those providers of raw or semi-processed materials such as those like South African vehicle-parts being exported to the EU. The effects on these value chains will be larger in the long-term, once the trade policy Implications of Brexit become effective.
The potential fallout of Brexit will be felt by Bangladesh in a number of areas including loss of duty benefits, remittance inflow, export earnings and immigration.
- Loss of Duty Benefits: The first blow that may hit Bangladesh as a result of the Brexit is the loss of duty benefits amounting to over USD 3 billion. Departure from EU by the UK may lead to the departure of Bangladesh from duty benefits on the export to UK that was inexistent when UK was part of the EU.
- Remittance Inflow: The remittance income may see a downfall that has been generating from the UK for Bangladesh till date. Out of the total remittance income of more than USD 15 billion, migrant workers of UK from Bangladesh contributed USD 1 billion.
- Export Earning: The export issue is more concerning than anything for Bangladesh. Bangladesh exported USD 3.23 billion worth of products in the year 2014-15 which registered 21.28 percent growth in export to the UK from the previous year.
- Immigration Issue: Brexit is said to have been influenced mainly by the migration issue. The British immigration regime may become stricter resulting in less Bangladeshis getting immigration visa. If the size of the British economy does not expand enough, immigration may continue to be tougher.
The Brexit result has outcome on the expansion of humanity’s capacity to make decisions that impact all of humanity globally. Nationalist sentiment has merit but not when fear is the driving force. Since our collective security resides in the relationship between humanity and the life-support system of our home, the planet, moves to contract to an island mentality do not signify well for co-creating the future. Whether or not the European Union is the right vehicle to achieve a global and future-minded form of governance is not the question.
But the question is: how can we use the shocking outcome of Brexit to intentionally create better economic and political relationships to restore health of all of life?
