Now that Britain has triggered the two-year, formal process of leaving the European Union (EU), what impact might this have on Britain’s relations with Asia, and in particular with China?
The politicians who support Brexit wax lyrical about restoring Britain as a global economy and creating a new set of trading relations away from its dominant partner, the EU. They are however, placing hope above experience. At present, 90 per cent of British trade is with Europe and the United States. The degradation of Britain’s preferential treatment and access to the European market that is expected in two-years’ time will therefore require the country to up its game elsewhere.
In theory, Asia would be a prime target. It has the strongest growth rates, the largest population of any region, and contains some of the world’s great emerging economies. Europe, in contrast, has been economically moribund since the eurozone crisis of 2009.
So for optimists, a British drive to seek new opportunities outside of its traditional economic zone makes long-term sense, whatever the short-term pain.
Realists, however, say such a strategy is high risk. How many companies or organisations would willingly walk away from the partner with whom they have the best and longest relationship, based only on the distant hope of a new relationship elsewhere?
The British like to say they are pragmatic and hard-nosed, and base their actions on fact, not whimsy. But Brexiteers’ idealism often seems to cloud what is in front of their noses.
Even the most rose-tinted view of the opportunities for trade and investment with Asia needs to acknowledge that, based on present circumstances, there is no solid ground for Britain to expect great things from the region.
Trade with China exemplifies this. It might be the world’s second biggest economy, but it accounts for less than 0.5 per cent of investment into Britain and only one per cent of British investment abroad. China also runs a huge trade surplus with Britain.
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There are similar situations across the region. Indonesia, Singapore, Thailand and Malaysia are tiny players for the British economy compared to Germany, France or Holland. Only Japan and South Korea have much significance, predominantly as investors.
The rush to trigger Article 50, the formal mechanism by which a country can exit the EU that was set in motion by Prime Minister Theresa May this week, has prompted such a tide of emotion in Brexit enthusiasts that it is unlikely they will acknowledge any time soon the massive risks it will cause to Britain and its economy.
Maybe the doomsayers will be proved wrong. British companies and financial entities will show a side to their behaviour they have never done before, and embrace a far more open attitude towards opportunities in Asia.
Were that to be remotely possible, Britain would need a strategic approach to the region. It would need to create a framework, probably government led, in which companies of all sizes and across sectors would share information and market intelligence in an effort to get to grips very quickly with a challenge never before encountered. It would need to upgrade and expand British companies’ cultural, linguistic and political knowledge of the region, so that they could deal with new markets in an informed way.
Remember that, outside of the EU, Britain is no longer a key member of the world’s largest trading block, just a middle-sized economy. Its attractiveness to others will decline.
Britain will need to lose any hint of hubris or pride that the rest of the world needs to deal with it, and recognise that it has more to lose than everybody else if things turn out wrong.
Indeed, a hard Brexit is likely to make Britain appear reliant on the good will and mercy of others as it looks away from its most natural partner on its own doorstep. There is every possibility that Britain will appear a beggar, not a king.
There were rational reasons for Britain wanting to change, or reform its relations with the EU. The EU in many ways lacks democratic accountability and has profound structural problems. The euro zone has proved a huge failure in many respects.
But the strategy of pursuing Brexit at all costs looks increasingly foolhardy. And dreaming about the riches to be gained from forging grand new deals across Asia is at the moment little more than just that – a dream. It will need serious commitment and hard work. And that is something Britain has never really put into this region in the past few decades. It has a very steep learning curve ahead, and it has no choice but to learn – and learn quick. ■
Kerry Brown is director of the Lau China Institute at King’s College London