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Hounded by Brexit rows at home, UK Prime Minister Theresa May met Chinese President Xi Jinping on February 1 to forge deeper trade ties after Britain leaves the European Union. Photo: AFP

China economy would be the big winner from a no-deal Brexit, UN study finds

  • In a no-deal Brexit scenario, China’s exports to the United Kingdom would rise under lower tariff rates than those used by the European Union
  • The United States and Japan also benefit from lower tariffs, while EU nations would lose preferential access to the UK market, a United Nations study found

China would be the big winner, should the United Kingdom leave the European Union without a deal, according to a new study by the United Nations Conference on Trade and Development.

A no-deal Brexit would boost Chinese exports to the UK by US$10 billion, or 17 per cent of its current exports to the country. US exports would rise by US$5.34 billion while Japan would gain US$4.9 billion, the study found.

The study, led by researchers Alessandro Nicita, Ksenia Koloskova and Mesut Saygili, was released as UK Prime Minister Theresa May was back in Brussels attempting to negotiate a Brexit deadline extension, so that the UK Parliament can agree an exit plan.

It was based on the hypothesis that the UK will leave the EU without an agreements in place about what the future bilateral relationship would be like in future.

Many analysts have warned that this would be the worst-case scenario for the UK economy. Under this scenario, the UK would crash out of the European single market and customs union, meaning there would be an immediate end to free trade between the UK and other EU member states.

It would mean that border checks could be reintroduced between the UK and Ireland, which provides the only land border between the UK and EU. It would disrupt transport between the UK and EU, while the National Health Service and many commercial bodies have been stockpiling medicines and goods in the fear that the flow of goods is interrupted.

However, for non-EU countries, no-deal Brexit may mean they can access the UK market on lower tariffs than they did under EU trade terms.


“Countries which would gain the most from a no-deal Brexit are those are currently facing higher tariffs: China, the United States and Japan,” the study concluded.

These three countries would gain a competitive advantage from lower tariff rates while countries that previously enjoyed tariff-free access to the UK market as members of the EU – such as Germany and France – would have to pay the same tariff rate as China.

For this reason, EU nations would be the big losers (excluding the UK) from a no-deal Brexit. The United Nations Conference on Trade and Development (UNCTAD) predicts that their loss in exports could be as high as US$35.5 billion, equivalent to 11 per cent of the EU’s current exports to the UK.
Huge uncertainties still hang over the Brexit process, with EU leaders expected to meet on Wednesday to discuss whether it should grant the UK another Brexit deadline delay.
China’s exports to the UK would grow by 17 per cent under a no-deal Brexit, UNCTAD predicts. Photo: Reuters

The EU has rejected the UK’s request for a short-term extension, until June 30, but is reportedly open to a year-long extension, with the possibility of an earlier exit if the UK Parliament can agree on an exit plan.

The UK was China’s ninth largest export destination last year, with total exports valued at US$56.6 billion, according to data from the Chinese General Administration of Customs. The UK has also been a major gateway for Chinese investment in the EU.

The UK and China are enjoying a mutually proclaimed “golden era” of bilateral relations, after they announced a partnership to increase trade and investment during Chinese President Xi Jinping’s state visit to the UK in 2015.
Brexit is expected to cause huge disruption to the UK economy, especially if it crashes out of the EU without a deal. Photo: AP

Miranda Carr, senior analyst at Haitong International (UK), said May’s cabinet will have to quickly seek new relationships with its other trading partners, including China, if the UK leaves the EU without an exit deal.


“The trouble for the UK is that it would not be negotiating from a position of strength, given it only accounts for 2 per cent of both China’s total exports and global [gross domestic product],” Carr said. “China could potentially reap more from any deal than the UK would.”

If the UK Parliament were to agree an exit deal, the country would likely remain part of the EU’s customs union for several years on a transitional basis, meaning it would continue to enjoy tariff-free access to the bloc and use EU tariff rates for non-EU imports.