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Brexit: Should countries like Zimbabwe worry?
22/06/2016 00:00:00
by David Mutori
 
David Mutori
 
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BREXIT is a word that has been coined to describe Great Britain’s probable exit from the 28-member European Union if this week’s referendum results in victory by the ‘leave’ campaign.

The European Union is group of 28 countries in Europe that have signed an agreement which includes free movement of people, free trade etc. The EU can be compared to a more integrated and larger version of Southern Africa’s SADC.

Just like in any union of different parties, there are a set of rules that members have to sign up, to belong to the union. Following the recent ‘Greek Tragedy’ (financial crisis), the majority of countries in the union have come out in support of rules that bind the union even closer together - an arrangement that has been described by Euro sceptics as a ‘federal Europe’.

Great Britain on the other hand, perhaps overestimating her clout in the union, has broken ranks and decided that existing rules are already too tight for her liking and has demanded to be exempted from some of the existing rules. As an example, the UK wants be part of rules that demand free trade between member countries but does not want to be bound by rules that demand free movement of people between member countries.

It would seem that under pressure from some quarters, the UK is demanding to cherry-pick the union rules that it wants to comply with and excuse itself from those it does not like. In a move that can only be described as clumsy, the British Prime Minister promised his country an ‘in’ or ‘out’ referendum before he started negotiating for exemptions from some rules with the EU. This left him with very little wriggle room because whatever exemptions he got from the UK would never be enough for those who were already determined to leave the EU.

In some ways, the British Prime minister was politically naïve to hold a gun on the heads of all other parties and order them to ‘give me this or else’ I am out. On the other side, the rest of the union members who were already seeking tighter rules worry that giving GB exemptions will only lead the rest of the countries demanding their own exemptions – a scenario that could possibly lead to the breakup of the EU.

The purpose of this post is to explore whether countries like Zimbabwe (who are outside of the union) should worry about a possible Brexit from a trade/business perspective. 



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The first perspective we consider is the ease of travelling. A large part of the EU block is part of what is called a Schengen visa rea. A Schengen visa allows travellers to only get one visa which allows that person to travel to the other Schengen countries without requirement for additional visas. Unfortunately, in a move that has echoes of current demands, the UK opted out of the Schengen agreement which means that Zimbabweans currently (and will continue to) need a visa to the UK. So, no difference there!

One of the union rules is that the 28-member block have common tariffs and trade quotas with ‘outsiders’ and negotiates trade deals as a block. This supposedly gives the block clout to negotiate better deals with countries outside of the union. Such deals have to be good for all the members.

Unfortunately, this does not always mean good terms for countries outside the union. The 28-member market would only have been an advantage if a Zimbabwean business had set up companies inside the block allowing them to access a much larger market. Japanese car manufacturers and American banks are known to have exploited this large market opportunity.

Trade theory tells us that trading with one big block of countries rarely offers good deals. It is advisable to have a wider range of customers or suppliers because they compete for your business. One big block behaves more like a monopoly that tend to gravitate towards a tendency dictate terms rather than allow market forces to determine trade terms.

I, for one, am against the Common Agricultural Policy (CAP) of the EU which subsidises farming in the EU. I believe that this state subsidy has an indirect negative impact on African farmers whose products struggle to compete with subsidised European produce. Brexit and indeed an EU breakup would change the dynamics of the CAP and hopefully make it easier for African farmers to sell their products to Europe.

Those who survived EU sanctions would probably celebrate Brexit and pray for the demise of the rest of European Union. This is because the UK was the main proponent of sanctions and it convinced its EU counterparts that the whole block should endorse and impose those sanctions.

It is possible that, at the time that the sanctions were imposed, Sweden (or indeed France) would not have been keen to impose them but their membership of the union would have compelled them to sign up to the idea. So, instead of UK sanctions, it became sanctions by 28 countries. Brexit means that the UK will impose those sanctions alone, the other EU countries will decide separately and it is plausible that they may take a different view.

It is unlikely that a UK outside of the EU will be content with sitting alone in isolation. It’s more likely that a UK outside the EU will look for friends and trade opportunities elsewhere. It would not be surprising if Britain ends up looking to former colonies (Zimbabwe being one of them) for closer ties. The UK might just start focusing more across the Atlantic to North America or even try to resuscitate the now ceremonial Commonwealth.

A Brexit and possible EU breakup is potentially a good thing for countries like Zimbabwe especially if they do not already have huge business interests in the EU. They can fairly negotiate separate trade deals with each of the members. It is possible that other countries in Europe would choose different policies towards trade with countries like Zimbabwe if the UK did not influence their views. 

David Mutori (FCCA MBA MSc) believes that Zimbabweans underestimate their individual responsibilities and potential to determine their future. He writes in his personal capacity and can be contacted on mutorid@gmail.com.


 
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