• Thursday, June 20, 2024
businessday logo

BusinessDay

Brexit will weaken Africa’s voice at the European table

olu_fasan

I wrote last week that the world has talked about nothing else but Britain’s decision, in the June 23 referendum, to leave the European Union (EU). Even as I write this, the world is still transfixed by the Brexit vote. So, why is everyone fixated with Brexit? After all, come to think of it, the UK is just a small island of about 65 million people and accounts for less than 4% of world GDP. Well, Brexit is momentous for two main reasons. The first, which has been the focus of much of the commentary, is that Britain and Europe are both so pivotal to world peace and prosperity that any rupture in their relationship is bound to unleash anxieties across the world. The second, less talked-about, reason is that for many countries outside Europe, Britain is their voice in the opaque and labyrinthine world of Brussels politics and policy-making. Surely, if Britain is no longer at the EU table, these countries’ influence in Brussels could shrivel. My main focus is the second reason, particularly as it affects Africa. But let’s also consider the first.

As every student of economic history knows, Europe, led by Britain, dominated the global economy in the 19th century, but two devastating wars in the 20th century reduced it to a desolate wasteland. It took the US, through its reconstruction and development programme, the Marshall Plan, to help the continent back on its feet. But less than two decades after World War II, Europe spectacularly bounced back, thanks in no small measure to economic and political cooperation between the European countries, underpinned by institutional arrangements, such as the EU and the common market. Today, Europe is one of the world’s economic power houses, with a combined GDP equalling that of the US. Four European countries, Germany, the UK, France and Italy, are the world’s 4th, 5th, 6th and 8th largest economies respectively.

In 2012, the EU was awarded the Nobel Peace Prize “for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe”. Of course, peace and prosperity are inextricably linked. Therefore anything that could disturb political stability and peace in Europe, and undermine its economy will certainly agitate the world. It was in this context that the world’s political elites, led by President Barak Obama, and the world’s great economic institutions, such as the Bank of England, the US Federal Reserves and the IMF, warned against a Brexit vote. But once it actually happened, the world’s key central banks and finance ministers quickly came together to reassure markets and investors. Brexit is just so momentous an event that it has to be properly managed to prevent serious harms to global peace and prosperity. That, I would argue, is one reason the world can’t stop talking about it!

But, as I said, Brexit is also epochal for another important, albeit less obvious, reason: it would deny many countries an effective voice in Brussels. The US Secretary of State, John Kerry, said recently that the US would “miss the UK’s voice within the context of the EU”, adding: “I personally will regret that Britain is not going to be at that table when there is an US-EU dialogue”. To be sure, the “special relationship” between the UK and the US ensures that the UK acts, when necessary, as the US’s voice in EU meetings, articulating US interests and values, which, in any case, it broadly shares. Thus, if Britain is no longer around the EU table, the US would, as Kerry acknowledged, lose a key ally in the EU policy circle, which, truth be told, is not short of anti-US sentiments!

But, more broadly, Britain’s unique liberal voice in EU’s economic policy will also be missed. In a talk that I gave at the London School of Economics (LSE) in 2014, titled “Negotiating trade in services agreements – a case study of EU economic diplomacy”, I said that it’s difficult to appreciate EU trade and economic policy-making without understanding the policy orientation and differences of EU Members States. Broadly speaking, EU countries are traditionally divided into two blocs. The first is known as the Northern liberals, led by the UK, and includes countries such as Germany, Denmark, Sweden, Luxembourg, Ireland and Finland. The second is the Southern or “Club Med” protectionists, led by France, and consisting of countries like Italy, Spain, Portugal and Greece.

The first group is, as its name implies, consistently pro-free markets, and it usually looked to the UK for leadership. As the Financial Times said recently: “The UK has consistently been a voice for liberal economics within Europe”, adding: “Without Britain at the table, the EU is much more likely to move towards protectionism”. This is not a theoretical risk, and has implications for developing countries, particularly Africa. For instance, the UK was the chief demandeur for the reform of the Common Agricultural Policy (CAP), which hurts African farmers through price distortions. But France is often very defensive on CAP reform. Thus, Brexit could tip the balance of power or centre of gravity within the EU away from the Northern liberals in favour of the “Club Med” protectionist members. Surely, those non-EU countries, including African ones, that can benefit from a less protectionist Europe will lose a critical voice in Brussels if Britain is no longer inside the EU to make the case for trade and economic openness.

Recently, the London Times reported that “The Commonwealth was desperate for Britain to stay in Europe to be its voice in Brussels”. That’s not surprising. And the same is true for African countries. Without a doubt, Britain was the strongest advocate of Africa’s interests in Brussels. It pursued a strong pro-trade and development agenda, and was always concerned about the potential impact of EU tariffs for African countries. For instance, while the UK strongly supported the Economic Partnership Agreements (EPAs), it was keen that African countries that lost their trade preferences after concluding an EPA should be compensated by the EU. The UK was also the strongest advocate ofthe WTO Least Developed Country (LDC) services waiver, which allows preferential treatment for services and service suppliers from LDCs. It pushed hard for the waiver and lobbied other member states to put pressure on the European Commission so as to stiffen EU negotiation on the issue. After the waiver was approved at the 8th WTO Ministerial Conference in 2011, Britain led the drive in Brussels for its implementation amid some nitpicking over details by some member states. That the EU implemented the waiver was certainly due, in large part, to Britain’s leadership and its strong advocacy and lobbying efforts.

So, make no mistake, Brexit would deny Africa a strong voice and ally in Brussels. Yet Brexit should not be a disaster for Africa. Indeed, it could give Africa the best of both worlds: trade with the world’s largest single market, the EU, and with an open post-Brexit Britain. African countries should take advantage of both opportunities. It’s, indeed, important that Africa continues to engage actively with the EU, including by ratifying the EPAs, and that the EU demonstrates a strong commitment to Africa through effective trade and development measures. Furthermore, post-Brexit, and unencumbered by EU restrictions, Britain would be free, and indeed eager, to enter its own trade agreements with as many countries as possible. Africa must see this as an opportunity to engage with a pro-free market and pro-development Britain!

For most African countries, there is an added incentive. A few months ago, the Commonwealth Secretariat published a study showing that there is a ‘Commonwealth effect’ that boosts trade and investment between Commonwealth countries, and I wrote that Nigeria should exploit the trade advantage (BusinessDay, 6 February 2016). The UK is the largest of the three Commonwealth countries in the EU, including Malta and Cyprus. Britain outside the EU would certainly have more interest in the Commonwealth than hitherto. Thanks to the ‘Commonwealth effect’, this should engender greater trade and investment between Africa and the UK. Surely, African should seize that opportunity, without, of course, ignoring the EU market. So, yes, Brexit may shrivel Africa’s voice in Brussels, but it also gives it the best of both worlds!

 

Olu Fasan