I found myself in London a week ago, the same time the Trump freak show, as the Mirror tabloid described it, was getting started. Unlike the US president, I wasn’t taking as much joy in the UK’s decision to shoot itself in the foot via Brexit.
In the world of Donald Trump, everything is a zero-sum game. There is no such thing as a win-win outcome. So it is with China and anybody else who trades with the US. That’s the approach the US is taking towards the UK, traditionally its biggest ally. And there wasn’t even a pretense at subtlety. Brexit will leave the UK diminished, and this will be an opportunity to construct a trade deal that advantages US companies.
As the UK heads towards a messy divorce with its biggest trading partner, scheduled for October 31, it will be desperate to establish new relationships, including replacement agreements for some 40 deals with about 70 countries, including SA, which it is party to due to its membership of the EU.
Before the end of his term, trade and industry minister Rob Davies sought to reassure us that SA was “watching very closely” and working towards an arrangement to ensure there were plans in place to ensure that business with our biggest partner wouldn’t be disrupted.
The most likely scenario is that when they crash out there won’t be a replacement deal to shield our car makers.
That should probably be on top of the agenda for his successor, Ebrahim Patel. A no-deal Brexit will mean that our trade with the UK will no longer be covered under the SA/EU Trade Development and Co-operation Agreement (TDCA) of 1999, which took four years of sometimes difficult negotiations to conclude.
A most immediate and devastating impact of a no-deal scenario in which the UK defaults to the World Trade Organisation (WTO), would be the imposition of 10% tariffs on SA car exports to the UK. For selected agricultural goods, the taxes could be even higher, rising to an average of more than 35% for dairy products, according to the BBC.
In a record year for SA car exports, the UK was the biggest buyer of SA-made vehicles in 2018, while Germany, the biggest economy in the EU, bought about R58bn of vehicles and components, the most by value. The impact won’t end there. As we import components from the UK and then use those in cars that get sold to other EU countries, Britain crashing out of the EU will disrupt trade with those remaining within the bloc.
While it’s easy to say Patel and his department should get on with putting in place some kind of agreement with the UK to replace existing arrangements, it’s hard to see how that can be achieved with Britain in a state of political paralysis.
With the UK having to renegotiate with some 70 countries while at the time dealing with other complications from Brexit, not least what to do with the Irish border, SA can’t bet on them having the capacity to conclude any agreements over the next five months. So the most likely scenario is that when they crash out there won’t be a replacement deal to shield our car makers.
With the third anniversary of the Brexit vote less than two weeks away, Britain is far from reaching consensus on what this would entail, and the debate, if it can be described as such, has turned more toxic. It came as no surprise to anyone that disagreements over Europe would claim another Conservative leader. And it’s also no surprise that those who seek to replace Theresa May as prime minister haven’t come up with anything resembling a plan.
The frontrunner, Boris Johnson, is rerunning debates from even before the vote, making empty threats about withholding “divorce” payments to the EU, a strategy May tried and wisely dropped. While the EU has said the withdrawal agreement it agreed with May is the only deal on the table, the Conservatives, and opposition leader Jeremy Corbyn, insist they can somehow negotiate a new deal by the end of October.
Just as a demonstration of how we are really in a “post-truth” age in which evidence-based reasoning has been jettisoned in favour of fantasy thinking, BBC radio had a debate between Carolyn Fairbairn, the CEO of the Confederation of British Industry, with someone who was introduced as an adviser to Johnson.
One would assume as head of the country’s biggest business lobby group, it would be Fairbairn’s business to know, and one would take her seriously when she says a no-deal Brexit would be a disaster that businesses can’t prepare for. Even those that had made contingency plans, such as banks, had done so at great cost. And all the Johnson adviser had to say was that she was just wrong, without providing a counterargument.
Not renowned for diplomatic niceties, Trump walked into this and gave a clear indication that US companies were licking their lips at the thought of getting their hands on the UK’s cherished National Health Service, which no sane politician looking to win power has ever seriously suggested should be privatised.
Trump’s ambassador had set the scene before the president arrived, signalling that US companies being able to offer private-funded health services would be the price to pay for any trade deal with the US.
Brexit might still end up being a positive that enables SA to extract some concessions from overstretched and inexperienced UK trade negotiators. The trick is to get them to the negotiating table.
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