Post-Brexit Britain is in a perfect position to benefit from free trade with the US and the Gulf

Post-Brexit Britain is in a perfect position to benefit from free trade with the US and the Gulf

Many leaders around the world are starting to wake-up to the potential offered by Britain outside of the EU with its aversion to free trade. Several important Free Trade Agreements (FTAs) are already in the pipeline for Britain, most notably with the US and the Arabian Gulf. Britain is likely, therefore, to find itself in an influential position as the middle man between these two wealthy regions.

The Gulf Co-operation Council (GCC) is an important market for US companies, particularly those working in the defence, machinery, and food and drink sectors. Currently, however, the US chooses to export goods to the GCC single market through Bahrain and Oman, which have limited FTAs with the US, and products that do attract tariffs are restricted at 10% of the cost of the product. When these products enter Oman or Bahrain, however, there are specific requirements for export to other GCC states, and there is a 35% American origin requirement imposed at ports and airports for tariff-free rules to apply.

It is increasingly clear that President Trump’s administration is in favour of a quick and comprehensive FTA with Britain once we leave the EU. Gulf rulers, based on a legacy dating back to 1763 when the East India Company first set-up base in Bandar Abbas, and a Residency protectorate system ending in 1971, are also pushing for FTAs with the British Government from as early as 2019.

Britain could, therefore, find herself acting as an intermediary between both large and small US companies looking for cheap access to the lucrative Gulf markets, and Gulf companies looking to sell to the US. To avoid direct import tariffs and restrictive regulations imposed by Gulf governments, the two are likely to use the UK as a tariff-free hub; US companies would ship their goods to a British port or airport without any tariffs, and then a UK-registered subsidiary would ship the goods on to the Gulf without tariffs.

This is likely to create hundreds, if not thousands, of jobs across the UK in shipping, customs, and related industries, giving an extra boost to the post-Brexit jobs market, and related income will boost Treasury coffers. The balance of trade between the US and UAE alone was worth approximately $25.7 billion in 2016, excluding taxes and shipping fees, according to the United States Census Bureau. These statistics offer an insight into the sheer potential that Britain could be set to benefit from if used as a free trade intermediary.

Intermediary trading is commonplace in finance and equities, where subsidiaries in the likes of Bermuda and the Isle of Man act as trade representatives for large multi-nationals, and cars shipped from one country to another to be sold in a third country, so it is not as uncommon as many might think. And Britain is perfectly placed both geographically and politically to make the most of the increasing fluidity of trade and goods.

When the US and the Gulf, as the stalwarts of international trade, successfully utilise Britain as a free trade middleman, many more countries are sure to follow, making use of the many FTAs that British diplomats are set to sign shortly after we leave the EU. Britain’s post-Brexit free trade future is looking increasingly fruitful. It is even conceivable that the EU, after they have finished trying to once they have shed punish us for leaving, could trade via Britain with markets that they have been unable to agree FTAs with, including the US now that the Trans-Atlantic Trade and Investment Partnership (TTIP) has been scrapped by President Trump.

Post-Brexit Britain is in a perfect position to benefit from trade between the US and the Gulf, successfully making use of historic trade relationships, a highly respected legal system, and a perfect geographic position. Only time will tell, but the growing list of countries looking to sign FTAs with post-Brexit Britain, along with an increasing desire on their part to trade with high-tariff markets, will present countless opportunities for Britain to act as a trade intermediary between states. The British Government has much to gain by promoting and highlighting these opportunities as they embark on their trade negotiations around the world.

(Photocredit: Number 10)