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Brexit may soften isolationist views

Monday 4 July 2016 | Published in Regional

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PACIFIC – A backlash against isolationism following Britain’s vote to leave the European Union could bode well for trade deals in the Pacific.

But Pacific island countries may miss out on sorely needed capital.

Economists studying the region say Britain’s departure from the EU would not have much impact on the region unless there’s a contagion effect and other European states decided to leave too.

An economics professor at Wellington’s Victoria University, Ilan Noy, says it’s Britain that would be most affected.

“Unless there is this dramatic collapse of the European Union in general, the fact that the UK is leaving the EU is not going to have much impact on the Pacific.”

The European Union is a major provider of development assistance to the region with its main regional office in the Fijian capital Suva.

“For the Pacific the UK is not a very big trade partner, it’s not a very big donor or aid partner,” Professor Noy says. “The EU is much more important for the Pacific and I don’t think the UK leaving the EU is going to change much of that.”

However 15 per cent of the EU’s development assistance in the region comes via the UK.

The British High Commissioner to Fiji says changes will also need to be made to some trade deals such as the Economic Partnership Agreements being negotiated in the region.

Currently only Papua New Guinea and Fiji having signed interim EPA’s granting them duty free access to EU markets.

High Commissioner Roddy Drummond says other commodities such as Fiji’s mainstay sugar exports to the EU which are bought mostly by the British-based Tate and Lyle could also be affected.

“That regime with price support is due to finish in 2017 in any case so there will have to be changes in the next couple of years in terms of how producers of those kind of products approach the European market and approach the British market in the future.”

When contacted by RNZ International the head of the EU delegation in the Pacific, Andrew Jacobs, said he had no comment.

Yurendra Basnett of the Asian Development Bank in PNG says there is one immediate impact of the outcome of the Brexit referendum which could affect the likes of PNG which is actively seeking international funds to shore up its struggling economy.

“One of the things I suspect, perhaps that might be an immediate impact is raising capital globally. I’ts going to be quite challenging given the impact of Brexit on the international market.”

Professor Noy says Britain’s departure could bode well for negotiations on the regional trade deal PacerPlus, which involves the island countries and Australia and New Zealand.

The PacerPlus negotiations which began in 2009 are due to be wrapped up this year and Noy says a global backlash against xenophobic, nationalistic and isolationist sentiments around the referendum could help seal the deal.

“You know if anything I will say there will be a backlash and there will be an attempt to strengthen international cooperation in things like the trade agreements and PacerPlus and things like that.”

Regarding British aid and support to the region, High Commissioner Drummond says while modes of delivery will have to change, the UK and the EU have a shared vision for supporting development in the Pacific.

“How that will change when we are no longer part of things remains to be seen in years to come. But it may be that there is not as much change as people think, except in how we deliver these programmes.”

One immediate impact of the Brexit referendum however, which according to Professor Noy will linger over the course of the next few years, is the uncertainty it has introduced into the financial markets.

- RNZI