Brexit and its impact on trade relations between Europe and Asia

The United Kingdom's withdrawal from the European Union has not only redefined trade relations between the UK and the EU, but has also influenced global trade flows. Trade relations between Europe and Asia in particular have been noticeably changed by the new regulations and geopolitical dynamics.

I. Overview

On January 31, 2020, Brexit officially came into force and changed the trade landscape worldwide. The United Kingdom, which traditionally acted as a bridge between Europe and Asia, has created new challenges for both European and Asian trading partners by leaving the single market and customs union.

1. The United Kingdom as a trading hub

   • The UK has historically been an important hub for trade between the EU and other regions.
   • After Brexit, questions arise as to how the changed trade regulations will affect trade flows between Europe and Asia.

2. New trade agreements

   • After leaving the EU, the UK independently negotiated new trade agreements, particularly with Asian countries such as Japan and South Korea.
   • This opened up new opportunities to position itself as a trading player independently of the EU.

II Changes in customs procedures

1. Border controls and customs duties
   • With Brexit, border controls and potential tariffs between the EU and the UK returned, disrupting supply chains that reach as far as Asia.
   • Companies had to implement new customs regulations, which led to higher costs and longer transit times.

• Example:
  An Asian electronics manufacturer that supplies the UK via the EU is now faced with double customs formalities if the goods are distributed first in the EU and then in the UK.

2. Effects on Asian exporters
   • Asian exporters who used the UK as a gateway to the EU had to develop alternative strategies to circumvent the new trade barriers.
   • Many companies set up warehouses and branches within the EU to secure their presence.

• Example:
  A textile company from Bangladesh set up a distribution center in the Netherlands in order to continue serving EU markets and simplify customs documentation.

III Trade agreements with Asian nations

1. New trade agreements of the United Kingdom
   • The UK has concluded new trade agreements with Asian countries such as Japan, Singapore and South Korea. These agreements aim to facilitate trade and reduce barriers.

• Example:
  The UK-Japan Comprehensive Economic Partnership Agreement (CEPA) allows British companies to continue to export duty-free to the Japanese market, similar to the previous situation under EU rules.

2. EU trade agreement with Asia
   • While the UK negotiated its own agreements, the EU continued its trade partnerships with Asia, e.g. the EU-Japan Economic Partnership Agreement and the EU-Vietnam Free Trade Agreement.

• Example:
  A German mechanical engineering company continues to benefit from duty-free exports to Vietnam under the EU agreement, while British exporters have to renegotiate such benefits.

IV. Opportunities and challenges

1. Opportunities for Asian exporters
   • Brexit offers Asian companies opportunities to strengthen trade relations with both the UK and the EU without being dependent on a common framework.
   • Free trade agreements offer new access to markets with specific advantages.

• Example:
  An Indian pharmaceutical company is using the UK-India trade agreement to enter the UK market more quickly while serving the EU through existing contracts.

2. Regulatory complexity
   • Brexit brought with it increased regulatory complexity, as companies now have to navigate between British and EU standards.
   • Rules of origin, double certifications and different customs duties pose additional challenges.

• Example:
  A South Korean car manufacturer has to adapt its products to both EU and British approval regulations, which results in higher costs.

V. After Brexit

1. Diversification of supply chains
   • Many companies have begun to diversify their supply chains in order to avoid dependency on a single market.
   • Alternative routes and new partnerships have been developed to minimize risks.

• Example:
  A Thai electronics exporter relocated some of its shipments from the UK to the EU to avoid customs duties and border delays.

2. Ongoing uncertainty
   • Uncertainties regarding future trade agreements and customs regulations remain as negotiations between the UK, the EU and Asian countries continue.
   • Companies must remain flexible and adapt their strategies to new regulations.

• Example:
  A Chinese company continues to monitor developments in the trade agreement between the UK and the EU in order to adapt its trade strategies for the European market accordingly.