Last reviewed 4 March 2021
Tim Hiscock looks at the post-Brexit trading opportunities in emerging markets.
So, it finally happened. The United Kingdom left the Single Market and Customs Union at 11pm on 31 December 2020 and trading relations with the 27 countries of the European Union changed at a stroke.
Four and a half years after the referendum, the action was enforced that probably represents the biggest single change in international trade procedures for British exporters in most people’s working lives. For some the departure made little difference. For some it brought new opportunities, while for others it created costs and barriers that may have been a particularly unwelcome burden on top of the severe disruption of the Covid-19 pandemic.
Leaving the Customs Union and Single Market means that trading with the EU countries is more complicated, more controlled and in most cases more costly. We have a trade agreement but that only helps exporters of products that meet the new origin rules. So, for all British exporters it is harder to trade with the EU. Not surprisingly, many exporting businesses have had to focus attention on understanding and complying with the new rules and procedures.
The European Union is a contradiction for exporters. It is very big but also quite small. The European Union is a tiny part of the world, just 1% of the global land mass. It is about 6% of the world’s population and about 20% of world economic activity. But it is almost half of the UK’s international trade. For those exporters for whom this is more than just a slight inconvenience, there are major repercussions to deal with.
That leads us to consider the other 80% of the world. If trading with the EU is harder, it is surely time to look (or perhaps look again) at opportunities elsewhere. It is almost 30 years since the Single European Market relaxed many of the barriers to trade in Europe, and the rest of the world is now a very different place.
In the twenty first century, large swathes of the globe have benefitted from sustained economic growth. China has risen to challenge the United States for the title of world’s largest economic power. The other so-called BRIC economies (Brazil, Russia and India) have stepped up a few gears too. Parts of Africa that were impoverished and often not considered as serious export markets have recently been among the world’s fastest growing economies, fuelling demand for a massive range of goods and services.
Of course, 2020 was different. The effects of the pandemic and the severe measures taken to control it inevitably put the brakes on economic growth. Only a handful of countries escaped economic decline over the year. But with the distribution of vaccines, business confidence is returning, and the prospects for strong recovery look encouraging.
Finding the opportunities
So where are the opportunities and how do we find them? After the trauma we have all experienced, it is a good time to carry out an export marketing audit. In a digital age, it is not hard to find the basic information to check how our business is performing against global trends for our market or sector.
There are lots of ways to do this, but a very quick and simple first step is to look at where others are exporting products like ours. Using tariff numbers for our products, which every exporting company knows, we can unlock information about trends in world trade that are relevant to our business. UK Trade Info is a British Government website that allows us to garner very specific information about British exports and imports of goods worldwide. Try comparing sector trends against actual company performance. Are we perhaps missing out on emerging opportunities?
And we can look at this more widely, too. The International Trade Centre collects and shares global statistics for international trade, most of which is accessible without charge from their website. This allows us to extend our search, so we can see which countries are exporting products like ours and where those exports are going.
In just two minutes, I downloaded figures for British export stats by country for all products and quickly found some surprising facts. Over four years from 2016 to 2019, British exports of goods increased by 14%. But to more than 40 countries, the growth rate was in three figures, that is to say the exports more than doubled in four years. This included such diverse markets as Mozambique and Malta, Cambodia and Colombia. That, of course, is a very general observation and some of those big growth figures were from very small starting points. But it is just as quick to drill down to a particular product group say, for example, HS chapter 84 of the harmonised system, which is a huge chapter that covers machinery and other industrial products. Overall, British exports of these items grew by 21% over the same four-year period, slightly faster than the figure for all products. Among the really fast-growing markets were Mozambique, Slovakia, Ethiopia and Belarus. Are any of those on our radar? If not, why not?
We can keep drilling this down to much finer detail, up to eight digits in the Harmonised System.
This is just the start and it is something that every exporting company can do very easily and very quickly. In many cases it can point to some surprising ideas. Even supposedly global businesses are sometimes blind to emerging opportunities. It is a perfectly natural human tendency to suppose that things we haven’t considered for some time haven’t changed very much, but it’s a supposition that can cost an exporter dearly. Understandably, a lot of exporting businesses have been focusing on the possible harm that Brexit might do to trade with our nearest markets. And then for many of us, attention has been on surviving the impact of the pandemic. But now is the time to look again at what is happening elsewhere. The world has changed at a phenomenal rate in the last twenty years and is set to change even more rapidly in the next two decades. No exporter can afford to be left behind.
Of course, this rudimentary approach is just the start. Maybe we can point to some markets that might be worth more consideration? That is all we have done. Having come up with some possible answers to the question of where emerging opportunities might come from, we need to start looking into detail at what those opportunities are, how appropriate for our business they might be, who can help us and when?
Don’t ignore markets still in the EU
In a world that’s experiencing more economic turbulence than anyone can remember, it’s undeniable that it will be the exporters who see the opportunities and respond to them who will thrive. Be prepared to challenge assumptions you might have once had and look with fresh eyes at where the future might be. Incidentally, did you notice that of those eight countries mentioned above, two of them were EU members? Just because we have left the EU does not mean we must ignore emerging opportunities there. While some prospects might be in remote parts of the world we haven’t considered before, others may be right under our noses!