Brexit Britain Should Want to Be Like Singapore; to Get there it will First Have to Pass through the Arabian Gulf

Faisal Al Yafai

AFP photo: Roslan Rahman

This is a tale of two free-trade agreements. The first, between the European Union and the countries of the Gulf Cooperation Council, has languished unsuccessfully in limbo, being periodically negotiated for 20 years, with no resolution in sight. The second, between Singapore and the GCC, concluded in 2013, is the first free-trade agreement signed by the bloc with a country outside of the Middle East.

After Britain leaves the European Union – whether it is at the end of the month or after a short delay – it will need to decide what kind of country it wants to be, free of continental constraints.

One model is Singapore, a low-tax, low-regulation beacon of free trade; this indeed is the ideal Brexiteer vision, and the one most likely to come about if the UK exits without a deal.

But becoming like Singapore is fraught with uncertainty. It means more than merely changing the UK’s relationship with the European Union. It will mean changing the UK’s relationship with itself.

The first test of this new vision will come in the Gulf.

Britain’s exit from the EU is usually seen as a chance to do things differently. But in the Gulf, the best the UK can do is more of the same. In some ways, an FTA with the GCC ought to be one of the UK’s easiest. Barriers to trade are already low: import tariffs hover around 5 percent, although the GCC-Singapore deal made almost all imports tariff-free, so there is room for improvement.

The year after the Brexit referendum, the UK’s international trade minister celebrated the fact that British companies exported more than £30 billion in goods and services to the GCC every year, more than exports to China. Since then trade has grown. The UAE and the UK alone have a bilateral trade target of £25 billion by 2020, and the other major economies of the GCC — Saudi Arabia and Qatar — are keen to expand their imports from and investments in the UK.

In particular, as GCC countries look to diversify away from hydrocarbons, many will seek to expand their education, healthcare and financial services sectors. These are all sectors in which British services are strong, offering considerable opportunity for further cooperation.

What, on the other side, though, does the Gulf want from the UK?

The short answer is stability and continuity. At the moment, most of the trade between the two is focused on oil and gas and defense sales. But defense will not be covered by a free-trade agreement and is usually a government-to-government matter, so from the GCC’s perspective, the continuity of a good political relationship is key.

The same applies to stability. Sovereign wealth funds and private citizens are heavily invested in the UK real estate market, so a decline in prices or fluctuations in the exchange rate can have an impact. However, those things are beyond the scope of an FTA. There are also issues like visa-free access, which the GCC has already requested.

In fact, what the GCC wants from the UK isn’t entirely more trade — it’s less politics.

The sticking points in the EU free-trade negotiations have been mainly over politics: the GCC want to trade with the EU without what it sees as unnecessary interference in GCC states’ domestic politics, in particular with regard to clauses about human rights. There is mutual suspicion: the EU is suspicious that a current lack of political liberalization also means the GCC doesn’t really want economic liberalization either; while the Gulf suspects that EU clauses about human rights are a way to interfere further in domestic affairs in the future.

To do a free-trade deal, then, will mean changing how the UK operates, dropping more political issues and focusing on pure trade. That is precisely what the Brexiteers want, and what the GCC prefers. But from the perspective of the UK, it will mean altering the way Britain has negotiated deals for decades; changing its offer to countries over the circumstances of bilateral trade; and, indeed, changing its relationship with itself.

It remains to be seen whether the Singapore vision is one that commands support in the UK.

Singapore’s success has been built on a very specific political and social culture, one that includes aspects that the British public might favor (such as low taxes and minimal regulation), others that the public definitely won’t want (such as low public spending in a country devoted to its deep-pocketed National Health Service), and things that the UK simply cannot copy even if it wanted to (such as Singapore’s modest population of five and half million or its broadly cohesive society).

If it can do that, it really could be like Singapore, but the Gulf will be the first major test. Conclude a GCC free-trade deal quickly and more complex deals with less willing countries become easier. But fail to pass a deal, or discover that a majority of the country don’t want the Brexiteer vision of Singapore-on-Thames, and everything else will become significantly harder.

Britain’s Brexit journey to becoming the next Singapore could find itself stuck just east of Suez.

Faisal Al Yafai is currently writing a book on the Middle East and is a frequent commentator on international TV news networks. He has worked for news outlets such as The Guardian and the BBC, and reported on the Middle East, Eastern Europe, Asia and Africa.