How Brexit will impact the UK-GCC relationship

The voters of the United Kingdom stunned the world on June 23^rd, 2016 when a majority won the Referendum to exit Europe. The very next day, on June 24^th, 2016, Prime Minister David Cameron stepped down, effective October 2016. While Britain deals with the aftermath of the results of the non-binding Referendum to leave the EU, as its government is reshuffled and the question of a second Referendum is posed, it is important to note that because of the globalized world in which we live, should the post-Cameron government actually trigger Article 50 of the Lisbon Treaty, Brexit will impact the United Kingdom’s relationships with other parts of the world. This article briefly looks at how the impact of a non-EU United Kingdom will affect the GCC and the relationship between the United Kingdom and the GCC. This is a “quick and dirty” list of how the UK-GCC relationship will be affected by Brexit:

1. Devalued Pound. A devalued pound will make investment into the United Kingdom very attractive to government-owned investment companies that may be on the lookout for companies and properties to purchase now that the British Pound has dropped to a thirty-year low. This is good for potential investors and bad for a British populace/government that wants to “take back control” of its land.

2. Xenophobia. However, the results of the Referendum and the subsequent surge in racist attacks, graffiti and xenophobia against other Europeans not to mention the aversion to hosting Arab refugees hailing from Syria, makes it patently obvious that the United Kingdom has a problem with racism. The racism might be so problematic that GCC countries might think twice before investing their money into a country that bought into the Brexit campaigners’ fear-mongering and xenophobia. On the flip-side, a devalued Pound could result in an influx of investment and tourism, despite the xenophobia and racism of some parts of the populace. Will the racism in the United Kingdom force the GCC countries to look further East for business and political relationships and thus ignore the United Kingdom, leaving it and its flailing economy and political aspirations behind?

3. Politics. With the future of British politics up in the air at the time of writing, should a pro-Brexiter become the next Prime Minister, will said Prime Minister approach the GCC with a xenophobic and non-cooperative attitude? Will we see an influx of hypocritical politicians from the United Kingdom racing to secure Free Trade Agreements with the Gulf Cooperation Countries in the wake of the proposed EU exit? And, given the patent xenophobia and racism espoused by the Brexit campaign, will the Gulf Cooperation Countries want to do business with such nation on point of principle? The British media has already had a field day with Qatar and its efforts to improve its handling of human rights, demonizing Qatar in a non-productive and unhelpful fashion, which is the way large chunks of the British Media operate. Will the United Kingdom be able to build trust-based relationships with the GCC in light of what just happened in the United Kingdom and why?

4. The GCC is only a loose union. In June 2014, Chatham House and the Gulf Research Center held a workshop that explored the “New Dynamics in GCC-UK Relations and Challenges for the GCC Union” wherein academics, government representatives and journalists participated to explore the specific relationship between the United Kingdom and the GCC. The results of this workshop were memorialized in a paper of the same name. One of the many important points raised in this paper was that the United Kingdom’s relationships in the GCC are with the individual countries and that is because the GCC does not operate as a federal union in the same way as the EU does and that “there exists no unified GCC policy towards the United Kingdom, and vice versa, with bilateral relations between individual Gulf States and the United Kingdom prevailing.” That means that the United Kingdom will have to enter into six different agreements specific to the individual GCC nations, manage six different governments and then try to understand and negotiate in a political climate that is nuanced with subtle politics and relationship dynamics.  The GCC does not operate as a federal union for the most part for specific reasons, will United Kingdom representatives grasp these reasons or run brashly in like a bull in a china shop to try to secure what it wants?

5. Security and Antiterrorism. The threat of global terrorism is, unfortunately, real and fighting it is a priority for most countries around the world. If the pro-Brexit government and the GCC countries find accord in the face of the increasing threat of terrorism, then it behooves the United Kingdom and the GCC countries to work together to ensure that the conflicts in the MENA region are contained, that the economic and political stability of the GCC countries continue and that perceived threats, such as Iran and ISIS, are managed. There is an historical relationship between the United Kingdom and the GCC that is at least as old as each of the GCC countries (about forty-five years) which means that, despite changing governments and political upheaval in the United Kingdom, the parties are no strangers to one another and have long-standing relationships in place.  If the United Kingdom plays its cards right and the new government is not pro-Brexit and everything that Brexit stands for, then the possibility of building a mutually beneficial relationship between the United Kingdom and the GCC remains viable.

6. Economic Refugees? If the British economy starts to fail, it is likely that many individual British citizens will seek economic stability in the GCC. With entrepreneurialism on the rise in the GCC and the GCC’s keen interest in the diversification of the economy, this might, in theory be a mutually beneficial arrangement in the short to mid-term. However, in the long-term, GCC countries are keen to advance their own nationals as the various affirmative action programs favoring giving work opportunities to locals (i.e., Qatarisation, Emiratisation, Kuwaitisation, etc.) are established and aggressively enforced. In the current economic climate of tightening purse strings, the previous fat salaries and benefits are no longer as prevalent as in years gone buy. British economic refugees in search of the “expat lifestyle” may be met with lower salaries and fewer benefits while oil prices are still low and GCC governments trim the proverbial fat.

7. English language in business and law. One of the by-products of the United Kingdom leaving the EU is that English will no longer be an official language of the EU. Should the Pound continue to plummet and the British economy fail, will that mean that the lingua franca of commerce cease to be English? Will our contracts be governed by German law, for example, and written in German? Although English is now the lingua franca of international business and typically English or NY law governs contracts with an international element and it is unlikely to change in the foreseeable future, we may see a shift in the governing law and contract language of international contracts going forward if the British economy slips rather than rallies after its proposed exit from the EU.

8. Trade Agreements. Should the British government actually trigger Article 50, the British government will be occupied in the negotiation and formalization of trade and other agreements with the individual countries of the European Union. This will be a time-consuming effort. In the meantime, Britain will probably lose opportunities to trade and will be at a disadvantage unless and until such trade agreements are put in place. Such time and economic pressures will leave room for mistakes and bad deals if the United Kingdom is not careful.

9. Cultural Exchange. No one quite knows the extent to which the United Kingdom will be cast out of the EU. When I was a student in the United Kingdom, one of the more interesting opportunities open to university students was the possibility of going on an Erasmus year or semester abroad at a European university. This helped to foster intercultural understanding and good will. If the United Kingdom ends up independent from the EU, it will have to make extra efforts to fortify its own individual relationships with GCC countries, including cultural and university exchanges. This might prove particularly difficult in light of the xenophobia that the Brexit Referendum highlighted.

The world will not know what will happen with the Brexit vote for a while. As I write, it is reported that individual citizens are suing the government to stop Britain from exiting the EU. Such suits will delay the proposed Brexit. If, in the unfortunate event the United Kingdom does actually leave the EU, the United Kingdom will be under pressure to finalize its own trade agreements and that pressure will render the United Kingdom vulnerable to getting bad deals, especially given that the Brexit Referendum highlighted an ugly xenophobia and racism lurking not too deep in the shadows in the United Kingdom which will, in turn, deter GCC nations from getting too deeply involved with a British government that has already shown signs of being uncooperative, xenophobic and arrogant and this is potentially heading for an economic disaster. Will the GCC be sucked into bailing out the British – both economically and security-wise – if the going gets really tough? When the world is your oyster, why would you go for the least appetising dish on the menu?