The Middle East & North Africa in 2017: Business as usual? Phil Broek, MENA Associate at Middleton Jones examines the outlook for UK trade relations in the forthcoming new year…

To say that 2016 has been quite a year feels like a massive understatement; Terror attacks in Brussels, IS on the rampage, Syria in flames, refugee crisis, Brexit, falling Pound, Trump…I could go on but its nearly Christmas and I don’t want to add to your seasonal indigestion further. Besides which, being fearful of the future doesn’t really help does it? Not unless your business is making nuclear bomb shelters or anti-depressants.

However, being forewarned is being forearmed as the saying goes, so I thought it may be helpful to look at how some of the key events of 2016 may shape the Middle-Eastern business environment for British companies in 2017 and beyond.

Let’s start with Brexit – that dreadful term that sounds more like an on-the-go breakfast snack-bar than one of the biggest shake-ups in Britain’s’ history. How will Brexit affect our trading relations with the Middle-East, if at all? The short answer is that no one can know for sure but it is fairly safe to assume that Her Majesty’s Government will have to place trade with non-EU countries, which of course includes all of the Middle East and North Africa (MENA) region, at a higher priority given the future uncertainties of EU trade relations. This is already being borne out by some of the rhetoric coming from the DIT and other government departments who are keen to expand upon the $22bn of British exports to the region.*This is higher than our trade with China and more than twice that with India. Indeed, just this week Theresa May, announced that she will become the first British leader and the first woman to attend the annual gathering of the Gulf Cooperation Council (GCC) annual summit saying; “As the UK leaves the EU, we should seize the opportunity to forge a new trade arrangement between the UK and the Gulf. This could transform the way we do business and lock in a new level of prosperity for our people.” Strong words indeed.

A further driver of this policy will be Britain’s weakened political clout as it leaves the EU bloc which makes trade and investment deals with the richer Gulf countries more important, though this may be at the expense of some of the North African trade relations. It is worth noting that despite having a free trade agreement with the European free trade area, the GCC states have failed to strike a trade deal with the EU and talks with the EU have been frozen since 2008. It is possible therefore that a new trade agreement between Britain and the GCC could be struck well before the EU deal happens which would be grist to the Brexiteers mill.

 “It is worth noting that despite having a free trade agreement with the European free trade area, the GCC states have failed to strike a trade deal with the EU and talks with the EU have been frozen since 2008.”

Olive-oil-tunisia-MENAOn the bilateral trade front, a post-Brexit Britain may have a weakened position on bilateral trade negotiations but it would also have a greater degree of flexibility. We could for example, agree to drop or reduce tariff barriers on some agricultural goods like olive oil. Tunisia for instance, is the world’s second-largest exporter of olive oil and has been seeking better access to EU markets, but lobbying from major producers in the EU, has limited their market access. Opportunities here for British olive oil importers perhaps?

One of the first casualties In the Battle Of Brexit dogfight has of course, been the Pound Sterling. Having initially gone into a tail-spin, it has rallied somewhat but is still trading a fair few points below the pre-Brexit Dollar exchange rate. This is good news for British exporters especially as the major currencies in the Gulf Co-Operation Council (GCC) are fixed to the US Dollar and the majority of their imports are bought in Dollars. Whether this situation will continue throughout 2017 remains to be seen. The Dollar has strengthened in the honeymoon period after the US election but when President Trump takes office on January 21st, who knows what will happen. My crystal ball certainly gets very cloudy from then on.

Ok, don your hard hats, we’re going to talk about President-elect Trump.

This is not meant to be a political statement on the merits of Donald Trump but it is important to explore the potential implications of some of his more controversial pre-election statements. I’ll preface this by saying I have no wish to offend anyone here, whatever political shade, creed or religion you happen to be, but it’s inevitable that I will so my apologies in advance.

Wish me luck, I’m going in… donald-trump-rubix-cube-Middle-East-North-Africa

In December 2015 Mr Trump proposed “a total and complete shutdown of Muslims entering the United States”. OK, so presidential candidates say a lot of daft things in their election campaign and we can but hope that this idea will be quietly dropped when he comes to power. Nevertheless, the clear anti-Muslim tone of his campaign has sent shivers down the spine of the Muslim world and will undoubtably make many Muslims increasingly wary of entering new trade deals with US companies or even continuing with their existing relationships. This unhappy state of affairs may of course, play into the hands of British companies willing to exploit any trade vacuum left in their wake and I think it behoves all British companies looking to export to the Muslim world to ensure Great Britain PLC is not tarred by the same anti-Muslim brush. Certainly, in my experience of the MENA region, British business practise is regarded as generally more pragmatic and even-handed than our US counterparts and I think we would be well advised to keep it that way in 2017.

On the Iranian issue, many fear he will be a lot tougher than Barack Obama. Trump called the deal struck by Obama on Iran’s nuclear programme a ‘disaster’ and ‘the worst deal ever negotiated’. This may all be blow-hard rhetoric to appeal to his more extreme supporters and come January, sense may prevail and the slow thaw in US / Iran relations may continue – we can but hope. Anyway, with a new Secretary Of State for Defence called General ‘Mad Dog’ Mattis, what could possibly go wrong?

So there you go, 2017 promises to be an interesting year for British / Middle-Eastern trade relations. If we can all keep a calm head and not succumb to our scaremongering press, then I believe it could be a great time for British SME’s to make a concerted export drive to this exiting region.

Finally, I would like to wish you all a peaceful and joyous Christmas and in the spirit of good-will to all mankind, may we all spare a thought for Syria, whose people have shown me nothing but kindness over the years.

Continuing on a Presidential theme, I’ll leave you with the words of the 30th US President, Calvin Coolidge: “Christmas is not a time nor a season, but a state of mind. To cherish peace and goodwill, to be plenteous in mercy, is to have the real spirit of Christmas.”

 

Phil Broek MIEx
05/12/2016

 

Phil Broek is a member of the Institute Of Export and is the Middle East and North Africa (MENA) Associate at Middleton Jones. He can be contacted at: philb@middleton-jones.com

*2015 figure

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