Wait and See: The Brexit Effect
Keep calm and carry on. That very British of phrases was recently used several times in a IHS Maritime expert panel on the topic of Brexit and its effects on international trade and shipping. Brexit—the decision by Britons through popular vote to leave the European Union—was met with concern and disbelief by many observers around the world and had the effect of sending shockwaves through financial markets in the immediate aftermath. Most experts agree that the effects of the decision are not exactly apparent and are mostly subject to speculation at this point. What is definitely known is that the actual process of Brexit will be lengthy, possibly taking years to sort out a new normal with the UK as a non-EU country. Short term economic and political effects have already been felt, a steep drop in financial markets before a measured rebound as well as the resignation of British Prime Minister David Cameron. Outside of the financial and political worlds, the international shipping sector will also likely be impacted.
In Virginia, trade through the Port generates a total of $60 billion in revenue for the Commonwealth. In 2015, transatlantic trade accounted for just over twenty percent of Virginia’s imports/exports. The United Kingdom is still one of America’s top trading partners—ranking highly as a partner with the Port of Virginia in both exports and imports. Therefore, to Virginians, it is important to start thinking about what this change in landscape might mean to international trade and shipping. Some experts say that, from a larger economic perspective, Brexit’s effects will be less pronounced beyond Europe. While US export flows may be affected by Brexit, other current trends are likely to have a continued and more pronounced impact. For example, today’s strong Dollar, which increases the price of American products to foreign buyers, continues to stifle American exports. Likewise, the absence of free trade agreements between Europe and the US and between the US and the UK has further stymied potential export growth, perhaps to the point where Brexit could not make the current shipping situation any worse.
Brexit will invariably have some legal and regulatory implications to the current shipping industry. Most notably, the possible addition of UK-specific customs laws may cause delays and add an extra layer of complexity for Virginia shippers. Also, uncertainties could arise in how disputes will be resolved if and when UK-based tribunals are no longer bound to EU rules governing jurisdiction and applicable law. It is thus prudent when conducting international business to have clear, exclusive law/jurisdiction clauses and to utilize alternative dispute resolution when possible.
Closely monitoring developments and calmly adapting to changes as they come will be the best strategy going forward into this changing international landscape.