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How Russian-UK Chemical Fertiliser, Seafood, Metals Trade Can Thrive Post-Brexit

© Sputnik / Igor Zarembo / Go to the photo bankWheat harvest in Russia's Kaliningrad Region
Wheat harvest in Russia's Kaliningrad Region - Sputnik International
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Uncertainties over Brexit have already hurt the UK’s financial sector, with multiple banks and insurance firms migrating to Europe. Meanwhile, a report by the United Nations trade agency has projected that a no-deal Brexit could cost the UK at least $16 billion in lost EU sales. But it doesn’t have to be all doom and gloom for Britain.

Brexit could very well be the push needed to increase trade between Russia and the United Kingdom, to the economic benefit of both countries, says Boris Abramov, Russia’s trade representative to the UK.

“Brexit could be the impetus for revising outdated bilateral agreements and modernizing the structures of our trade,” Abramov explained, speaking to Russia’s Izvestia newspaper.

The official noted that, for example, “in Russia today, some patients need rare medicines from the UK, however, British licensing rules and the lack of an agreement on trade in medicines with Russia serve to impede their supply. After the country’s exit from the European Union, there will be a chance to solve these problems.”

Furthermore, Abramov noted that trade between the two countries has already enjoyed a steady uptick in recent years, climbing a respectable 7.7 percent in the first half of 2019 alone. Best of all for the Russian side, given Moscow’s recent efforts at diversification of its economy, was the fact that much of this growth was not from energy and raw materials sectors.

“The growth took place largely due to trade in non-resource based, non-energy products: key drivers included platinum (45 percent of all Russian non-primary, non-energy exports to Britain, fertilizers, (5.4 percent), fish and seafood products (17 percent), as well as products made from base metals (22.9 percent),” the official noted.

Finally, amid British investors’ search for safe investments not burdened by political risks, and Russian efforts to increase awareness of the country’s brands and products in foreign markets via the Russian Export Center’s ‘Made in Russia’ programme, growing Russian-British trade may become a golden opportunity for synergistic cooperation.

UK business, Abramov noted, has already committed to investments in production and research “in the fields of pharmaceutidcals (AstraZeneca, GlaxSmithKline), machine-building (JCB), localization of production in Russia, and strategic cooperation efforts between Rosneft and BP, which are ongoing.”

Russia’s Competitive Advantage: Lower Prices, Higher Quality

“There are clearly opportunities for Russia arising from Brexit, both because trade relations with the EU will potentially break down in the transition period, and because the UK might adopt different industrial and pollutant standards that would favour Russian producers of products like phosphate,” Steve Keen, a London-based economist and honourary University College London professor, says.

According to Keen, these opportunities may be limited somewhat by the UK’s hunger for industrial goods, many of which Russia does not produce at the moment.

However, Russia’s trade Delegation in the UK remains confident, estimating the current trade turnover of about $13.7 billion could easily surpass $26 billion by 2024. Russia is already the UK’s 11th largest trading partner outside the EU, with Russia ranking first last year among Britain’s top 20 trade partners in growth in turnover.

Furthermore, along with energy and material resources, which can be help to rebuild the UK’s depleted industrial base, the Russian Export Center’s ‘Made in Russia’ website points to nearly a dozen major sectors, from machine goods, to vehicles, factory equipment, and agricultural combines, to plastics, household chemicals, medical equipment, metalwork, lumber, construction materials and even consumer goods and educational products that Russia is ready to offer Britain.

Gains large and small can be had, depending on the sector. For example, earlier this year, independent UK-based consultancy Agrus Media issued a report speculating that the UK may drop its 6.5 percent duty against Russian ammonium nitrate and ammonium nitrate-based fertilizers post-Brexit, with the government said to have “shown no inclination to restrict imports,” and Russia said to be eager to secure “higher netbacks from the UK market than from sales to Central and South America.”

 “Indeed, it seems that other countries could potentially gain additional market shares in the UK fertilizer market in case of ‘no deal’ (or some sort of ‘limited deal’),” Dr. Thomas Glauben, director of the Leibniz-based Institute of Agricultural Development in Transitional Economies, says.

“Since the ruble is currently not that strong, Russian companies could show some competitive advantages (along the WTO rules). Further, as Russian phosphorus shows a higher quality than that out of Morocco (less radioactive components) Russian exporters might have some advantages. All depends on the outcome of the Brexit process,” Glauben argues.

Back to Bilateralism

"Russia could benefit from a new era in business relations after the UK leaves the EU," says Christopher Bovis, a renowned professor of business law at the University of Hull. "The UK will start afresh bilateral international trade arrangements on its own, once outside the EU, and Russia presents a major opportunity to create a broad-reaching trade and business framework on a reciprocal basis."

According to Bovis, the agricultural sector could be one of the areas benefiting most. "Although it is likely that the UK will leave the EU with an agreement that broadly corresponds to a free trade area with the single market of the EU, the agricultural sector is not well suited to Free Trade Agreement arrangements due to the vast amount of sanitary and phyto-sanitary regulatory requirements," the academic explains.

The professor also voiced agreement with Dr. Glauben's analysis about the potential in the areas of agrichemicals and the pesticides industry. "Russia has agrichemicals and pesticides which are superior to US and Chinese competition, yet not bound from the stringent regulatory frameworks of the EU," he says.

While noting that the agricultural sector and its related industries have the potential to make the quickest gains, Dr. Bovis also pointed out that general manufacturing, the services sector, and resource exports were also ripe for mutually beneficial trade arrangements, with manufacturing especially "represent[ing] a great opportunity to evolve Russian-British trade and business cooperation. Russia has many manufacturing sectors which are competitive and advanced and the UK could be a big market for exports," the academic stresses.

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