Brexit:The Referendum That Altered The World
July 15, 2016
June 23, 2016, the people of Britain voted for the exit of the United Kingdom from the European Union in a historical referendum that resulted in the Brexit (the abbreviation of exit of Britain) with 51.9% of the people of the UK demanding the exit from the EU and 48.1% demanding to remain the member of the European Union. The poll caused Prime Minister David Cameron who supported to remain a member of the EU to step down from his position, resulting in a political crisis throughout the UK.
The referendum shocked global markets, including currencies, causing the British pound to fall to its lowest level in decades. Official data showing how the decision is affecting the economy will not be published until mid-August but it's possible to say that early signs of impact have been become apparent.
How will Brexit affect Turkey?
Brexit has brought forward a number of different opinions on how the decision will affect Turkey in the field of global and national economy as well as international politics and relations with the EU. The historical referendum also raised questions over the future of trade relations between Turkey and the UK.
Turkey experiences a high concentration in both its exports to and imports from the UK. Motor vehicles, wearing apparels and non-monetary gold exports constituted more than half of the total exports to the UK. Together with this, the sectors of computers, electronic and optical products and wearing apparel as well as automotive exhibit a high dependence on the UK market. UK recently became the top export market of Turkey replacing Germany thanks to the 600 billion USD gold exports to Turkey this May.
Resource: İş Bankası
With Brexit, EU has lost a substantial member of the Union, weakening its 23-year-old politico-economic solidarity. As UK will no longer be a part of the EU and the EU trading policy, the British government will have to form its own trade deals with non-European Union countries, Britain may even turn towards having a unilateral free trade policy. Non-European Union countries may find negotiating with Britain easier and quicker than dealing with the European Union’s bureaucratic machine. This change may cause Turkey to adapt to a new and possibly different trading regime, paving the way for change in other trading policies with other countries and economical opportunities.
Considering the supposedly two-year long transition period, no major risk is anticipated for the relations between Turkey and the UK in the short-run. Nonetheless, there can be a downward pressure especially on our exports if Brexit weakens the UK and/or the EU economies in the medium and longer term.
Other opinions are that Brexit will result in a visible improvement in the relations of the UK and Turkey, as the now weakened EU may be considered to no longer have a strong influence in the global politics and international economy. Turkish experts believe that Brexit will open new doors and improve the trade relations and political dialog between the two countries. The newly elected prime minister of UK Theresa May indicates that from this day forward, UK will try to construct close relationships with countries that are not part of the EU.
As the global market is questioning the influence of the EU since Brexit, experts predict that there will be a large amount of fund entry to Turkey. To bridge the gap of a possible international fund crisis, the government aims to draw the attention of national investors to extend the Turkish capital. Turkish authorities are planning on initiating a "tax peace", abolishing any kind of tax audit, thus permitting a confidential transfer of funds to Turkey until the end of the year. The vote to initiate the fourth tax peace in the history of the Turkish Republic was rejected by the delegates, but considering the need for funds, it's possible that this subject will mentioned again in the future.
As the global market is questioning the influence of the EU since Brexit, experts predict that there will be a large amount of fund entry to Turkey.
Another important matter is the membership of Turkey to the EU. The UK was known to be a big support during the negotiations between Turkey and EU. Experts believe that the negotiations between Turkey and EU may be affected in a bad way, resulting in the delay of Turkey's membership.
Even though the radical change and possible negative effects of Brexit, some Turkish experts believe that the decision is a big opportunity for Istanbul to become the new financial center of the world, as the power of London has been shook with the financial and political imbalance caused by Brexit.
It's clear to say that the whole world was shocked with the outcome of the Brexit referendum held June 23, 2016, but it's still to early to witness the effects. Will Brexit work out for Turkey? Will the EU change its standards after the separation of the UK? Only time will tell.
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StratejiCo. is an independent Turkish corporate and public affairs consultancy firm, providing trusted advice to multinational companies and government institutions in Eurasia since 1987.
This report is prepared by StratejiCo. based on the information gathered from publicly available sources. Opinions and views expressed in this view does not reflect StratejiCo.’s official view. The purpose of this content is to provide our readers with different perspectives about their businesses. StratejiCo. cannot be hold liable or responsible for the decisions based on the information provided here.