Economic impact of Brexit on Morocco

Economic impact of Brexit on Morocco

Economics 1
Economic impact of Brexit on Morocco
Introduction
In the entire economy, this is very clear that Brexit was drawing of United Kingdom from
European Union. Brexit is generally UK breaking away from their entire trading partner.
European Union will no longer be advantages from the free trade deals within their trading bloc.
However, this is one of the major reasons that are causing much of the uncertainty and
disruption; there could potentially be wide opportunities for the UK government to negotiate the
new or the revised economic partnership agreement (EPA) or trade deal with those countries that
are generally outside EU. The paper purposes to critically analyse the economic influence of the
Brexit (that is generally Britain exit from EU) on one of the country. The country that has been
selected for the analysis is Morocco who recently signed a trade deal with the UK on 26th
October 2019. Furthermore, in the year 2018, total trade among UK and Morocco was equal to
£2.5 (UK Government, 2020). The paper explores the Brexit impact on UK and Morocco, its role
in the global economy and also about the Foreign Direct investment with the theory of OLI.
Also, the paper shows comparative advantage theory related to the Brexit and its effect on
Morocco.
Brexit and its uncertainty
The term “Brexit” is a name that is given to United Kingdom’s leaving from the European Union
which means that it is a mixture of Britain and exit. Brexit was decided to vote for leaving the
European Union (Clarke, Goodwin, Goodwin, and Whiteley, 2017). There are majorly three
reasons due to which Brits voted for Brexit. The economy is considered as one of the major

Economics 2
reasons due to which the EU get unsuccessful to acknowledge different economic difficulties due
to which the people said to exit from EU (Fagan, 2019). The second reason for Brexit is an
increase of nationalism across the world. It has been found that there is increasing disbelief of
the international monetary, trade as well as defence organisation that formed after World War II.
Finally, third reason is related to the political Elitism which shows that party-political
management of Britain tackled thoughtful damage (Mauldin, 2016). The people who voted to
leave rejected both workforce parties and conservative. Together, both the parties have permitted
residua with EU and also witnessed numerous different followers go opposition on the issue. In
the research, this is witnessed that Brexit has led to the uncertainty about the future outcomes
which are a vital driver of the financial behaviour which is over and above the central predictions
(Bank of England, 2019). The process of the Brexit has already impacted the economy of the UK
which has affected certain companies and families more negative for central viewpoint. Brexit
has enhanced uncertainty around the central viewpoint. This uncertainty affects the spending by
the household as well as their consumption of the goods and services within the market. This has
been presented with the graph given below.

Economics 3
(Source: Bank of England, 2019)
In the research, this has been witnessed that Morocco's economy will be influenced by the choice
of British that is to leave European Union in terms of both the short as well as the long because
of the uncertainty that is present in the market of EU. The Brexit is all set to trigger a period of
the uncertainty within Europe and this will, in turn, leads to the impact on the trade of Morocco
as well as GDP. Morocco had to face the trade deficit of approx. $200 million with the United
Kingdom in the year 2015 as per the Exchange office of Morocco’s with the exports to British
that reaches to the $600 million (Guerraoui, 2016). The trade among the two countries is
immense due to which Brexit will lead to the major effect. This has been found that about one-
quarter of Morocco’s imports from Britain are in terms of the passenger's cars which are
approximately $185 million that is followed by the petroleum products which is $155 million
(Pagliarulo, 2014). There will be an impact on the exports of Morocco on clothing, passenger’s
cars, as well as the electric equipment’s to the United Kingdom. In the research, this has been
found that the funding of Morocco by EU is likely to be impacted when it comes to the long run

Economics 4
by the exit of Britain since UK net contribution to the entire budget of EU is predicted at approx.
$11.3 billion in the year 2015 that will not exist for a longer time. Furthermore, past agreement
with the EU to help Morocco to increase the number of tourist arrivals will be affected. The
number of tourists is required by the country as this is the way through which they can maintain
the GDP of the country (Mzezewa, 2020).
Brexit affect UK and Morocco
Britain’s trade ties with Morocco that will remain unchanged in case London negotiates with the
27 EU members its inclusion in the EEA to get a status similar to the Norwegian one that
consists of the free movement of the services, capital, good and people as per the research. This
shows that there will be a benefit of both economies. The terms of their trade agreements benefit
each economy. The trade agreement signed restores entire benefits that are present under terms
and conditions of morocco-European Union association contract (Xinhua, 2019). The agreement
will arrive into the amendment after Brexit and also it ensures that there is a smooth transition
and also upholds fluidity of trade. Along with this, the agreement terms assures for the tariff-free
trade of industrial goods all combine with the liberalization of the trade-related to the agri-food,
fishery, and agricultural goods (Aawast, 2019). The terms of agreements will give the exporters
as well as consumers certainty that they require to continue confidently as well as freely.
Role of Morocco and the United Kingdom in the overall economy
The role of Morocco is vital in the world economy as the country is considered as the world’s
third-largest manufacturer of phosphates and influence in the prices of products affects the
economy of the world. The country is ranked 6th among 14 countries that are present in North
Africa and the Middle East region and they have the overall score is more than the world and

Economics 5
regional averages (Heritage, 2020). On the other hand, the United Kingdom has a main role in
the world financial centre which has continued as the basis of financial strength. The country is
ranked as 3rd among the 44 countries in the Europe region. The country has a major role across
the world as it has a more efficient business and investment environment which are essential for
good trade relationships (Heritage, 2020).
Foreign Direct Investment
In the research, the aspect of the Foreign Direct Investment (FDI) trends, as well as the foreign
value, added activities are required to be considered. An electric paradigm is known as
ownership, location, and internationalisation model. This is better understood with the help of the
OLI outline that is a three-tiered assessment context that organisation can monitor when trying to
identify if it is advantageous to pursue the FDI. The framework includes the primary element as
ownership rewards which consist of proprietary details and dissimilar privileges of ownership of
a corporation. The businesses might consist of copyright, trademark, branding and many others.
Furthermore, location benefit is considered as the second required good. Businesses need to
know about their comparative advantage which is required to perform specific functions within
the nation. Lastly, the internalization rewards indication when it is effective for a company to
create a specific product in-house versus constricting with a third-party. All these elements are
related to the foreign direct investment that is present in Morocco. In Morocco, after the decline
during the global recession, the flow of the FDI of the country enhanced more than 2013-2015
which is exceeding more than USD 3 billion every year. However, this has been witnessed that
there is a sharp fall to USD 2.16 billion in the year 2016. In the year 2018, the flow of the FDI
got recovered from a year previous and rise to USD 3.64 billion which made the country to
register the record of the second-uppermost in the district of Northern Africa (Nordea, 2020).

Economics 6
The high flow of FDI allows the company in Morocco to maintain the ownership, location, and
internationalisation model. The high amount of FDI will make the company to ensure that they
have the ownership rights which include the trademarks, patents and other legal elements.
Further, the location will lead to the high resources which are possible with the good amount of
the FDI that is invested by the companies across the world. The rise in the FDI leads to wide
opportunities with the help of which the company can avail all the service in-house without
going somewhere else for the additional services.
Comparative advantage theory
In the research, this has been witnessed that Morocco has been deeply reliant on Europe for its
investment and trade which leads to the weaknesses in the main segments of its economy.
However, this has been found that the economy of the European is heavily dependent on the few
sectors. The Brexit and its trade with Morocco can be understood best with the help of the
comparative advantage theory that shows the ways through which the countries will engage in
the trade with one another, also exporting the goods that they have a relative advantage in terms
of the productivity. In the research, it has been found that more than 60% of Morocco’s $22
billion in transfers flows to the nations that are present in European Union along with Spain and
France major receivers of the Moroccan goods (Pagliarulo, 2014). Further, there are only 8.8%
of its products that are exported to the countries of African. This shows that the country has the
comparative advantage theory as they export the products which show that they have vast
production of the goods. In addition to this, the European Union is not depended on the
Moroccan exports. This means that there will no effect if the products are not exported to other
countries. In the industry of the garment, Morocco sells approx. 78.5% of the apparel exports to
Spain as well as to France.

Economics 7
Along with this, the electronic industry is considered as the powerful one for the economy of the
Moroccan which allows them to export 65% of the products to France and Spain. This has been
found that the fashion industry of Morocco is required to be strengthened and also it had a big
partnership with some other European countries but not the UK (Gault, 2020). This has been
found that morocco manufacturers are interested in the market of UK but they might find some
of the issues due to Brexit. For example; Max and Jan, a well-known company has the stylish
and inspire fashion stuff with international fashion. The company finds that they can export the
fashionable products which are exported to other countries in the market.
Conclusion
At the end of the paper, this can be said that Brexit is considered as one of the vital that is
discussed across the world. The withdrawal of the United Kingdom from the European Union
leads to the economic impact on different countries from which the country had a trade
agreement. The analysis of the economic impact of Brexit on Morocco is done which is required
as they recently had a deal with the UK. The impact on the exports has been witnessed in
Morocco that is on clothing, passenger’s car, and other electric equipment’s. This has been found
that both Morocco and the United Kingdom have a vital role in the world’s economy as they
stand on 6th and 3rd rank in their respective areas. The discussion about the FDI in Morocco has
been done due to Brexit and the FDI is increased which is understood with the help of the OLI
framework. It has been found that there are explanation and implementation of economic trade
theory that is comparative advantage. The economic theory of the comparative advantage is
applied and explained in the paper.

Economics 8
References
Aawast. (2019) Morocco, UK Sign Deal to Maintain Post-Brexit Agreement [Online]. Available
from: https://aawsat.com/english/home/article/1963726/morocco-uk-sign-deal-maintain-post-
brexit-agreement [Accessed on 14th March 2020]
Bank of England (2019) In focus - Uncertainty and Brexit [Online]. Available from:
https://www.bankofengland.co.uk/monetary-policy-report/2019/november-2019/in-focus-
uncertainty-and-brexit [Accessed on 14th March 2020]
Clarke, H.D., Goodwin, M.J., Goodwin, M. and Whiteley, P. (2017) Brexit. Cambridge
University Press.
Fagan, L. (2019) Morocco has a new Brexit deal. It’s the UK that still can’t seal one [Online].
Available from: https://africatimes.com/2019/10/27/morocco-has-a-new-brexit-deal-its-the-uk-
that-still-cant-seal-one/ [Accessed on 14th March 2020]
Gault, B. (2020) Moroccan manufacturers target Brexit Britain at Fashion SVP [Online].
Available from: https://www.drapersonline.com/product-and-trade-shows/moroccan-
manufacturers-target-brexit-britain-at-fashion-svp/7039364.article [Accessed on 14th March
2020]
Guerraoui, S. (2016) Brexit to impact Morocco’s economy [Online]. Available from:
https://thearabweekly.com/brexit-impact-moroccos-economy [Accessed on 14th March 2020]
Heritage (2020) Morocco [Online]. Available from:
https://www.heritage.org/index/country/morocco [Accessed on 14th March 2020]

Economics 9
Heritage (2020) United Kingdom [Online]. Available from:
https://www.heritage.org/index/country/unitedkingdom [Accessed on 14th March 2020]
Mauldin, J. (2016) 3 Reasons Brits Voted For Brexit [Online]. Available from:
https://www.forbes.com/sites/johnmauldin/2016/07/05/3-reasons-brits-voted-for-brexit/
#4cd07a7e1f9d [Accessed on 14th March 2020]
Mzezewa, T. (2020) How Brexit Will Affect Travel to the U.K. and Europe [Online]. Available
from: https://www.nytimes.com/2020/01/16/travel/brexit-travel-impact.html [Accessed on 14th
March 2020]
Nordea (2020) Foreign direct investment (FDI) in Morocco [Online]. Available from:
https://www.nordeatrade.com/en/explore-new-market/morocco/investment [Accessed on 14th
March 2020]
Pagliarulo, N. (2014) EDA: Morocco overly dependent on trade with Europe [Online]. Available
from: https://globalriskinsights.com/2014/12/eda-morocco-overly-dependent-on-trade-with-
europe/ [Accessed on 14th March 2020]
UK Government (2020) UK and Morocco sign continuity agreement [Online]. Available from:
https://www.gov.uk/government/news/uk-and-morocco-sign-continuity-agreement [Accessed on
14th March 2020]
Xinhua (2019) Morocco, Britain sign trade agreement [Online]. Available from:
http://www.xinhuanet.com/english/2019-10/26/c_138505559.htm [Accessed on 14th March 2020]