The flow of trade between Vietnam and the rest of the world is set to enter a prolonged period of disruption after voters in the UK opted to exit the EU.

The move will require Vietnam to renegotiate the recently agreed upon Vietnam-EU free trade agreement for which the Southeast Asian nation was to have received preferential market access as early as 2018.

Under that agreement Vietnam was to have received favourable market access in the form of reduced import tariffs and the removal of other trade barriers to the economies of all 28 member nations of the EU.

At a minimum the exit of the UK will require Vietnam’s trade agreements with both the UK and 27 other members of the EU to be renegotiated. However, it is not possible at this time to know to what extent, if any, that will have on the 2018 timetable.

Though economic experts predict it will take about two years for Britain to negotiate the terms of its exit from the EU, dubbed ‘Brexit,’ the ultimate effect on Vietnam is simply indeterminable.

However, it appears reasonable to conclude that it is likely the 2018 timeframe will at least be pushed back as it will take longer to reach new trade accords, many economists have said.

That does not mean commercial activity between Vietnam and the UK or any of the EU member countries will stop by any measure. It just means that they will continue to be governed – as is the case currently – under World Trade Organization (WTO) rules.

Just as importantly, Brexit has jeopardized the Transatlantic Trade and Investment Partnership (TTIP), a trade deal between the EU and the US, and could negatively impact the Trans Pacific Partnership (TPP).

The TPP is a 12-member nation free trade agreement involving both the US and Vietnam as well as the 10 other countries of – Japan, Malaysia, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

To the extent that both the TTIP and TPP are principally US driven free trade agreements modelled after the EU model—and to the extent that Brexit represents the failure of that model—the implications are potentially devastating for the TPP.

Already Donald Trump, the presumptive US Republican presidential nominee has called for a total rejection of the TPP and said he would prefer to pursue a return to bilateral trade agreements with Vietnam.

Hillary Clinton and other US Democratic candidates for the US presidency have also called for a repudiation of the TPP and at a minimum renegotiation, if not outright total abandonment of the agreement along similar lines of thought.

They too, like Donald Trump, are not calling for an end to trade with Vietnam, but are calling for a return to more traditional bilateral trade agreements that ultimately may well benefit Vietnam far more than the TPP ever would have.

Simply put, Brexit may represent the first inkling of a turning away from globalization. As many as five other EU countries have come forward and expressed a desire to hold a similar referendum and choose between leaving or staying in the EU.

France has called for its own referendum vote as well as concerns have been raised from Italy and the Netherlands. If they break many global trade deals including those with Vietnam will need to be restructured.

Other experts caution that fears of the EU falling apart are overblown.

Most significantly, Brexit triggers a strong US dollar. In short, a stronger US dollar typically lowers US exports and in turn will likely hurt companies operating in Vietnam that are in the US global supply chain.

Though many things are up in the air at this time, the Vietnam government has positioned the country well and trade prospects with the US still hold tremendous potential and the nation’s future remains undaunted.

VOV