Brexit: time to engage
Claire Umney, General Manager, AEB (International) Ltd., considers some of the options for global trade - based on existing scenarios - following Brexit. It was back in June when 51.9% of the British electorate voted to leave the EU. So it’s time for an update, a look at the state of things – and minds. There has been plenty of media coverage as well as a variety of statements from government ministers since – especially during the political conference season throughout autumn.
In October, Prime Minister Theresa May gave everyone a date to focus on, announcing that she was planning to invoke Article 50 of the Lisbon Treaty by the end of March 2017. The business community is well aware that in line with the stipulated two-year exit window, this means that the official status of the UK as member of the EU would change by the end of March 2019.
What the general media headlines on the topic don’t tend to cover, particularly on an international level, is the active engagement that’s taking place within the business community. There are a great variety of conferences and events on the topic, and businesses across different trades and sectors are coming together to discuss different options for the different Brexit models.
All of the businesses I have spoken to recently are keeping a close eye on what is happening. However, some of them are not actively doing anything, while others are already busy drawing up different scenarios to be prepared to take action when the time comes.
It seems to me at the moment that larger companies are more actively engaged than small and medium-sized enterprises (SME). Multi-national corporations are driving exchanges with government agencies to discuss the best options to prepare, and I’m concerned that the SME community is currently too much in a waiting position.
It is crucial for SME to realise that the time to reach out to government bodies and industry associations to address their business needs is now. The SME sector is highly important for the UK economy and it is vital that businesses within engage and get involved in current discussions. 'Knowledge is power' – and it is up to the business communities now to engage with government negotiators to equip them with the knowledge they need to understand – and represent – the needs of trade and industry going forward.
At this point, it isn’t clear what the future economic model will be for the UK. Yet businesses do not have to wait for this to review sourcing strategies and global trade system flexibilities – to name just two of the areas businesses can engage in to prepare.
In the meantime, let’s take a look at currently existing economic models outside the EU that could serve as blueprints for the UK to develop its own, future post-Brexit model:
The Norway scenario: Norway has full access to the single market for goods and services. It can move capital into, and out of, the EU without restrictions. As part of the agreement, Norway grants free movement to workers from the EU and makes significant contributions to the EU budget. It negotiates its own free trade agreements with non-EU countries.
The Switzerland scenario: Switzerland has negotiated 120 bilateral agreements with the EU, affording the country broad but limited access to the single market. This excludes, for example, the financial services sector. Like Norway, Switzerland also negotiates its own free trade agreements with non-EU countries, contributes to the EU budget, and allows the free movement of EU workers.
The Turkey scenario: Turkey does not allow the free movement of EU workers and makes no contributions to the EU budget. With the exception of steel, coal and agricultural products, the EU and Turkey can share all goods duty free under the ATR movement certificate. So far Turkey has not gained access to the EU single market for services.
The Bangladesh scenario: this country was selected to serve as example for any country that operates under no special trade agreements other than those applicable under the general World Trade Association (WTO) rules. These general rules would apply to the UK if it doesn’t manage to negotiate agreements with its global trading partners within two years after triggering Article 50. WTO members do have access to simplified customs procedures, but in this scenario, the UK would probably face a significant rise in customs duties. However, this is not expected at this point. Besides, once the UK leaves the EU, WTO membership terms need to be renegotiated with all 162 WTO members anyway – by both the EU and the UK – because currently, the UK’s terms are bundled in with those of the EU.
These existing options may or may not serve as blueprintsfor the future economic model of the UK. October’s media headlines indicated that priority may be given during negotiations to controlling the movement of people rather than accessing the EU single market.
Of course nothing is certain until the official negotiations actually begin but in the meantime there is a lot for us in the business community to do to get prepared – for any of the possible scenarios.