5 days of Brexit – a view of the negotiations from the ‘the ground up’
FleishmanHillard Brussels recently ran a series of 5 informal lunchtime seminars to look at what the impacts of Brexit will actually be for specific sectors, beyond the headline macro-political issues being covered in the press and in the bars and restaurants of Brussels. Bringing in representatives of the manufacturing, energy, chemicals, technology and food sectors we looked at the issues below the headline negotiating points – the impacts on the overall trading system, and the specifics of the regulatory frameworks that have been built up over the past 40 years. We also looked at the overall dynamics of the negotiation from our perspectives having been in the centre of the EU and UK systems.
What issues did these discussions bring forwards?
- The complexity of these negotiations is not being overstated – existing regulatory convergence is helpful but not sufficient to make a trade deal a quick and easy endeavour – the fact that the EU regulatory system is a highly dynamic means that divergence of regulation is more important than existing convergence.
- As the stated objective of the UK is to leave the Customs Union, the objective of ‘frictionless trade’ seems to be potentially highly problematic as things stand – putting aside the issue of tariffs (as a zero-tariff agreement seems to be a realistic, if not guaranteed, objective) rules of origin, and at an even more basic level standard customs procedures will add a barrier to UK-EU trade. In leaving the Customs Union it seems highly unlikely that it will be possible to avoid the reintroduction of Customs Procedures. Clearly the Irish border is of high concern to affected businesses, but the wider issue of the Channel Tunnel/Channel ports has the potential for serious disruption.
- Unsurprisingly the impacts on different sectors varies widely – freedom of movement restrictions are of very significant concern to sectors such as technology, whilst the major impact on energy is much more related to the ability of energy companies to continue to trade gas and electricity, as well as uncertainty around the UK’s membership of the ETS. Manufacturing and food are most affected by the overarching issues of customs union withdrawal and the implications of leaving the single market, whilst the chemicals sector faces those issues, with perhaps the most complex and dynamic regulatory system – REACH – in place above it.
- Transitional arrangements continue to be seen by industry as essential. But whilst they may be almost the first need from a business perspective, they will likely be the last thing to be negotiated. In the end for a transitional arrangement to be put in place, you need a clear destination. The consequence will be that for business planning the longer term engagement with both Europe and the UK, will not have a sense of certainty before late in the process.
Finally it seems to us that talking about the future UK-EU relationship in the context of a ‘Free-Trade Agreement’ seems to be slightly misfocused. Given the existing integration of the UK and EU economy, and the stated aim of the British Government for ‘deep and special relationship’ looking at these negotiations from the prism of trade policy is perhaps misleading – instead the issues that face negotiators over the coming years are much less about tariff schedules, and much more about finding a way to maintain the mutual benefits of our integrated economies – in essence what happens to the acquis and the dynamic regulatory frameworks.
From a business perspective, it continues to be essential for you to be explaining to authorities on both sides of the Channel the potential impacts, on both sides, on your sector. Explaining the impact for your industry is key for the negotiators to take this into account, as the scale of the negotiations means that the possibility of important issues being lost in the complexity is high. What happens to business and trade on the ground remains one of the most important issues to communicate and advocate on.
Mette Grolleman is Senior Vice-President at FleishmanHillard Brussels, and was previously a member of the Hill and Dombrovskis Cabinets.
Matt Hinde is Director of Energy and Brexit lead at FleishmanHillard Brussels and was previously a member of the UK Civil Service.