Archives



Business, Forwarding, Freight News, Logistics


Is the UK teetering on the Brexit cliff edge?

[ October 25, 2017   //   ]

There is “a real danger” that the UK is heading for a ‘cliff edge’ in which it leaves the European Union with no trade deal, says a leading economics expert.

Dr Michael Gasiorek, who is senior lecturer in economics at the University of Sussex and managing director of trade policy specialist InterAnalysis, says in a recent blog that the government’s recently-published Customs Bill, “has raised the issue of a no-deal scenario much more explicitly than previously!”. And while there should not be any surprise that the government is preparing for that contingency, it has now become a real danger due to “the slow pace of progress (and)… the time taken to sort out the UK’s strategy and detailed position.”

Dr Gasiorek argues that the prospect of a no-deal scenario is being used to put pressure on the EU, with the UK not making any budget contributions and leaving a hole in the EU’s budget, but this is a risky negotiating tactic and could lead to the EU position becoming more entrenched.

Another complication is that whereas the February 2017 white paper stated that the government’s aim is to establish our schedules in a way that replicates as far as possible the UK’s current position as an EU member state, the Customs Bill states that duty levels would be decided by the UK government, and set out in secondary legislation before the UK leaves the EU. This raises the possibility that the UK might be considering not replicating the EU’s Most Favopur Nation (MFN) tariffs, which in turn may complicate the UK’s position in the WTO, and potentially opens up a range of further complications which will be time-consuming.

Moreover, says Dr Gasiorek, the government has proposed that there should be a ‘no change’ period after March 2019 during which the UK is outside the EU but under the same business conditions. As well as having agreed the final settlement, this would appear to mean signing a new Customs Union agreement with the EU and also negotiating a new equivalent of the European Economic Area (a grouping that allows Norway, Iceland and Liechtenstein to be part of the EU’s single market) for just two years to avoid regulatory barriers. However, “even if both parties were willing to agree to this, it is far from clear that this is remotely feasible in the timescale.”

The blog also criticises Government attempts to engage with business on the issue. More active and coordinated engagement with stakeholders could have started after the referendum 15 months ago and while this indeed has been to a greater or lesser degree depending on the government department involved, “the overwhelming impression has been one of a government which is relatively closed to outside engagement and of a lack of coordination with regard to that engagement.

The government is asking for stakeholders’ views but is offering little of its own analysis and perspectives in return other than the relatively broad statements such as in the White Paper, or detailed questions as in the Customs Bill. It appears too anxious to share any of the detailed thinking not just with stakeholders, but also with other government departments. “There are countless position papers and analyses being written within cross-cutting or overlapping departments and units, but mum’s the word. This is a mistake. Of course, not everything can be made public but the government could do a lot more to coordinate its activity internally, and to share its thinking externally.”

A few days after publishing his blog on 11 October), Dr Gasiorek told the UK Trade Policy Observatory’s ‘Brexit and Cross-Channel Trade conference in London on 24 October that businesses were not well prepared for Brexit. “Leaving the Single Market and EU customs union will lead directly to additional bureaucracy, and even more so if there is no deal.”

Even a 5% increase in administration costs could be a significant barrier to trade and “firms won’t know what they are doing, they won’t be able to export”. Government must recognised that they need help and support to get them through, ghe said.

https://blogs.sussex.ac.uk/uktpo/2017/10/11/groundhogday/

Tags: , ,