Issue of the week: the cost of control
For many companies, the transition to post-Brexit trade is not going smoothly. And it’s not all down to teething problems
Less than a fortnight into Britain’s new trading arrangements with the EU, considerable snags have begun to appear, said Bloomberg. Although the “mile-long lines of trucks have dissipated at ports”, businesses are waking up to “less visible forms of friction at the border” that may end up causing more enduring damage. Trading with Europe is officially tarifffree as a result of the deal, but companies report they are “drowning in red tape” – from health certificates and additional paperwork to new taxes and a plethora of obscure rules that have suddenly acquired acute significance. Individually, each of these “marks a minor shift from the border-free trade Britain enjoyed for four decades”. Taken together, “they add up to a significant constraint” – particularly for the country’s backbone small-to-medium-sized firms (SMEs). Trade insurer Euler Hermes reckons Brexit may cost exporters £25bn this year.
Ironically, given the industry’s Brexit cheerleading, no sector is crying more than fishing, said the FT. UK seafood exporters are suffering such severe disruption that “one-third of the Scottish fishing fleet” is stuck in port. Some pragmatic skippers are said to be “choosing to land fish in Denmark” to avoid export problems. Although many in the sector “hope the bulk of the problems are teething issues”, they highlight the challenges of making “highly time-sensitive shipments”. Prices of highvalue seafood, such as monkfish, squid and langoustine, have tumbled by up to 50%. Elsewhere, the measures causing the most hassle are the EU’s “rules of origin”, said Bloomberg. UK firms must now “show where goods were made – and where the components in those products come from – to determine if tariffs are levied”. Some companies have abandoned cross-channel trade altogether, according to the Daily Mail.
“There is no definitive answer on how to manage these new non-tariff barriers,” said The Times. For some companies with relatively modest exports, it may make sense “merely to pay the duty, rather than engage in wholesale corporate restructuring”. For others, the costs of adapting to the Trade and Cooperation Agreement (TCA) will be “substantial” – at a time when businesses are already reeling from Covid. The Government should deliver all the help it can, and “redouble its commitment to global free trade” to create “new export destinations”. But extreme care is needed, said the FT. “Lowering non-tariff barriers to new trading partners may amount to raising them with Europe – and between Northern Ireland and Great Britain.” The key fact is that the EU will remain the UK’s biggest and closest market by far. “Any sensible trade policy must take that as its starting point.”