What will the UK's customs arrangements with the EU look like after departure from the EU in March of next year? Until the end of 2020 it is unlikely that very much will change under a deal that has been struck for a temporary 'transition' period (or implementation period, as some would have it). Shipments of goods between the UK and the EU will flow free of tariffs and unchecked ('frictionless') as now. Effectively, the UK remains in the EU customs union but can start to negotiate trade deals around the world that can come into effect when the UK actually leaves the customs union.
The big unanswered questions surround the 'permanent' trading arrangements that follow the transition. We still don't know what they will look like, beyond the assertion on the UK side that we will not be staying in the EU customs union. The EU position is that leaving the customs union and single market means that the UK's position then becomes that of any other non-EU country (ie potentially subject to tariffs and border checks for things like rules of origin compliance). The UK side is certainly getting creative with potential solutions that could - in theory - minimise additional cost and streamline future customs procedures, but they look a long way from being ready for application.
The uncertainty will continue to cause concern for companies that rely heavily on pan-European supply chains and sell a high proportion of their final UK output in the EU market (or, indeed, EU companies that sell into the UK market and potentially face reciprocal UK tariffs - eg the German OEMs).
The two sides getting closer on the principles of their future trade arrangements would be a breakthrough that would calm frayed nerves on both sides of the English Channel.
There are some interesting thoughts here from BMW on the possible impact on small companies who could face a whole new layer of compliance: BMW warns of customs costs down the UK supply chain
Meanwhile, the UK minister responsible for business is striving for future trade arrangements that would deepen European supply chains
. Yes, that would be a very nice outcome, of course.
Are automotive companies with operations in Britain at least happy that they are getting messages across to UK politicians? Toyota seems to be.
That's a little bit reassuring.
In the end, common sense ought to prevail - a compromise being struck that will more or less suit everyone, given the need to avoid 'no deal' and the economic disruption that could lead to (10% tariffs on cars, physical checks at borders causing big shipment bottlenecks, security issues in Ireland etc).
The UK will probably retain more of its current EU trade arrangements than would apply from a standard free trade deal ('EU-Canada FTA plus, plus' as one British politician described the aspiration). Additional costs on UK-EU trade will be kept to a minimum perhaps, but that minimum - whatever form it takes - will be enough for the EU side to demonstrate that it has retained the integrity of its customs union and single market. You can't be outside the club and still get the full benefits that accrue to club members - fair enough. But you can do quite a bit (like following product standards, where it is sensible to do so - 'equivalency' also in areas like financial services) to be a very good trading partner and neighbour. No-one, ultimately, wants a bad break-up that would hit Europe's economy as a whole.
That compromise deal, though, still seems a way off - both sides content to jostle and hustle. Indeed, the transition deal struck in March may have succeeded in stringing things out (and that end-2020 deadline could be extended). I fear there is much more political posturing as well as Brexit uncertainty and angst for businesses ahead.
Until next time...
Turkey is literally and metaphorically at a crossroads between East and West, while its 80m population has an average age of only 30. just-auto took the country's manufacturing, political and supply chain pulse in Istanbul to gauge its health.