By David Henig and Anna Jerzewska
“I’m from the government and I’m here to help” is often a statement business representatives really don’t like to hear. But as the UK embarks on an independent trade policy outside the European Union, that needs to change, at least for businesses trading goods or services outside of the country.
The main purpose of trade policy is to allow businesses to trade more. For the UK government to achieve this, with their new-found powers in areas such as customs issues, trade remedies and international trade agreements negotiations with the European Union and third countries, they need help from business*.
We’ve heard a lot about what the government needs to do to be ready for the UK running its independent trade policy, and a lot about what business needs to do to be ready for Brexit. But what does businesses of all sizes and sectors need to do to provide the required support to the government on trade policy?
In short, while it is clearly for the government to propose a vision and policy direction, business must contribute, communicating the impact of different policy scenarios in general, but also proposing specific solutions that will facilitate trade in the post-Brexit world. These would then form negotiating priorities, and the government and the interested businesses should work together to make sure that the desired outcomes are delivered.
Paperwork to shaping policy
Let’s start with the absolute basics: paperwork.
It’s been widely written that if you’ve only previously traded with the EU there’s suddenly going to be a lot more paperwork at customs. As a business you will most likely use a customs agent to handle the submission of the paperwork. But it is the business, as the importer or exporter, that is ultimately legally responsible for ensuring the information submitted to HMRC and the other customs authority on your behalf is accurate. If your business is not familiar with customs compliance requirements you will need to get up to speed fairly quickly.
Whether this is new or you have already imported or exported for a while and are familiar with customs procedures, as a business you should be suggesting changes and simplifications to the current processes and forms where you can see an opportunity. Similarly, if you are currently using one of many simplifications of reliefs such as customs warehousing or inward processing, you might be concerned about how this will work in a post Brexit environment.
Beyond customs paperwork there are many more possible complications, including for example restrictions on providing certain services or specific requirements for exporting a particular type of goods. Such issues are typically covered in a trade agreement, but a government cannot cover your issue if they don’t know about it. Business associations can help advise, but typically won’t be able to raise individual cases, so this is something you will need to do.
Getting involved with a trade agreement negotiation
So, the government has started a trade negotiation with a country of interest to you (you may even have influenced this decision by saying such an agreement could really help you). Depending on your product or service it’s likely to be worth taking the time over the following.
Tariffs. Trade agreements may not reduce tariffs on all goods, so you probably want to ensure the export of your product is granted a preferential tariff in the partner country, especially if your goods are currently facing a high tariff. If your supply chain is highly integrated and your inputs come from several countries you will also want to ensure you can meet the specific rules of origin that will be required to qualify for the reduced tariff, and this in particular will be worth engagement with government. If the UK has a tariff on your product you should also be aware that this is likely to be reduced or eliminated in trade agreements, and plan accordingly.
Non-tariff barriers could be the bigger obstacle to exporting. Among the more likely are the requirement to meet regulations, adhere to a voluntary standard, and have the product conformity assessment tested. If the product already meets all known regulations, and is considered safe in the target market, then great, though it might be an idea to make sure that is written into the trade agreement so it doesn’t change. More likely if there are problems such as hard to meet and maybe discriminatory regulations, different standards, and testing that requires you to spend some time in the destination even though you’ve already tested safe in the UK, a trade agreement is your chance to change some of this, and potentially make your exports much more competitive.
Non-tariff barriers require more engagement with government than tariffs – to make them aware of the importance of the issues, and then throughout negotiations to make sure that any solution offered by the other party will actually solve them. For example, at first the other party may argue that there is nothing they can do, or possibly offer a solution that wouldn’t help. You and the UK government will need to maintain discussion to obtain a satisfactory outcome.
Unfair competition fears? Do you believe another country’s competing products are unfairly subsidised or are being dumped in the UK at below cost-price? In this situation you could raise the possibility of an anti-dumping case, which could see measures taken such as increasing the tariff to offset the subsidy, or press for government to include anti-subsidy clauses in the trade agreement. Another scenario has the competing product potentially benefiting from lower tariffs and able to be produced at a lower cost because the other country does not enforce labour or environmental laws. In this case you may want to lobby for such enforcement to be included within the trade agreement.
Special requirements for different sectors? Food and drink makers have to think about Sanitary and Phytosanitary (SPS) regulations which are strict in most countries, but could be addressed in a trade agreement. Licenses will be needed in the pharmaceutical sector. The same basic point applies – that all exporters should be thinking and communicating with the government about how UK trade policy can help them do business in the other market.
Services. There are a number of barriers to trade. The sections of international trade agreements that deal with services use either a ‘positive list’ – what is listed is what can be provided by foreign companies or natural persons, or a ‘negative list’ – what is listed is what can’t be. Typically, these lists contain rights to establishment, and national treatment, and more importantly any restrictions to being allowed to operate. For example, you may not be allowed to set up a company in a specific field of services, or could be treated in a different way to national providers. Alternately foreign businesses may need certain licenses, or to fulfil other criteria, which is where the barriers are less obvious. Clearly you will want to ensure you can operate in the other market without restrictions, and ensure government knows of your interest.
Beyond these lists there may be an opportunity to mutually recognise professional qualifications with those of the other country, which may be of use to you. There may also be underlying issues to be raised, such as data flows. Ultimately if it is something you need for your businesses to operate you should be discussing it with the government.
Your business, your trade policy
Ultimately, if you are an exporter, UK trade policy should reflect your needs. A government will not necessarily be able to achieve all of the above for all UK businesses, but the more they are aware of issues and opportunities the more can be raised with the other country.
This knowledge can only come from businesses, so the more you are aware of the potential restrictions in other markets, and how these can be overcome, and the more you can feed this to the government, the better. Whether you are a trading business large or small, if the UK is starting trade negotiations there might be an opportunity, to improve your business and UK trade policy.
*Note: The formulation of a country’s trade policy requires involvement from a wide group of stakeholders, this post is specifically aimed at how business can best be involved
David Henig is Director, UK Trade Policy Project, at the European Centre for International Political Economy. Anna Jerzewska is a UK-based global trade and customs specialist.