Bordering on trade Nov 6 2017 | Liam Smyth, deputy chief executive, Aberdeen & Grampian Chamber of Commerce

Hasn’t the last year been an interesting one for the country?  After the EU Referendum we all discovered the impact that the European Union has had on our economy over the last 40 years.

And who knew that what we do at the Chamber every day, facilitating trade across national borders, could be so interesting to everyone else?

Every night on the news there’s talk of frictionless trade, the customs union, hard or soft Brexit and now the nation has woken up to the importance of International Trade to our future economic growth.

It seems that our everyday discussions are Brexit flavoured as we talk about the impact and opportunities that it might bring. 

And so over two days last week at the BCC Trade Facilitation Forum and International Summit, your Chamber joined businesses from across the UK, who shared their experience of doing business abroad.

And we heard from the policymakers, the people of influence who will define our future trade arrangements, share their thinking on our future partnership options.

In Chambers, we know that the way trade is done is constantly changing, but change is generally slow paced, its planned and we get ready for it.  The big shocks are rare.  And whilst with or without Brexit, change was happening, its seems obvious that a big shock for the way we trade is on its way.  What do we know already?

  • The Union Customs Code (UCC) is now fully implemented and will be with us for at least 18 months or until a new UK code is agreed. (Expect the new code to look very like the UCC, changes will only delay a trade agreement with the EU27.
  • The Approved Economic Operator (AEO) system to approve trusted traders will continue to be implemented post Brexit. It’s present now, is on the horizon for many businesses and is certain to be part of future FTA’s in its safe and secure (AEOs) form at least.
  • And WTO Trade Facilitation Agreement was delivered in February 2017 for implementation across 164 countries, of which the UK is a signatory, it’s here to stay.

The UK Government published white papers on the Trade and Customs Bills last week too.  They outline the proposed options for a negotiated agreement with the EU27, and state clearly that the government will prepare and legislate for the instruments to deal with a hard Brexit if it comes.

If that happens, it’ll bring a bigger shock to our trading system as we revert to WTO rules on tariffs and trade.

If we leave in an ordered way, the aim frictionless trade between the UK and the EU will accelerate the rate at which companies find they need to become a trusted trader (AEO accredited) and the BCC is working with HMRC, the Treasury and the Chamber Network to develop a UK wide response to assist traders in getting there.

So, we need to keep talking, and as we ruminate about the impact on business, our need for a period of transition, and the aim to agree a negotiated settlement, the hard reality is that as new trade deals are agreed, businesses will need to adapt, and adapt quickly.

For most people a Free Trade Agreement (FTA) simply means that we can move goods across nationally agreed borders without hindrance, and that is true.  However, most countries or trade blocks that we want to make a deal with will already have existing FTA’s in place.  Those deals with other nations and trade blocks, the EU27 for example, will impact on the nature of the deal we can strike. 

On Brexit day +1 we will not have any existing agreements and everyone we want to do a deal with will. We are therefore unlikely to get a better deal than the EU already has in place.

FTA’s provide benefits for many areas of trade. The most obvious of those is on tariffs that are usually duty free or reduced.  It is that factor that reduces the cost to the importer and makes our exported goods more competitive.   It’s like offering your buyer a discount voucher.  But for the buyer to be able to use it, the seller must satisfy a range of conditions that are unique to most trade deals and often centre around the Rules of Origin. 

It is those rules and how they are dealt with in trade deals that will determine whether goods can be exported without tariffs. Many traders use components sourced from the EU and other trade partners to make finished goods that are then considered to be of EU Origin and trade tariff free.  Post Brexit, those same goods will need to be able to prove UK origin and the proportion of the finished goods that will need to originate in the UK for the goods to export without tariff will depend on any final deal.

It’s what makes the clothes we buy, the latest electronics we demand and the food we eat so cheap.  Even if they don’t understand it, consumers benefit from Free Trade Agreements every day of the week.

Trade is technical and at times complex, so when changes happen, members and exporters reasonably expect that Chambers of Commerce will be a reliable source of advice and information.  And our members have a national and international network of Chamber colleagues that they can call on for help and advice to get goods to market. 

So, spending time keeping up to speed with what’s happening now and what changes may take place in the future helps us to support our members.  We want to help our members to be ready for the big shocks if they come.

The movement of goods across the EU will need to be as frictionless as possible if we are to maintain our ability to take advantage of ‘just in time’ efficiency.  Over 185,000 businesses only trade with the EU, and over half only trade services.  That means that 100,000 businesses may have to learn to make customs declarations for the first time.  

The number of trade documents we issued by UK Chambers reached record levels last year, perhaps it’s no surprise that during a period of uncertainty businesses are more likely to turn to a tried and trusted third party to provide the assurance and guidance that they need.

So, what questions should businesses be thinking about right now? 

  1. What countries are we selling to and could Brexit affect future orders?
  2. What countries are we buying from, is our supply chain secure?
  3. What currency are we being paid in now and how will we manage rate fluctuations?
  4. Are there any specific rules of origin that could impact our access to our markets?
  5. Do we benefit from EU FTA’s, what tariff may be due if WTO rules were applied and how might it affect margins?

We are in a period of uncertainty for companies that are trading across borders.  And the only way for business to deal with uncertainty is to forecast and plan for the possible outcomes.  Identifying potential risks will allow the time to mitigate their impact and time has a habit of running out.

The team at the Chamber are the people that make trade agreements work because we can help to ensure that you understand the potential risks and opportunities.  A deluge of FTA’s arriving in short order has the potential to create confusion, and reduce competitiveness, particularly for SME’s, if businesses don’t take advantage of the benefits of duty waivers.

The potential cost of change is concerning, and that’s why the British Chamber of Commerce are lobbying on behalf of our members to have a minimum 3-year transition period.  Business will need time to adapt. 

We have a ‘Tariff Tool Calculator’ to help you to understand the impact of WTO tariffs, should they be applied to your product and supply chain in the future. Its free for our members.

If you are considering applying for AEO, and need some guidance or insights on the process, just ask.  We can offer everything from basic training through to full service consultancy to help you with the process.

Your Chamber team are here to help, you only need to ask and if we don’t know the answer to your question we probably know someone who will. 

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