Briefing on Brexit and FTAs

The Arab British Chamber of Commerce hosted a briefing on Brexit and its implications for UK-Arab trade on the afternoon of 27th September 2018.

The Briefing on Brexit and FTAs held at the ABCC’s premises was attended by Arab ambassadors, Arab commercial attaches, ABCC Board members, senior executives, officials, policy makers, journalists and representatives of ABCC member companies.

Mr Abdeslam El-Idrissi, Director of Trade Services and Acting General Manager, ABCC, opened the session and welcomed attendees on behalf of the Chamber’s Chairman, the Rt Hon Baroness Symons, who was unable to attend.

Mr El-Idrissi delivered opening remarks that set the scene for the guest speakers and remarked on the attitude of the Arab States towards Brexit reflecting on its implications for future bilateral trade.

He commented on the sheer difficulties of achieving free trade deals and stated that the ABCC was committed to helping its members deal with such challenging issues as Brexit.

The briefing was designed to help resolve the uncertainties and allay some of the confusion surrounding what might happen once Britain has left the EU.

He pointed to the GCC-British Economic Forum organised by the Chamber and held in July 2016 within just a few days of the EU referendum and at which Dr Liam Fox, Britain’s Secretary of State for International Trade, was one of the keynote speakers.

Mr Charlie Morris, Head of Public Engagement for Trade Agreement Continuity, at the UK Department for International Trade (DIT), spoke on the topic of “Trade Agreements Continuity”.

Mr Morris explained that in the event of a deal with the EU, the UK would be able to see new free trade deals coming into force after January 2021.

The government recognised that the main concern of the business community was the uncertainty surrounding what will happen after Britain leaves the European Union.

He stressed that the UK government hoped to achieve a deal with the EU that ensured no disruption to trade at the point of exit in 2019 by seeking to ensure the continuity of existing agreements.

Much of the discussions held with potential future trade partners had been positive and the overwhelming impression received was that they wanted good relations to continue, he said.

Furthermore, Mr Morris outlined the consultations on future free trade deals that the DIT had launched in July 2018 with many countries, such as the US, Australia and New Zealand alongside talks on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

He pointed out that the UK was already participating in free trade arrangements with several Arab countries, namely Morocco, Algeria, Tunisia, Egypt, Jordan, Lebanon and Palestine, through the Euro-Mediterranean free trade area.

Mr Morris stressed that FTAs should not be seen as the be all and end all of global trade. The UK does successful trade with many countries where no FTA exists, such as the Gulf states, who were vital trading partners for British business.

Mr Liam Smyth, Director – Trade Facilitation, British Chambers of Commerce (BCC), considered the current state of UK-EU negotiations and the preferred outcome for business and exporters.

He stated that the BCC was lobbying government to ensure that the opinions of businesses as buyers and suppliers would be taken account of during the planning of future trading arrangements.

Mr Smyth looked at some key questions to which the business community still needed to receive clear answers, highlighting various questions such as:

Would there be customs declarations between the UK and the EU?

Would service firms have to register for VAT in every EU state where they have customers?

What would the UK’s immigration regime look like in the future?

Businesses certainly didn’t want to find that goods would be delayed at the border due to lack of agreement of customs and they also needed the access to skilled workforce to continue.

Mr Smyth pointed out that the standards and regulations that business followed were created by industry bodies independent of the EU.

British standards (BSI), he said, had been in the vanguard of international standards for decades and he hoped that this would continue after Brexit.

Ms Victoria Hewson, Counsel to International Trade and Competition Unit, Institute of Economic Affairs, spoke on “Plan A+ – an Alternative Approach”.

She highlighted a new report that had been published by the IEA think tank which was titled, “Plan A+ Creating a Prosperous Post-Brexit UK” which argued that the government’s Chequers proposals were unworkable.

As an alternative, Ms Hewson argued for a “Canada-style” trade deal which would enable the UK to strengthen its trading relationships around the world.

She remarked that the UK should be free to act independently within the WTO and during its negotiations with other countries and trade blocs; and she looked ahead to domestic reforms for greater competitiveness and protection of consumer welfare.

Mr Thomas Lake, Senior Political Risk Analyst, Fitch Solutions, outlined the political risks that were associated with Brexit and explained the likeliest outcome based on the expert analysis that Fitch had undertaken.

“The chances of a Brexit deal that takes the UK out of the single market and the customs union are evaporating as the government of Prime Minister Theresa May struggles to present a coherent plan amid huge divisions within her party, intransigent EU negotiators, an opposition seeking to exploit the government’s weakness, and rising public antipathy,” he stated.

Faced with this situation the possible outcome was a “soft Brexit”, Mr Lake concluded, explaining that Fitch “have changed our core view on Brexit to a ‘soft’ Brexit, where the UK is tied closely into EU institutions, the single market, and a customs union.”

Finally, the floor was given to the event’s sponsor, Mr Gareth Sean Kobrin, CEO, VATGlobal, who looked at the VAT considerations of leaving the single market and the customs union.

Mr Kobrin said that as a member of the EU, the UK currently complies with laws and regulations outlined in the Principal EU VAT Directive, as well as the European Union Customs Code.

In addition, the European Court of Justice has jurisprudence over UK courts, meaning that its VAT rulings have direct effect on UK VAT law. It was not clear how this would change as a consequence of Brexit, but business needed to be kept well informed of the issues.

The presentations were followed by questions from the audience who raised various issues such as changes to quotas and tariffs and the prospects for increased trade volumes once the UK is outside the EU.

The event concluded with a reception where attendees were able to engage in informal networking. The Brexit Briefing was generously sponsored by ABCC member, VATGlobal.