The EU referendum raises many issues for retailers. Helen Dickinson of the BRC looks at one: the ease and cost of moving products across borders
We, the British Retail Consortium (BRC), are neutral on whether the UK should remain in or leave the EU, given that the issues of sovereignty, immigration and the economy will weigh differently on each of us as we decide how we will cast our vote. Neutral, but not indifferent.
Looking at the issues for the industry, they fall into three areas: the ease/cost of moving products across borders; retailers’ regulatory framework; and the viability of our local food supply chains. This, the first of three articles, looks at the first of these.
A risk of leaving is that our trade in goods with the rest of Europe might become subject to new customs duties. This could put upward pressure on prices throughout the supply chain (and food supply chains in particular), which in turn could lead to higher prices for consumers.
The challenge for those advocating Brexit is to show how such extra costs could be avoided. The ‘Norway option’ (out of the EU but in the Single Market) might achieve this, although it would still require the UK to make financial contributions to the EU, accept free movement of people and accept the rules from Brussels, over which we would have no say. This may prove politically unpalatable for a nation that has just voted to leave the club.
An alternative would be to negotiate a free trade agreement with the EU. Again, possible, but the challenge is time and political will.
Negotiations with the EU on trade proceed at a glacial pace. The fastest was four years for a deal with Korea. Compare that with the two-year period that is allowed in the EU treaties for a member state to agree its terms of departure.
“Negotiations with the EU on trade proceed at a glacial pace. The fastest was four years for a deal with Korea”
Helen Dickinson, BRC
Plus, free trade agreements rarely actually deliver entirely free trade. Experience shows that free trade agreements with the EU still maintain trade restrictions, often on product areas of interest to retailers, such as food and fast-moving consumer goods (FMCG).
Looking further afield, Brexit is unlikely to have much impact on retail import prices from the rest of the world in the short term and may even offer scope to reduce import prices in the future.
These could be realised through free trade agreements negotiated between the UK and other countries, but they could also be realised through unilateral reductions in UK customs duty rates. This possibility has not been raised much in the debate so far, but it is very real.
The EU itself has been slow to grasp the opportunity of freer trade with other countries. Indeed, there are worrying signs that it is becoming more protectionist; there is a head of steam developing among some EU countries to raise tariffs against Chinese imports and the promising start to the EU/US negotiations – otherwise known as the Transatlantic Trade Investment Partnership (TTIP) – appears to be losing momentum.
The challenge then for the Remain camp is to demonstrate how, within the EU, the UK will be able to grasp the opportunities offered by freer trade worldwide in order to deliver the best possible range of products to our customers at the best possible prices.
- Helen Dickinson, chief executive, British Retail Consortium