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You are here: Home Members Warwick Business School Whether negotiators agree a Brexit deal now makes little difference for long-suffering businesses

Whether negotiators agree a Brexit deal now makes little difference for long-suffering businesses

Posted by Warwick Business School at 04 December 2020, 12:38 CET |
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Commenting on news that Brexit negotiations between the UK and EU are ongoing, but hopes of a breakthrough are receding, Nigel Driffield, Professor of International Business at Warwick Business School, said:

"From the perspective of business, I suspect that whether the UK arrives at a deal that is acceptable to the ERG, or whether we leave with no deal, probably makes little difference.

"I say this because many people still think of a deal as being "Canada style" or "Japan style". However, hope of securing anything as comprehensive as that has receded. The reason is that the EU wants to protect itself from the UK diverging too far or too fast.

"For example, suppose we were to get a "Canada style" agreement. Would that give the UK the right to do a "free trade" deal with China ? If so, the UK could in theory import goods from China, tariff free at Chinese prices, and then sell them into the EU, also tariff free at EU prices. That may be an extreme example, but that is what the EU is seeking to prevent.

"Given the UK's desire to forge its own trade deals - which appears to be at best simply rolling over existing ones - the EU will want to agree rules of origin, labour, and environmental standards. For the ERG they are all sticking points.

"So, any deal achieved now will be a very bare bones one, simply to allow both sides to herald a compromise. Then the real negotiations over the detail will have to start. Therefore, any deal achieved now will offer very little more certainty than "no deal".

"There is another elephant in the room here, which politicians are finally catching onto. Suppose for example we reach agreement with the EU over rules of origin (the percentage of say a Range Rover which is made in the UK compared with components imported from say Germany). Under any agreement, the EU would probably be happy to allow EU components to class as "British" for sale into EU markets, but why should Japan for example be willing to accept the same, as they have different deals with the UK and EU.

"If I were an exporter or an importer I would be livid."

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