JOHN WHELAN: Brexit is getting ever more tricky for Irish firms

UK proposals spell added costs for doing business, writes John Whelan

In her keynote Brexit speech last week, British Prime Minister Theresa May reiterated her opposition to a customs union. Ms May was clear she wants the UK to be able to set its own tariffs for goods intended for the UK market but that it will apply EU tariffs and the same rules of origin for those goods destined for the EU. Hence for Irish exporters selling into the UK, there would be a return to tariffs and certificates of origin as applies under the World Trade Organisation rules.

However, for Irish businesses importing from the UK there may not be any of these changes if the goods originated from within the EU or a certain percentage of the ingredients originated in the UK but a higher percentage came from other EU countries.

If this sounds like a return to the Boris Johnson approach of having your cake and eat it, she firmly rejected the notion. “I recognise some of these ideas depend on technology, robust systems to ensure trust and confidence as well as goodwill but they are serious and merit consideration by all sides,” she said. For Irish businesses importing and exporting daily through and to the UK, the situation looks increasing complex and costly, particularly for small firms.

In addressing an issue of great economic concern for the UK, financial services, which provide over €1 trillion in banking and insurance services, there was a more realistic tone. She accepted pass-porting rights for financial institutions would end. But once again she created further uncertainty by saying she would look for “a special partnership’’ based on mutual recognition of standards. That’s not the kind of clarity the wide range of financial services companies operating from the City of London were looking for.

The same tone was adopted by Ms May in her address of the issues facing pharmaceutical and medical devices firms. She aspired to close links and maintaining the same regulatory standards as the EU. Again, there was not sufficient detail for those operating manufacturing plants in Ireland that supply the UK or for Irish institutions importing from the UK, to effectively make a plan.

Many digital firms will have been caught by surprise by her comment that “the UK will not be a part of the EU’s Digital Single Market”. This could stunt the development of the UK’s evolving software, multimedia, and social media businesses, and may create added difficulties for Irish digital firms who use the UK as a stepping stone for continental Europe.

Regarding the North, Ms May suggested no restrictions for SMEs which trade across the island. This firmly throws the problem of trade across the border into the laps of Dublin and Brussels who must either reject the idea or offer something similar leading to a soft border. In summary, the UK prime minister’s speech can be seen as an olive branch to EU negotiators when she assures them the UK will stay close to EU regulatory agencies, accept EU competition and State–aid rules, and maintain EU social and environmental and consumers standards.

But the way it stands, farming and fishing would remain outside the control of the Common Agricultural policy, leaving EU Commissioner Phil Hogan with much to ponder. The EU’s chief Brexit negotiator welcomed Ms May’s speech but said “clarity” was needed about the UK’s plans to leave the single market and the customs union.

John Whelan is a leading Irish consultant on international trade.

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