In it for the Long Haul?
How Britain being outside of a Customs Union lead to unchartered territory for the logistics and freight industry
Following the news that the majority of small businesses in the UK oppose a customs union exit following Brexit, the logistics and freight industry need to be looking at all its options, according to Andrew Austin, Group Operations Director of Priority Freight, as it enters a period of uncertainty which could not only shape the future of the industry but the country as a whole.
The significant advantage of a customs union is that goods are able to travel freely between a large number of countries. Usually these countries are close to one another, often sharing borders, meaning relationships are built and become the most important trading partners. Britain, by its island nature, relies heavily on these relationships with mainland Europe and a willingness to trade puts it in good stead. With this large volume of trading taking place across multiple regions, there needs to be practices that are known throughout the trading process, and the customs union ensures that everyone is aware of these, meaning that there is quick travel without significant impediment and most importantly consistency.
Other negative, but obvious consequences may be delays in clearing both imports and exports into the country, related price increases, and UK goods potentially becoming more expensive due to unfavourable tariffs
However, there is an argument for not being part of a customs union, or not having one at all. There are significant economic costs for countries being “part of the club”, with some questioning whether it is worth the membership fee especially when a lot of the costs are going towards supporting administration. There is also the issue that some don’t want to be paying as much as others, or feel like they are not getting “value for money”. Why should some be getting better deals than others?
In addition, it could be argued that there is no need for a customs union in a more globalised world, where strong relationships between countries are in place. Take the example of France and the UK. Both countries see each other as a strong trade partners and there will be a strong desire and motivation for this to continue, be it within the customs union or outside of it. More long-distance assignments mean that more stock has to be in transit (therefore not delivered and not typically able to be invoiced against quickly, tying up cash) and this also may bring more competition into the fight for custom because of the proximity of other nations. Relationships with those nearby, if UK are in or out of a customs union, is therefore key.
There has also been discussions around the possibility of a streamlined customs arrangement. Andrew Austin, Group Operations Director of Priority Freight, believes that this is optimistic at best, commenting:
“There are two words that are an issue here – ‘streamlined’ and ‘arrangement’. Most users of the new customs system would love it to be streamlined from a conceptual point of view, but this may be wishful thinking.
“Is a new (or rather a re-invention of a system put in place over 60 years ago at the formation of what is now the EU) customs tool likely to be anything but cumbersome, complex, and hard to use, especially if it has been built in haste? Secondly, the word ‘arrangement’ – we have no real idea of what the negotiations will produce, but it is fair to say that the UK won’t enjoy the free access it has currently.”
If the UK was to go down the route of negotiating a new customs union with the EU, it could potentially be a long process. The UK would have to have trade agreements against all product classifications with all trading partners and countries – a massive job in itself. Mr Austin goes on to say; “The most practical outcome is to mirror current arrangements, but that may not be in the national self-interest of the countries that we are looking to trade with, so you can suspect that the UK may be greatly disadvantaged here.
“Of course, those other countries also have a vested interest in still being able to sell to the UK in most instances, so a new partnership deal could be struck reasonably amicably, but in reality, it is likely to be an arrangement only hammered out (and with built-in complexity) at the 11th hour, meaning that the UK infrastructure will find it difficult to deal with a change of this magnitude in a short timeframe.”
The UK’s future in the trading hierarchy is a delicate one. There are advantages for both being part of a customs union, and possibilities from being outside of it. That being said, while there are always opportunities, there are not many obvious untapped markets. Those who do not trade currently with the UK are either likely to have small volumes of trade, or are some distance away (causing higher shipping costs). Therefore, the emphasis should be on agreeing favourable tariffs with our key trading partners – our immediate neighbours, and the United States, of course. What the logistics and freight industry sectors needs to be is flexible, adaptable and progress whatever the outcome following discussions.