Boris Johnson’s Brexit trade deal ‘puts UK businesses at risk’ as 41% report fall in exports to EU. The Chambers of Commerce has called for fresh negotiations with the EU, to lower trade barriers created by the Prime Minister’s brexit trade deal. The free trade deal between the UK and European Union (EU) came into force on 1 January 2021.
Brexit Trade Deal Facts
According to a new survey by one of the UK’s leading business organisations, Boris Johnson’s brexit trade deal with the European Economic Union has put the future of many exporting businesses at risk, with 41 per cent reporting decreased overseas sales in the first three months of the new arrangements. The British Chambers of Commerce has called on the UK government to ask the EU for fresh negotiations to lower some of the barriers to trade created by Mr Johnson’s Christmas Eve Trade and Cooperation Agreement (TCA). While some of the collapse in trade with continental Europe is due to the effects of the Covid pandemic, the BCC said many firms blame the brexit trade deal for shipping delays, increased cost of transporting goods and extensive new paperwork requirements. The group dismissed ministers’ claims that the difficulties experienced by exporters were down to “teething problems” following the transition out of the EU’s single market and customs union on 1 January. Co-executive director Hannah Essex warned: “They are structural issues that, if they continue to go unaddressed, could lead to long-term, potentially irreversible weakness in the UK export sector.” The BCC’s quarterly Trade Confidence Outlook report surveyed more than 2,900 UK exporting firms and found that 41 per cent reported decreased overseas sales during the first three months of 2021 – up from 38 per cent in the last three months of 2020. The percentage reporting increased export sales fell from 22 to 20 per cent in the same period. Hotels, caterers, retailers and wholesalers were most likely to report falls in export sales.
Free Trade Deal
A free trade deal aims to encourage trade by reducing or eliminating tariffs, taxes or charges by governments for trading goods across borders. This is usually applied to goods, but occasionally to services too. This is often achieved by Trade agreements also aim to remove quotas, which are limits on the amount of goods which can be traded. Trade can also be made simpler if countries have the same rules, such as the colour of wires in plugs. The closer the rules are, the less likely that goods need to be checked.
Tariffs
Free trade agreements aim to boost trade. However an influx of cheap imports could threaten a country’s manufacturers as well as jobs. This is why tariffs may be applied in order to protect local manufacturers. Despite brexit coming to pass, the EU is still the UK’s largest and closest trading partner. The new UK-EU trade deal was announced on Christmas Eve 2020. The purpose of the trade deal was to prevent any tariffs and quotas being introduced – which make it more expensive to trade. Following brexit, the UK and EU needed to renegotiate the rules for their future trading relationship.
Brexit
Not everything is the same as it was before brexit. As the UK is no longer required to follow EU rules on product standards, businesses will need to adjust to new checks. This means increased paperwork, which causes delays if traders goods arrive at the ports unprepared. Strict EU laws on animal products also means some UK products can no longer be exported at all. The deal also doesn’t completely eliminate the possibility of tariffs in future. Both sides will need to stay close to shared rules in areas like workers’ rights and environmental protection. If either the UK or the EU shift their rules too far, the other side could introduce tariffs. Prior to brexit the UK was automatically part of any trade deal the EU had negotiated with another country. The EU had about 40 trade deals covering more than 70 countries at the time the UK left. The UK has made deals to continue trading in the same way with 63 of these countries. However, deals with four countries – Albania, Jordan, Canada and Mexico have not fully come into force at the time of writing. Talks are ongoing with a further five countries or blocs, but the largest agreements have been done. Any existing EU agreement that was not rolled over, ended on 31 December with trade then taking place on World Trade Organization terms until a deal could be reached. This means importers face tariffs and extra paperwork. The UK signed a deal with Japan on 22 October – the first that differed from an existing EU deal. The total value of UK-Japan trade (imports and exports) was £31.6bn in 2019, or 2% of the UK’s total trade. On 31 January, the UK government announced it would apply to join a free trade area with 11 Asia and Pacific nations called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Current members include Australia, Canada, Japan and New Zealand. Separately, the UK government is also holding trade talks with the US, Australia and New Zealand.
Business Support for International Traders
BCC’s Ms Essex “We want to ensure that businesses get the support they need to trade effectively with Europe and to seize new opportunities as we strike trade deals with the world’s fastest growing markets. That’s why – in addition to the £20m SME Brexit Support Fund – we are operating export helplines, running webinars with experts and offering businesses support via our network of 300 international trade advisers.”
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