Business at the ready
Now that Brexit is here, what will change for Catalan companies that do business with the UK? The answer is simple and complicated: nothing. For the moment. Yet, during the transition period that will last up to a year anything could happen. Joan Tristany, director general of AMEC, the Association of Internationalised Industrial Companies, says that we are at a turning point after four years of uncertainty for the world of trade, with as many voices raising the alarm as there are preaching calm. It is now time for trading relationships to be defined. “The issue is ripe,” says Tristany, “and the political situation is clearer, with more room for negotiation.”
It must be remembered that everyone will defend their own interests, and in this tug-of-war everyone has something to gain, and something to lose. Among the most commonly mentioned factors of this new protectionism that could have the most impact on trading relations are tariffs. Yet, there are other issues up for negotiation that are not so quantifiable, such as certification and other technical, administrative, and even logistical, barriers to trade. For example, what will happen with fiscal mechanisms? How will perishable goods or those related to just-in-time manufacturing be managed while they are waiting to be processed at borders? And, in the case of certification, how will garments lacking the “Made in the EU” or “Made in the UK” seal be sold on either side, or a medicine without the accreditation of local regulators?
Preferential relations
In the opinion of Joan Romero, CEO of Acció, the Catalan government’s business promotion agency, the most likely thing is that we will end up with a trading scenario similar to what the EU has with Norway or Switzerland, “which allows spaces of preferential relations”. If that does not happen, in the worst of cases, Acció estimates that the negative impact on the Catalan economy could be up to €2 billion over five years. That would account for up to 0.8% of Catalan GDP, given that over 3,300 Catalan companies export to the UK, some 2,200 regularly, although only 2% exclusively.
Romero points out that Catalonia exports goods worth €3.9 billion a year to the UK, which is our fifth most important trading partner, while the British already have a list of the 500 products that will be affected most by tariffs. On this list, Catalonia exports 257, “48 of which are significant in terms of volume.” If the UK chooses to be picky about what comes into the country, it could affect 38% of Catalan exports. “That does not have to mean,” adds Romero, “that these products will stop being exported; perhaps only a few will choose to look for other markets.” Whatever happens, the most important thing “is that companies be well prepared” to face any of these scenarios.
On this aspect, Tristany adds that “contingency plans have been made,” and were even drawn up at the start when uncertainty about the extent of the UK’s break with the EU was highest. For Tristany, the keys to competitiveness in this process “are anticipation and adaptability”. He thinks that as protecting trade cuts both ways, “we will not move towards a scenario that greatly affects the relations we have now”. Proof, he says, is that “Brexit did not come about to protect a specific sector”.
However, that is not to say that no sectors look on the whole thing with mistrust. The meat sector, clothes and fashion, the chemical sector, and above all the automotive sector, all have concerns. Catalonia is a big supplier of parts to British vehicle manufacturers. If these parts are burdened with tariffs, it will make the price of the vehicles less competitive, which will be subject to more tariffs if sold outside the UK. It is not good business to impose too many obstacles.
Other considerations
Tristany, who says that no members of his association have broken off trade relations with the UK, adds that, apart from any new conditions, what must also be taken into account are “all of the vectors of the new phase in globalisation”, and knowing many other aspects play a part, such as the slowing or growing of the British economy, which could be a determining factor in public investment, or the pound’s exchange rate. In other words, internal factors that make it difficult to forecast what the situation will be like in the future.
In Catalonia, in order to give information on the issue and help plan for its effects, Acció launched the Finestreta Brexit project last year. The service has already been used by 830 companies, almost 40% of those that trade regularly with the UK. At the same time, business associations are offering similar tools to their members.
Although the future remains uncertain, the head of Acció is optimistic: “It’s clear that tariffs benefit no one,” he says. Proof of that is Boris Johnson’s recent talk of setting up free trade zones in the UK. Romero sees that as a sign that “they realise that it is not in their interests to be too tough in the talks.”
FEATURE BREXIT