At long last, a key European business figure has spoken out against the EU’s damaging approach to Brexit negotiations. The simple fact is that punishing the United Kingdom for voting to leave is hugely damaging to Europe’s major economies, as Lutz Meschke Porsche’s finance chief highlighted recently.
Despite recent confirmation of a Brexit transition deal we are still no closer to understanding what the UK-EU trading relationship will look like in five years’ time.
I have consistently argued in favour of continuing free trade between the UK and EU member states. It is in the economic interest of all parties to sustain a positive trading relationship. For business leaders in Germany, France, Italy and elsewhere, from which we have heard very little, I would be extremely surprised if they are not increasingly anxious over the future of their exports to the UK market.
The negative approach to the negotiations adopted by the European Union’s free trade commission will only accelerate these concerns. Imposing tariffs and customs barriers would absolutely backfire by making German cars or French wine more expensive to export to the UK’s sizeable market.
Trading freely across borders is vital for any growing industry. Without such conditions, future economic relations between the UK and the European market look especially difficult. Short of absorbing significant costs, European businesses wanting to sell their products in the UK would find it all but impossible to keep prices at a stable level. A fall in demand for such goods would be inevitable.
I am under no illusions that if Britain left the EU without a free-trade deal, it would cause short-term economic damage to both the UK and major European economies. Businesses throughout Europe rely on extensive supply chains and partnerships across the continent, which would undoubtedly be disrupted.
But I believe that UK businesses will prove resilient and come out the other end stronger and better adapted than ever before. Statistics show that British businesses have already significantly increased their exports to non-EU markets in the period since June 2016, helped by the devaluation of the British pound.
As I have written on these pages previously, the UK’s overall trade deficit with the EU, and specifically with key players like Germany, puts it in a very strong negotiating position. The UK-EU trade deficit stands at a staggering £82bn. Our trade deficit with Germany and France alone is nearly £30bn, according to the latest official statistics.
The reliance on the UK market for European companies is so significant that it is has prompted “scores” of German firms to set up UK companies to ensure that they can continue trading in Britain after it leaves the EU. Such moves have been triggered by anxiety over the future of economic relations, and comments from Lutz Meschke and the German Association of the Automotive Industry representing firms such as BMW and Volkswagen, serve as a warning.
Currently however this is clearly not the view shared by EU negotiators as progress on a free trade deal has been undermined by political interests, and a desire to punish the UK for voting to leave. Germany, France, and other European powers are foregoing their economic interests to ensure the Brexit process is as painful as possible. This political mindset ignores the serious commercial consequences of such a strategy.
The EU is at its strongest when its member states are absolutely convinced of the advantages that are to be had by being a part of the European community. The UK left because it wasn’t convinced of the supposed merits of the EU. The subsequent tactics adopted by negotiators, designed to bully and harm the UK is morally corrupt, and while it may achieve the political goal of keeping Europe together, it would be doing so at the expense of democracy and commercial logic.
For the concerns of key European business figures to be heard, a far greater public effort is required to help shape the future of trading relations between the UK and EU. This is not just important for the individuals at the top of leading businesses like Siemens and Total, but for factory and office workers throughout Europe whose jobs rely on the UK export market.
It is therefore the duty of executives to outline the potentially devasting consequences of imposing tariffs and customs barriers. Lutz Meschke deserves great credit for condemning the aggressive stance taken in Brexit trade talks, and for promoting the need for compromise. A free-trade deal is firmly in both the EU and UK’s economic interests; punishing Britain will cost European jobs.