It is Brexit crunch time

It is Brexit crunch time

Simon De Cesare, MBB President

This Opinion Piece featured on The Sunday Times of Malta, on 29th September 2019

Two years of intense negotiations and a six-month extension later, here we are one month before the Brexit date, yet still with the same unclarity on what the future holds for thousands of citizens and businesses that will be impacted in any circumstance by the UK’s withdrawal from the EU, and especially in the event of a disorderly exit.

During summer we witnessed developments in the UK that did not lack political drama and twists; but this still did not change anything from the ultimate challenge, which is to ratify a legal agreement ahead of a looming deadline that is fast approaching on October 31. Frankly, recent EU-UK negotiations for changes to the current withdrawal agreement have not gone anywhere and any beacon of hope to avert the havoc that a no-deal outcome will bring is dying quickly.

Over the past two years Brexit has proved time and time again that it is a circle that cannot be squared, mainly due to the specific circumstances on the island of Ireland, where as a consequence of Brexit, a de facto border will be created between the EU and a third country. At the same time,  the border needs to be artificial to protect the fragile peace process in N. Ireland and continue promoting the concept of the all-island economy that seeks to improve social and economic conditions and prosperity through open trade on the island, which is an integral part of this process.

It is difficult to see how an artificial border can function when millions of products are daily transported from one side to the other that would require verification and customs taxes paid. The border or the absence of it therefore has implications not just on the neighbourly relations between the UK and the Republic of Ireland, but also on the rest of the EU, considering that once a product is in Ireland it can move freely to the rest of the European Single Market.

Warnings to businesses to prepare, complemented by information on the real implications of a no-deal Brexit in various sectors were published consistently in the past months. There will be bottlenecks created in several EU ports while imports from the UK are verified. Other  problems relate to the introduction of administrative burdens for companies to deal with customs procedures, especially if they would be dealing with a third country for the first time and the requirement of new certifications, licences and authorisations from EU bodies if previously issued in the UK.

Also, preferential tariff rates may no longer apply for products where supply chains involve partial production in the UK as this input will not be considered as EU content in view of rules of origin; European firms will immediately lose access to the UK procurement market; consumer protection equivalence, such as in the case of passenger travel for services provided by UK companies, will no longer be guaranteed, and the European Health Insurance Card will no longer cover EU citizens travelling to the UK. UK telecom providers can re-apply surcharges for roaming services, and redress from EU court rulings can no longer be enforced mandatorily in the UK.

In response, the European Commission has prepared contingency measures to somewhat cushion the impact of a no-deal Brexit in narrowly defined areas considered fundamental to protect EU interests, by temporarily extending certain legislation covering areas such as transport, financial services, food imports and the participation of UK entities in EU programmes by up to a year. Member states have set up support centres and published Brexit toolkits. Nevertheless, no amount of preparation can fully avert the disruption that will undoubtedly be created.

This brings us to the question many must ask. Is this madness necessary? I do not believe so. While many times political intervention is required to address economic failures, in this instance it is economic logic that should be guiding politics instead.

Clearly, accepting the withdrawal agreement negotiated by the EU and the UK government led by then Prime Minister Theresa May was up to the UK Parliament, which rejected it on three occasions. Yet, the current circumstances show how that agreement was carefully crafted in a very narrow space for compromises balancing the need for an agreement enshrined in a legal basis that respects the will of the British people in the 2016 referendum, but at the same time protects the integrity of the European Single Market and addresses the complex political circumstances on the island of Ireland.

As Europeans we cannot and should not become involved in the sovereign decisions that the UK government or Parliament requires to take while searching for acceptable terms for the UK withdrawal from the EU that also breaks the domestic political impasse, and that equally respects the EU’s long-established position. Nevertheless, it is crucial that in the end the EU is not the party that forces a no-deal Brexit.

In the upcoming European Council in October therefore, the Maltese government and all EU member States are invited to do everything within their power to avoid this problematic scenario, and if requested by the UK, show flexibility and openness to consider once more the granting of a further extension to the withdrawal date, which will avert the Brexit crisis at least temporarily. Political developments in the UK are evolving ra­pidly, and may ultimately lead to a clearer pathway and a more sensible outcome for this long and winding process.

Simon De Cesare is president of the Malta Business Bureau. The MBB is the EU-business advisory and support office of the Malta Chamber of Commerce, Enterprise and Industry, and the Malta Hotels and Restaurants Association.