INTERNATIONALTRADE
BREAKING DOWN BARRIERS Critical factors effecting international trade between the UK and the EU and why in-depth analysis of them by firms should be used to support development of their international business strategy.
Since the UK left the Single Market on 1 January this year exporting (and importing) companies of all sizes and across multiple sectors of the UK economy have struggled with international trade processes to and from the EU. Some common, recurring issues and critical factors which have arisen as a result of the Trade and Co-operation Agreement (TCA) signed with the EU on 24 December 2020 include: Rules of origin, product marking and product standards, customs regulations and VAT, tariffs, adherence to environmental and labour standards, sanitary and phytosanitary (SPS) regulations, exposure to broader EU regulations that apply to third countries and finally tax and VAT rules. A full list of TCA commitments and the effects they will have on exporters can be by scanning the QR code. (Hanske, Mathei and Galiai, London School of Economics: July 2021)
THE IMPLICATIONS FOR UK COMPANIES UK companies that export (and import) are having to deal with not just one of the above effects but in some cases several of them simultaneously. To date, anecdotally, companies for the most part seem to be managing each of the problems serially on an ad hoc basis as and when they come across them as opposed to setting up longer-term, more robust processes to deal with all the issues as a whole. As we can safely assume the above effects will be in play for some time to come knowing that adjustments to the Trade and Cooperation Agreement (in negotiation with the EU) to improve trading conditions (from a UK perspective) will be slow, now may be the time for businesses to begin
044
to put in place a more robust longer term international business strategy that includes longer-term processes and resolutions to the above issues and/or effects.
THE “NEW” CRITICAL PARTS OF AN INTERNATIONAL STRATEGY FOR EU TRADE When selling (or importing to the EU), a firm’s international business strategy would normally be based for the most part on its target international markets; is the sector in the target country market rising or falling? What does competitor activity look like and does a PESTEL analysis provide any business environment opportunities or threats the company should be aware of. The process of actually getting goods from A to B and the company’s supply chain process for sales to or imports from the EU was traditionally straightforward and consistent in terms of cost and complexity implications. In order to create a robust and competitive proposition in the long run, any international business strategy for EU trade will now need to incorporate more analysis and development around getting goods and services from A to B in a profitable and timely manner to mitigate against any added costs that could now include: Increased tariffs (import and export). Tax and VAT. SPS and other certification required by the EU. Costs associated with new border regulations and becoming a Third Country. Transport (Road, Rail, Air and Sea). New operational structure (company set-up in the EU for example). New Incoterms (and terms of trading). Cost of professional advice and services – legal, accountancy, certification, quality etc.
the increased cost of export to create enough margin to ensure a reasonable profit on the transaction.
Cost of services sales – certification etc.
Over the period the UK has been a part of the Single European Market when the absence of change to any shipping process covering the nuts and bolts of getting goods and services from A to B, shipping and logistics departments of companies have been considered the “Cinderella” service within businesses.
This does not include other costs associated with any delay of products going to or arriving from the EU such as the intangible cost and damage to the brand in front of the dissatisfied customer and market. Reputational as well as client relationship damage can also be an issue if the seller’s prices are increased to cover
September/October 2021
