What Are They, What Do They Mean for Retail and What Happens Now?
During the last week in February, the EU and the UK published their respective negotiating mandates, which outlined a framework for their upcoming negotiations on the future trading relationship.
These documents set out the scope of issues the negotiations should cover, what ambitions and objectives the negotiations should seek to achieve and any preconditions either side might attach to the negotiations.
A comparison of key issues impacting the cost of sourcing retail goods from the EU (e.g. the provisions on market access and wider regulatory issues collectively described by the EU as the “level playing field”) is summarised in our Pulse Update, and include:
- Both sides share a common ambition for a free trade agreement (FTA) that will avoid tariffs and quotas altogether
- Significant differences on “level playing field” issues will need to be overcome in order for the FTA to go ahead
- Under any FTA, new costs will be inevitable, with the food sector at greatest risk from new regulation
- UK exporters are at greater risk of new costs than UK importers • Highly likely that new regulation will develop friction at borders for food products
Matthew Kirk, international affairs advisor at Squire Patton Boggs, says:
“So we are off on the next leg of our journey, towards our new relationship with the EU. This will be a unique set of negotiations – about divergence rather than convergence, and at least as much about form and governance as substance. So it is hard to draw precedents from other such negotiations. A deal can certainly be done in the time available, but for that to happen both sides will need to look beyond ideologically driven positions and find pragmatic solutions that bridge some important conceptual differences. And then there is the problem of fish – not part of the FTA, but with the potential to disrupt the negotiations, and if threats of blockades come to anything even to disrupt trade. So buckle up for a bumpy ride – there is plenty of drama to come.”
Matthew Lewis, head of Retail at Squire Patton Boggs, says:
“Both sides now face the huge challenge of trying to strike a trade deal and reach agreement in a range of areas over the next few months. As this is the first time the European institution has lost a member, there is no precedent to follow, so neither party is bound by anything that has gone before. These are uncharted waters. The Brexit process plunged the UK into its worst political crisis for 50 years, but there are now more positive signs and a comparison of the UK and EU Mandates suggests there is the potential for a deal to be done. A deal could mean that retailers would be able to source all consumer goods from the EU free of customs duties and quota restrictions, though there will be some new administrative costs on imports from the EU. It won’t be plain sailing!”