Companies like Airbus are warning of the risks, but is it all coming too late?by Peter Kellner / June 25, 2018 / Leave a comment
Britain’s business community has started to stir. More companies are warning of the dangers of Brexit. Over the weekend, five industry organisations came together to demand a new approach to the negotiations in Brussels. How seriously should we take these warnings—and have they come too late to prevent an economically damaging hard Brexit?
Consider the seriousness first. Brexiteers say the companies are sabre-rattling in order to maximise their profits—come the day, they will not cut back in Britain. However, when Brexiteers are pressed on the details, they retreat into vague generalities; and the details matter.
Airbus’s position illustrates the point. It fears that Brexit could disrupt its European supply chains. Is it making empty threats? No: and for a specific reason that goes to the heart of the debate about the customs union and single market.
To see why, let’s recall what the Brexiteers propose: that the United Kingdom should pursue free trade deals with countries throughout the world; then the companies now complaining about Brexit would enjoy access to an even larger market than they do currently, all on tariff-free terms. They could continue to operate as successfully as they do now.
The trouble with this argument is that it does not apply to Airbus. Its operations are covered by rules set by the World Trade Organisation in 1980. The “Agreement on Trade in Civil Aircraft” abolished all import duties on the sale of civil aircraft and their components around the world. In other words, the kind of tariff-free future that the Brexiteers want already applies to Airbus.
So why is Airbus nervous about Brexit? Because trade rules are not just about tariffs. What worries Airbus is that there will be customs checks at Dover and other ports, delaying the transit of its lorries. Delays would wreck Airbus’s just-in-time operations, which rely on the frictionless movement of components in and out of the UK. It is these checks, not tariffs, that concern Airbus.
What Airbus needs is a Brexit deal that maintains frictionless trade with the rest of Europe. Not “as frictionless as possible,” as the prime minister promises, but “frictionless” full stop. This will likely require UK adherence to the EU’s customs union and single market rules, at least for traded goods. (Services are a different matter.) The UK would have to accept the jurisdiction of the European Court of Justice…