24 February 2021

The Economist: Counting the cost of Brexit’s impact on trade

TWO MONTHS after Britain left the single market and customs union in favour of a trade and co-operation agreement (TCA), complaints are multiplying, from seafood sellers and pork exporters to fashionistas and musicians. Some of these are teething problems, but most are the consequence of Boris Johnson’s decision to prioritise sovereignty over market access.

The biggest political problem is the Northern Ireland protocol, under which the province stays in the single market for goods and the customs union. The government chose this route as an alternative to a hard border on the island of Ireland. But now that border checks have begun, disrupting trade, the Democratic Unionist Party and some Tories are demanding that Mr Johnson should scrap the protocol entirely. He will not do that, but the protocol will be an issue in the elections next year to the Northern Ireland Assembly.

Trade across the channel is suffering even more. The British Chambers of Commerce report that almost half of exporters to the EU have met obstacles. Although the TCA promises zero tariffs and quotas, that is subject to rules-of-origin requirements to ensure that exported goods are not first imported from outside the EU. Rules of origin have hit businesses from supermarkets to pet foods to fashion designers. Strict sanitary rules are similarly obstructing exports of shellfish and many agrifoods. Daniel Kelemen, a politics professor at Rutgers University who is collating examples of Brexit trade barriers on Twitter, had by this week recorded nearly 200 cases.

Services are no better, mainly because the TCA omits them. The City of London’s hopes of retaining business across Europe through a grant of regulatory equivalence have evaporated. Instead, the EU crows about Amsterdam unseating London as the continent’s largest share market. Musicians, actors, fashion designers and professional-service firms are griping about expensive red tape and travel restrictions. A provisional decision to accept the adequacy of Britain’s data-protection standards is a rare ray of hope, and even this may be challenged in court.

The chances of reducing these barriers are small. Mujtaba Rahman of the Eurasia Group consultancy says there could be improvements at the margin, but anything substantial (such as Britain aligning with EU sanitary standards) would require Mr Johnson to cross his sovereignty red lines. The promotion of Lord Frost, the hardline negotiator of the TCA, to replace Michael Gove as minister in charge of EU relations, does not augur compromise. Nor does the row over the EU’s ambassador in London, to whom the Johnson government (alone in the world) refuses full diplomatic status. Vaccine wars, even if only rhetorical, do not help.....

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