The Scandinavian Transport & Logistics Blog

The Potential Effect Of Leaving The Customs Union On Exports To Scandinavia

Posted by Liam Harrison on 29-Mar-2017 13:35:00

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Many of our customers are, understandably, concerned about the potential impact of Brexit on their trade with Scandinavia. There was a heated debate in the UK about the comparative advantages and disadvantages of European Union membership, with opinion still very divided.

We have always taken a nonpartisan position on Brexit. Yes, there are likely to be changes, especially as the UK will now almost certainly be leaving the Single Market, and will probably be leaving the Customs Union as well. However, let’s not forget that British businesses were able to trade very successfully with Scandinavia before the UK joined the EEC (now the EU), and will continue to do so after it leaves. Also, businesses from non-EU countries, especially American companies, trade very freely with Scandinavia, without any real penalties that reduce their competitiveness.

The Single Market & the Customs Union

It is important to draw a distinction between the EU Single Market and the Customs Union. Membership of these treaties bring certain trading privileges and also place restrictions on member countries.

What is the Single Market?

The so-called Single Market, also known as the internal market and previously the Common Market, is the heart of the EU’s economic project. The intention is to remove all barriers to trade between the member countries.

This is the purpose of the ‘four freedoms’ that have been much discussed lately. These were established in the original EEC Treaty of Rome in 1957 and were designed to dismantle protectionist legislation which inhibited European trade. The four freedoms imply freedom of movement of…

1) Goods e.g. products and materials.

2) Persons (this is the controversial one, due to its association with economic migration within the EU).

3) Services e.g. financial services.

4) Capital (e.g. removing unfair bank charges and transfer fees).

The Single Market establishes one set of trade rules for all EU member states, in place of individual ones for all the countries involved. The Single Market embraces all 28 EU countries, plus Norway and Iceland.

Invariably, the Single Market involves a lot of regulations as well as the four freedoms, because the idea is to make it just as easy to trade between Birmingham and Helsinki, as it is between Brighton and Gloucester. So Single Market rules need to establish that a washing machine made in Birmingham meets the same standards as one made in Helsinki, so that trade is fair to all parties.

What about the Customs Union?

The Customs Union is a bit different to the Single Market. While the Single Market is concerned with movement of goods and the quality of trade, the Customs Union involves a common approach to financial tariffs and trade barriers.

There are three important factors to membership of the Customs Union:

1) Members agree to reduce import paperwork and to not charge tariffs when trading among themselves.

2) Members agree to a common set of tariffs to be charged on all countries who are NOT members of the Customs Union.

3) Members are prohibited from negotiating independent trade deals with countries outside the bloc. This is another controversial point and was one of the main arguments in favour of leaving the EU put forward by the Pro-Leave side.

Both the Single Market and the Customs Union are intended to make it easier for member countries to trade with each other, but membership of one does not necessarily imply membership of the other. The Single Market is an internal trading arrangement. The Customs Union regulates external financial trading relationships.

What are the implications of leaving?

As we can see, leaving the Single Market and the Customs Union will involve the UK and the EU establishing a new trading relationship – a new set of rules to do business by. This is part of what needs to be discussed during the Brexit negotiations. Leaving the EU may involve the exchange of goods between the UK and Scandinavia being subject to additional paperwork and customs charges. Or it may not. Ultimately, it is in no one’s interest to create barriers to trade, least of all the governments who will be negotiating the new trading relationship.

Tentatively, therefore, we would be surprised if any future trading agreement involved any significant change to the principle of free movement of goods and services, although movement of people will not be as free as it is currently. Outside of the Customs Union, some new tariffs may apply, although these may exist more on paper than in reality. We will not be surprised if in practice there are waiver agreements in place that effectively allow trade to remain tariff free. In this case there will be no additional barriers greater than a couple of extra forms to fill in.

Keep Calm & Carry On

It is (frustratingly) still too early to tell exactly what the trading relationship between the UK and the EU is going to be, but we have reason to be optimistic. British and Scandinavian businesses have shown themselves extremely flexible and resilient to political changes over the years. Our job, ultimately, is to build prosperous businesses that benefit our companies and communities on both sides of the North Sea, and to let the politicians get on with what they do best! In uncertain times, we can guarantee you one thing: At NTEX we will continue to offer the fastest, easiest and most affordable logistics service between the UK and Scandinavia, both before and after Brexit takes effect.

Our service will include taking care of any paperwork and tariffs on your behalf, so you can enjoy unimpeded trade with your customers in Norway, Denmark, Finland and Sweden. We will also keep you informed through this blog of all likely changes once the Brexit negotiations get underway.

For now, the UK is still a fully paid-up member of the EU with full access to the Single Market, so book your delivery online by clicking here.

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