“It’s not Romania or Estonia who are leaving. It’s a big contributor so we have a lot of unanswered questions – and no good answers.” – Indrek Tarand
This would be music to the ears of all those Brexiters who think that Britain leaving the EU is going to be plain sailing. My previous post on Brexit gives some numbers behind this thought (I was going to write delusion but I am trying to be as evenhanded as I can – given that I think Brexit is a bad move for Britain). Another argument that is often put out there is that the German car industry won’t allow the German government and therefore the EU to be too punitive when negotiating some form of settlement with Britain. The figures do seem to back this up as the German trade surplus with Britain is the second largest (€50.9 billion) which is a lot of money to put at risk and equates to somewhere in the region of 750,000 jobs – which is a lot. However, when you move away from the headlines and start to think a little about German products that sell in the UK they are hardly ever products that are price sensitive – the car industry is a case in point. Nobody considers buying a Mercedes car because of the cut price. Instead it is bought because it can be seen as the epitome of German engineering excellence (whether that is justified or not is another matter). This is the same with BMW, VW Audi etc. So if German cars are bought for their quality rather than their price then perhaps an extra £1000 per car might not be such a big problem. ( I have no idea what any tariff might be as the final cost of a car has little relationship to the import cost. Also it should be remembered that the cost of a new car is probably more affected by currency swings than tariffs and as we have just lost 20% of the value of the pound thanks to Brexit then this is likely to be a bigger handbrake than any tariff.) This may explain why the German car industry is lying low at the moment on the issue of Brexit. It might also be that they don’t have the clout that the Brexiters claim. Whatever the case to assume that there will be any pressure to be applied here might be misplaced.
This, however, may not be the case when it comes to wine.
Currently Britain is the second largest wine import market in the world with around 14% of the world imports..
The largest importers of wine to the UK is France and Italy which control over 60% of the market.
This means that any change in the import duties placed on imports of wine into the UK could have an adverse effect on their sales as unlike German manufacturing they are not competing on quality but rather price. This, of course, is an oversimplified view taken by someone who only buys a bottle of wine occasionally but it does highlight a problem that both France and Italy have. Whilst you can only buy Champagne from France you can buy a chardonnay from many countries, especially Australia and New Zealand who have already said that they are more than happy to enter into trade talks with the UK and would hope for import duties to be reduced on their products at the expense of wines coming from the EU.
Of course the French could export their wine to other countries in the EU. However there is one very big snag with that.The UK is by far the largest importer of wine importer by value in the EU and so trying to find new markets for this wine could prove difficult. The reason why this is perhaps far more important than the German car makers is that whilst the Germans are far more prudent in showing their displeasure with their Government the French agriculture industry doesn’t suffer from such reluctance and you can bet that once the true cost of Brexit starts to hit the French farmers then they are going to ensure that their government ameliorates this disadvantage during any negotiations.
This is where the now almost certainly defunct CETA agreement might start to play a part. The UK government wants to sign CETA with the Canadians and I am sure that Liam Fox will already have been round to the Canadian High Commissioner to reassure him of this. If this the case then perhaps it can form the basis of trade agreements with Australia and New Zealand. If this were to happen then suddenly whole new trade block might start to form, perhaps we might call it a Commonwealth of like minded nations. Now imagine what might happen if you could get India to join such a Commonwealth how much more powerful it would become?
Of course this is a flight of fantasy at the moment, something that the Leave campaign should know all about, but it does reinforce the Estonian MEP’s quote at the start. The EU need Britain and Britain needs the EU and provided we both enter into the negotiations with this reality at the forefront there is so much common ground that we should be able to find a deal that even the Wallonians might agree to…
Perhaps, perhaps perhaps.