British firms don’t currently export to Europe, they simply deliver
07, Jan 2020
Industry News
The UK has been working under a fundamental illusion for the last 40 years. It hides in plain sight in virtually every government statistic, every government publication, Brexit readiness guide, departmental report, select committee hearing indeed everywhere. Even companies fall foul of it and it colours the entire understanding of what it is to be an EU Member State. It is also the reason why all the preparation for a no-deal Brexit vastly underestimates its consequences and the certain, irreparable damage it will do. (Whatever the outcome of the Withdrawal Bill, unresolved at the time of writing, the risks of leaving the EU without a trade deal which resembles the current relationship in terms of trade is undiminished.)
The illusion is this. Many UK businesses that currently sell to customers in the EU have never exported. Doesn’t look right does it? But it is. I’ll explain.
Today, quite simply delivering to a customer in Birmingham is the same as delivering to a customer in Berlin. That’s because both these customers are in the same marketplace. The Single marketplace. Now I suspect some of you will say ‘talk about stating the obvious!’ but this simple truth carries a lot more weight than it appears to. This is the illusion. To this very day most people describe the former of these two transactions as the home market and the latter as exports. The latter is intracommunity trade based on a common regulatory framework and no tariffs. No-one needs to provide a special export certificate, complete a customs declaration, pay duty or undergo an inspection of the consignment at the border. Their goods travel anywhere in the EU, Birmingham or Berlin, with a simple commercial document; an invoice.
Today, quite simply delivering to a customer in Birmingham is the same as delivering to a customer in Berlin. That’s because both these customers are in the same marketplace.
‘Exports’ were always the domain of big, sophisticated businesses with export departments, customs experts, clearing agents, performance history to secure quota and the other paraphernalia needed to deal with the regulatory complexity of moving goods across borders. All of that eats into margin even for big companies but for smaller operators it is usually a deal breaker as they can’t even benefit from economies of scale. The cost of getting an export certificate or completing a customs declaration is the same for a pallet load or a truck load. The Single Market has opened a world of opportunity to small businesses that neither have nor need that sort of infrastructure to trade within it. This in turn, has changed the way trade is done.
International trade is largely shaped by the fact that there are customs procedures and checks at borders. Buyers and sellers agree what their terms are and this determines who is responsible for these procedures. In most cases the change of ownership of the goods takes place at a logical point with a clear relationship between exporter and importer and this is usually at the dockside in the country of origin or the country of arrival. Usually it is the importer that takes care of the import procedures, clearing customs and paying any duty.
Today, for trade within the EU, there are no exporters and importers. None! There are sellers and buyers. Sellers and buyers in Birmingham and Berlin delivering goods to each other uninterrupted by border procedures.
There is another major benefit and that is one of scale. Groupage, consolidation and small regular deliveries of fresh product almost on a daily basis to customers across the EU. Inventories are kept low, waste is reduced and businesses can offer a service that competitors half way round the world cannot. This is an incredibly liberating fact and the EU’s Single Market has done more to democratise trade than any trade deal we have or will ever have outside it.
Those that would try to sell the idea that doing our own deals will somehow replace this are deluded or haven’ t taken on board these basic facts. For some businesses, erecting the barriers that have been swept away by the single market will be every bit as disruptive as requiring export health certificates and tariffs on deliveries to Birmingham. The current trade model simply collapses under these circumstances and for many this will be terminal.
