The French have finally realised that there may well be a no-deal Brexit. The Medef employers’ federation has said that French businesses are not prepared, the agricultural sector is waiting, while transporters are panicking. EURACTIV France reports.
The benevolent optimism that long prevailed over Brexit in France is being followed by panic among businessesc. The latest fluctuations in British politics were clear enough for one French senator, who said that “we’re clearly headed for a no-deal Brexit.”
France has a large trade deficit overall but trade surplus with the United Kingdom, which it would like to keep. While French public authorities are on deck to warn about potential problems, French small and medium-sized enterprises are not yet fully aware of what is at stake.
“French businesses aren’t ready for a hard Brexit,” said Geoffroy Roux de Bézieux, chair of Medef, in mid-February. He added that the vast majority of exporting businesses (about 30,000) are not prepared because being prepared is very complicated.
“It’s true and it’s their fault,” replied a source in the French government. “We have been asking them to call small and medium-sized businesses about VAT and export rules for months, and nothing is happening!” complained the high-ranking official, who considered Medef to be one of those “intermediary bodies which are disappearing.”
The French government has organised an increasing number of meetings with professional federations and set up several websites providing information for businesses. However, this information has primarily reached the largest businesses and not the small ones.
Return of customs duties
The key issue at stake is French exports to the UK. Without an agreement, the UK will become a third country, meaning it will be necessary to conform to British (non-European) standards to export apples, bolts and medication. There may even need to be customs duties.
Without an agreement, the general trade regulations – as established by the World Trade Organization (WTO) – will be applied from 30 March, in other words, the most favoured nation rule.
The UK’s situation with the EU will be the same as that of the United States and the country will have to have equivalent customs duties to export its goods. In these circumstances, it is not in the UK’s interests to increase its own customs barriers because it would be forced to renegotiate all of these trade relations with the WTO.
“We’re entering quite an unknown world: the British joined the EU before the development of international trade,” recalled Cécilia Bellora, a researcher at economic research centre CEPII, which has notably looked into Brexit’s consequences on agriculture.
According to the “Mirage” model, returning customs duties may penalise French agriculture, with the exception of the French meat industry. This sector could easily take European markets back from British farmers and ultimately benefit from Brexit.
“But this is quite a theoretical outlook, which doesn’t take the costs of uncertainty and redirecting flows into account,” Bellora warned.
Pharmaceutical sector well-prepared, transport in desperate states
Certain sectors of French business are well prepared. For instance, this is true of the pharmaceutical sector, which has made preparations for a hard Brexit.
“Medication is a strategic sector where logistics is crucial,” explained Philippe Lamoureux, director general of LEEM, which groups businesses in the French pharmaceutical industry.
“As the medicines agency was located in London, almost 3,000 medicines had marketing authorisation applications (MAA) from the United Kingdom. In the same way as clinical trials, these had to be repatriated within European subsidiaries, as the officials have to be on European territory,” he added, saying that he was not concerned in the short-term.
However, there is still a supply risk in the medium-term. Unless the EU and the UK quickly sign a mutual recognition agreement, there may be delays to delivery. This would be significant, even if France only imports 4.7% of its medicines from the United Kingdom.
In contrast, in the transport sector, the French national federation for road haulage (FNTR) is on edge. Of the tonnage traded between the EU and the United Kingdom, 60% passes through French infrastructure.
“There could be overnight chaos,” summarised Isabelle Maître, director at the FNTR, during a hearing at the French Senate.
“What real responsibility will lie on drivers? Will they be paid if there’s a waiting time?” asked Thierry Grumiaux, delegate of the FNTR’s transport committee.
Lack of expertise on customs matters
Following the removal of EU borders, certain skills have simply disappeared, also among transporters. And yet, the United Kingdom will become a third country on 30 March, with or without an agreement, meaning that drawing up customs declarations is essential.
This promises to be difficult. “We don’t have enough customs declarants, we would need 1,000 additional ones. But we can only create between 100 and 150 a year,” Grumiaux said.
Customs declarations for third countries may include a vast amount of information, based on the products and standards they respond to.
For instance, in fishing, any goods imported into the EU are subject to a specific check relating to where the fish were caught. Without a customs certificate, fish and scallops may be stopped.
With just over a month to go until Brexit, the likelihood that trade between France and the United Kingdom will flow as smoothly as it currently does is diminishing. The only way out would be to extend negotiations between London and Brussels, an option that is regularly raised in Brexit talks.
[Edited by Zoran Radosavljevic and Frédéric Simon]