Toespraak van minister Kaag op NBCC Brexit Forum

Toespraak | 29-03-2018

Ladies and gentlemen,

Exactly 1 year from now, the United Kingdom will leave the European Union. It’s a decision I regret and respect. I respect it because it’s a democratic decision – taken by the British people. At the same time, I regret it because, even if it may offer some opportunities, Brexit will have overall negative effects on the both the British and the European economy. Trade between the UK and the EU will never be the same again. It’s our common task to prepare well for this new reality and limit the impact as much as we can. 

Last week, the European Council welcomed the progress being made on a withdrawal agreement between the UK and the EU, including on a transition period. The political agreement reached last December on citizens’ rights and the financial settlement has been translated into treaty text. And the EU leaders adopted guidelines for talks with the UK on future relations. It’s a good start. But it’s no cause for euphoria: the most difficult part is yet to come. Debates are ongoing on complex issues like Northern Ireland and the role of the Court of Justice.

And negotiations on our future economic relationship haven’t even started yet. Even if we agree on a transition period that runs until December 2020, that will only postpone the practical consequences of Brexit – not prevent them.

Right now, the British government is planning to leave the single market and the customs union.

This has serious political and economic implications.

The Netherlands and the UK have been friends for a long time. We share many passions and principles.

In the political negotiations, the Dutch government wants to remain as close as possible to our British allies. That’s good for trade, for security, and for our strategic position − preserving the clout of European rules and regulations in global affairs. But it’s tricky. Because at the same time we cannot and will not allow a country that leaves the EU to end up with a better deal than those that are staying. Hence the basic negotiation principles adopted by the member states: no impingement on the single market and no cherry picking.

The single market is a total package: it comes with benefits and with obligations. It requires a single arbiter on the interpretation of the rules: the Court of Justice of the EU. And it requires a level playing field. Unfair competition cannot be tolerated.

Let me give you an example. In the future, the UK will still be bound by the Paris climate agreement. But when it leaves the EU, it will no longer be part of the EU Emissions Trading System. In practice, this means if the UK does not apply similar rules, it would have a comparative advantage in the production of cars and steel (energy-intensive industries), to the detriment of the EU 27 and to the detriment of the environment. The European Commission estimates that this unfair advantage alone could be as high as 4.7 billion euros a year. 

Even if we strive for a smooth parting and a rapid transition, we have to be realistic.

Along with its fellow EU 27 members, the Netherlands is aiming for maximum  possible market access and a maximum possible level playing field. But the chances of achieving this are slim given the UK’s political stance and the limited time that’s left.    

So what will Brexit mean in practice?

First and foremost, there will be a new border. In a period where many of us grew up with the gradual disappearance of restrictions, and got used to trading without borders, this is unmistakably a new and in many ways complex reality. A reality that we must learn to live with and adapt to.

For one thing, a new border will mean customs controls. One in five Dutch companies trading with the UK has never had anything to do with customs (that’s over 30,000 companies!). 1 year from now, this will all change. A new border will inevitably lead to more complex procedures, more checks and more bureaucracy.

The most pessimistic scenario is that there’ll be no final agreement. This would mean import levies on both sides. Duties would be around 4.8 per cent in general. But they’d be significantly higher on tobacco, shoes and cars. A full English breakfast of eggs, sausages and baked beans would be more than 12 per cent more expensive for the UK citizen. [in the EU, the NL is the biggest exporter of eggs, and the 4^th largest exporter of pork]. For those of you who watch Netflix, series like The Crown might not be available anymore, since 20 per cent of content has to originate in the EU. Scotch whisky will no longer be a protected trademark in the EU. Nor will Edam cheese be protected in the UK.   

Of course, the government is not the only one facing dilemmas. I know you are too. Should you stay or should you go?

Do nothing and hope for the best? Or prepare for the worst, and look for alternatives as quickly as possible?

I think you - companies, citizens and customs authorities will have to prepare for uncertainty right until the last moment. In these negotiations, nothing is agreed until everything is agreed. So what we can and should all do is make thorough preparations and make clear what our enabling role is:

1. You need to know, for example, what could change in your supply chain: customs formalities, product safety controls, veterinary and phytosanitary checks. You should know where your suppliers are, and identify alternatives. You can prepare by finding out about customs forms and how to fill them in, and about how to deal with border controls.
2. It’s important you have a clear picture of your entire production process. Because if any part of your product is produced in the UK, this could have a big impact on just-in-time delivery, on the total cost of your product and on import duties for third countries.

It’s not only your direct supplier that matters, but also your supplier’s supplier. And their suppliers. So it’s essential you look at the bigger picture.

To give you an example: if you make bikes and export them to Canada, right now you don’t pay import duties, thanks to CETA. But if parts of your bike are made with British components, you might not be exempt from those duties in the future. Because in that case − one year from now − you won’t be selling an ‘EU product’ to Canada anymore.

1. As I said, we need to be realistic. Trade with the UK will be more complex. Take, for example, a company that exports lobsters. Today, it takes just 24 minutes between the delivery truck parking at Schiphol Airport and the live animals being loaded onto the plane ready for take-off to the UK. After Brexit, lobsters will need to be checked, certified and sealed before they can be exported. The whole process will take at least twice as long.

For Dutch businesses, Brexit also means opportunities. Preparing well includes looking at alternative markets in your product chain. That applies to both imports and exports. Almost 70 per cent of British exports consist of semi-finished products, which are made into finished goods in the EU.

The UK’s biggest exporting sectors to the EU are IT and telecom, passenger vehicles, food, pharmaceuticals, chemicals and aviation. Coincidentally, these sectors correspond fairly closely with the Netherlands’ most important economic sectors. The uncertainty surrounding Brexit could mean that value chains get organised differently. Suppliers in, say, the car industry might look for alternatives for their semi-finished products, including Dutch alternatives.

Post Brexit, the Netherlands should aim to be the number-1 trading channel to and from the UK, linking the UK with the rest of Europe. I invite you all to share your ideas and suggestions on how to make this possible.

This spring, I will present my new proactive policy agenda of foreign trade and development cooperation. Small and medium enterprises continue to be the cornerstone of my policy as there is still a lot of room to grow internationally and propel innovation. 

The government and I see it as our responsibility and our privilege to assist you as much as we can in general and in coping with Brexit specifically. From my new policy I can already announce that we’ll do so in a number of ways:

1. First, we’ll launch a Brexit Impact Scan. In just a few clicks you’ll be able to see how Brexit will affect your company in terms of risks and opportunities.
2. Second, we’ll introduce Brexit vouchers. The government will pay [up to 50 per cent or 2,500 euros] for a consultant to help you assess the risks and explore alternative markets.
3. Finally, we’ll significantly increase the number of people working at customs, on inspections and at the Netherlands Food and Consumer Product Safety Authority.

The Ministry of Foreign Affairs is setting up a unit to coordinate Brexit contingency planning and preparedness. We’re actively seeking cooperation with the business community. So do let us know your concerns, your ideas and your suggestions. Your input is highly valuable to us.

In sum, The Dutch government needs to be ready and we will be ready, the Dutch government will help you adapt. And we’ll help you discover new markets. We certainly encourage you to continue doing business with London, but also to scale up your business with Lille, Lisbon and Ljubljana. Be alert to new opportunities. And why not explore newer markets further afield? Team NL − the Dutch government and Dutch companies – will work together and prepare together. Dutch businesspeople are smart, swift, flexible and always open to new opportunities. And those new opportunities will arise.