Nieuwsbericht

Mededeling van 20-03-2017

What to expect from Brexit: a Belgian point of view

BECI, March 20th, 2017


- - - the spoken word alone prevails - - -

Excellences,

Ladies and Gentlemen,

Within three days, exactly nine months – or a pregnancy - will have passed since the Brexit referendum. Being the first speaker of this morning, it seems appropriate to start with a brief recap.  

 

[Recapitulation]

Nine months ago, 51.9 % of the British people – or at least of those who voted – declared themselves in favor of a Brexit. 48.1 % were against it. Needless to say that the next day, Albion awoke with a serious ‘hangover’. The population, having expressed itself, seemed more divided than ever. One cannot speak of an “English Spring”, similar to the Arab one, as this English uprising took place only in the polling booth. So I’d rather suggest to speak of an “English Summer” where dawn can still promise to bring a lot of sunshine, yet around noon mists can suddenly lead to heavy showers. In short, it remains as difficult to predict the consequences of the Brexit as to forecast British weather. At this moment, uncertainty still prevails, and you will surely agree with me that this is bad for trade and business.

 

[What’s next?]

Excellences,

Ladies and Gentlemen,

The future is now, certainly the British one. The amendments voted to the Brexit-bill by the House of Lords and the obligatory return to the House of Commons were a small setback for the Government. However, a game of Ping-Pong has been avoided and we find ourselves on the eve of the notification of article 50, as promised by Prime Minister Theresa May. What follows is a period of negotiations with a deadline of two years. This period could be extended, but this is highly unlikely to happen since everyone wants the negotiations to end before the European elections of 2019. The agreement– let’s hope that we’ll find one – will then have to be approved by the Council and the European Parliament. At that moment, the Brexit will be a fait accompli.  

 

This is of course easier said than done, as these negotiations promise to be extremely complicated. The British obviously want an easy and cheap EU divorce, and at the same time conclude an agreement on their future relation with the Union. For its part, Europe will have to find a difficult balance. On the one hand, it cannot give the impression of wanting to punish the British for their democratic choice. On the other hand, it cannot make the departure too easy or comfortable, to avoid that the UK would escape its European obligations but would continue to benefit from the European structures and the single market and its four freedoms. For this could encourage others to follow the British example and to slam the door of the EU. Let me be clear: the British EU-exit is absolutely unique in European history and it must remain so. 

 

[Belgian point of view]

Ladies and Gentlemen,

Let’s return to today. The playing field is leveled and delimited and the pawns and main objectives are set. Everything seems to be prepared for a game, although the Brexit cannot become one. Today, we are far from a “win-win”, but are striving to avoid a “loose-loose”, in the first place for our companies and businesses. Let us not forget that nearly half of British exports go to EU countries, but more than 10 % of EU exports also find their way to the UK.

 

To prepare Belgium in the best possible way, we decided within the federal Government to create a Brexit- working group under the direction of Count Paul Buysse. The first meeting took place two days before the referendum, and at that moment I was still hoping that it would also be the last since Belgium is one of the countries likely to be the most affected by the Brexit, together with Ireland, the Netherlands and Germany. Total exports of goods from the EU to the UK amount to around EUR 316 billion, of which Belgium holds a 10% share. Total imports from the UK to the EU amount to EUR 182 billion, with a Belgian share of 9,4%. These figures make the UK our 4th most important trading partner, just behind Germany, France, and the Netherlands. So it is clear that Belgium has every interest in an orderly separation process and a rapid negotiation of a new treaty with the UK, as all possible commercial barriers could directly and sometimes very severely affect our Belgian companies.

 

[Mission to London]

Ladies and Gentlemen,

To feel the pulse, I went to London at the end of January. At an economic level, I had meetings with the Belgian Chamber of Commerce and exchanged views with numerous representatives of Belgian and British companies. I visited the R&D Department of UCB in Slough, and had a meeting with the British management of Solvay, a discussion at the Institute of Directors, the UK’s longest running organization for professional leaders, and a meeting with the director of international operations of the City. At a political level, I had intensive contacts at the House of Commons and the House of Lords, and a long and constructive discussion with the Minister responsible for the Brexit, HE David Jones.

Here are my main conclusions:

 

With her speech and white paper, Prime Minister May created some light in the dark, although uncertainty continues to prevail. Belgian and British investors are confronted with enormous uncertainties and the impact on investments begins to show. Several companies have told us in confidence that they intend to delay or reduce their investments, given the lack of stability and certainty.

 

Of course, commercial interests vary greatly across sectors. For some companies, the discussion on immigration and restriction of freedom of movement does not seem to be a major concern. They need highly qualified personnel and are convinced that such profiles will always find their way to the UK. However, this is not the case for sectors employing unskilled labor, although this mainly remains a British problem.

 

Another challenge is the one of tariffs. For many UK-based companies working with very narrow margins, a tariff of 6% for example would mean that they are no longer competitive with their European competitors.

 

Until now, the depreciation of the Pound Sterling has had little impact on British public sentiment, despite a real loss of purchasing power. However, this may change in the future if this trend continues and a general feeling of collective impoverishment should emerge.   

 

British companies continue to advocate a ‘soft Brexit’, although their words sound hollow as the road to a “Hard Brexit” seems to be definitely taken.

 

For its part, Europe has to remain extremely vigilant during the negotiations.  When two dogs fight over a bone … The City for example fears that, if it is denied access to the European market, up to 80% of its activities risk to move. Not to the European continent, but rather to New York or Singapore.

 

In short, everyone is convinced that the Brexit is an unparalleled and unprecedented challenge; one that could greatly affect Belgium and Europe. My conclusions were part of a report of the Belgian working group, handed over to Prime Minister Michel on January 30th, and subsequently presented to HRH King Philippe. This preparatory work must enable our country to move towards the Brexit-negotiations in a well-prepared manner. This is imperative, taking into account the crucial link between so many Belgian sectors and the UK. In particular the food and dairy industry, and the sectors of fresh fruits and vegetables. In the textile sector, household and decorative textiles are likely to be the most affected, followed by the export of carpets. The automotive industry, transport, pharmaceuticals, chemicals, plastics, and the machinery and equipment sector will also feel in greater or lesser extent the impact of the Brexit. With regard to services, I’m thinking about the transport sector, the Belgian ports and our financial sector.  To give you but one example: 45% percent of the transfers of the port of Zeebruges go to and come from the UK. If Belgian exporters would have to rely on the rates of the WTO, they risk paying 1.6 billion EUR additional  fees a year, possibly making them look for other markets and leaving the port. Furthermore, the depreciation of the British pound could also cost hundreds of millions of euros in the long term to our companies. Today already, more than half of Belgium’s exporting companies suffer adverse effects of the Brexit, in particular due to the weakening of the Pound Sterling. Therefore, we should also think of European support measures for affected companies within the EU27.

 

Ladies and Gentlemen,

In the future post-Brexit era, Belgium would therefore benefit from a strong commercial relationship limiting the impact for our companies to the strict minimum and guaranteeing the continuation of Belgian exports with a minimum of tariff and non-tariff barriers. Belgium has very important trade relations with the UK and each barrier would mean additional costs for both of our economies and companies. Our country will therefore have to remain very attentive during negotiations and ensure that these Belgian interests are well represented. In any case, we have a good starting position, with two of the three European negotiators for the Brexit being Belgians.

 

[Conclusion]

 

Ladies and Gentlemen,

Our country will have to mitigate the negative impact on Belgian industry and economy as much as possible through a transitional regime towards a new, comprehensive, institutional, trade-based framework. The notion of “comprehensive” or “global” is essential, since sectoral agreements would be counterproductive to us as they could lead to very difficult discussions and trade-offs between the 27 members of the EU. And of course, this global agreement should be based as much as possible on the principles of the single market. Indeed, having an open economy and being the second most globalized country in the world, Belgium is well aware of the enormous advantages of the European market. Most of our foreign trade is organized with our neighbors and European partners, and our ports are an important access point to the European single market. In addition to ensuring a rapid and constructive conclusion of the “Brexit” chapter, we will therefore continue to defend and strengthen Europe’s legacy. European citizens, including many Belgians, share a lot of concerns of the British who supported the “split”.  Elections in France and Germany could cause new cracks in the European concrete. The Brexit thus also is a wake-up call for Europe. The objectives being the preservation of the European construction, the deepening of European integration and the single market. Indeed, it is only by working together and maintaining unity that Europe will still be able to play an important role in this 21st century. The Brexit and the fear of American protectionism also offer us a unique opportunity to enhance European unity. It is true that the challenges are not negligible, but the opportunities are also numerous. Belgium and Europe can come out stronger and it is my ambition to contribute to this, wherever and whenever I can. Nevertheless, throughout Belgian history, the United Kingdom has always been one of our most important strategic and economic partners, and it is also my ambition to keep it that way.

 

- - - the spoken word alone prevails - - -


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