The effects of the hard Brexit on business and global trading – An interview: Gordon Kerr, lawyer

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Hi, Gordon. Welcome, as a starter, I would like to ask you to tell us a bit about your background:

Yes. I’m Gordon Kerr and I am a lawyer. I’ve worked in the relocation industry for most of my working life. What I specialise in today is advising relocation businesses on how the law affects them. For example:

  • About legal advice regarding the GDPR and how we can move personal data,
  • How to negotiate commercial contracts for relocation services,
  • Competition law that may affect them;
  • Brexit and practical implications arising from it.

So my interests are the variety of legal issues which affect the relocation industry.

Thank you for this background information. It’s useful to understand from which viewpoint you’re looking at Brexit. There are a couple of simple questions I have about Brexit or maybe not that simple. Because clearly stating what Brexit means is not that simple.

So just as a recap: what does Brexit mean from your viewpoint?

Brexit, in its simplest terms, means Britain is exiting the European Union. It is currently scheduled for the 31st of October of this year. Brexit is the result of a referendum in the United Kingdom held in 2016 which produced a result of 52 percent of people in favour of Brexit and 48 per cent in favour of remaining in the European Union. 

The UK Government is still working on the Brexit details. Three years in we are still far from knowing how that will work out.

Lately, I think the direction has been moving towards hard Brexit. What does Hard or no-deal Brexit mean from your viewpoint?

Hard Brexit, as opposed to a soft Brexit, means leaving the European Union single market and leaving the Customs Union.

This contrasts with Norway, for example, which although it’s not part of the EU, has full access to the single market. It aligns very closely with EU rules and regulations, including freedom of movement, so it’s able to take advantage of the single market. The U.K. government’s policy is to leave the single market and the Customs Union, end freedom of movement with the EU and no longer be subject to the European Court of Justice and to EU rules and regulations.

It’s a clean break, with Britain hoping to negotiate a free-trade agreement with E.U., but without alignment to EU rules. The negotiations with the EU are very challenging, and this is why we’ve ended up in the position we’re in, just a couple of months before we’re due to depart.

Had the U.K. government decided that they wanted a soft Brexit rather than a hard Brexit then negotiations would have been more comfortable. We could have followed the Norwegian example of having a softer relationship with the European Union. However, that is not where we are today. We are moving towards not just a hard Brexit but in fact, a no-deal Brexit where we will leave the European Union on the 31st of October with no interim arrangements in place.

What does the E.U. want from Brexit or Britain? 

I think the E.U.’s primary objective is to maintain the integrity of the single market.

So while the E.U. has been happy to enter negotiations, their general statement is that the U.K. can’t just walk away from the European Union while still expecting to have all the benefits of the single market and the Customs Union. The expression that was used earlier in the negotiations was that Britain could not “cherry-pick”.

You cannot choose the best part of the membership of the E.U. while deciding that you’re no longer a member. That would be very damaging to the European Union. The EU wants to preserve the integrity of the single market and clear economic advantages for the remaining 27 members.

While recognising that the UK will be an essential future trade partner, trying to enter an agreement with them that works for both E.U. and U.K. has given rise to a number of  intractable problems. There is no agreement on so many fundamental issues. As an example, the problems related to the only land border between the U.K. and the European Union, on the island of Ireland, has created impossible obstacles to overcome.

Nobody wants to reimpose a formal border in Ireland, but you need some form of border controls if you have different customs arrangements.

And it might potentially light up Ireland again?

Exactly. It’s more than just a trading or economic issue having tariffs introduced between the two parts of Ireland. It’s the fact that tariffs require border controls on the island and it’s difficult to see how border posts can then be avoided.

This may endanger the peace process. A hard Brexit is a gift to those who prefer violent conflict to political solutions: they can say now look at what the British government has done. They’ve re-introduced border controls.  Let’s rise against this. So it’s a real issue — not just a theoretical concern.

What are the current sentiments in this respect in Scotland?

That is a fascinating question because in the EU referendum Scotland voted by 62% to 38% to remain in the European Union. Of course, it was a U.K. wide referendum.

Northern Ireland also voted “Remain” and many there argue that the ultimate solution is to reunify Ireland and to end the union of Northern Ireland with the United Kingdom. A similar discussion is taking place in Scotland, led by those who argue that Scotland is being dragged out of the EU against its will.

Any form of “hard” or no-deal” Brexit strengthens the arguments of  those who would like to see Scotland leave the United Kingdom and rejoin the European Union. So there is a real prospect of a new referendum on Scottish independence within the next year or two and the possibility, therefore, of an independent Scotland applying to rejoin the European Union.

All this would be in the headlines if it weren’t for the whole Brexit process itself occupying all media coverage. The UK media is of course fully focused on the fundamentals of the UK leaving the European Union and the potentially catastrophic effects on the U.K. economy.  And unlike the immediate political impact of Brexit on Northern Ireland, it is likely to take just a little longer for the issue of Scottish independence to come to the boil following Brexit.

Having a real border put in place would have a severe effect on people living in Northern Ireland.

Take, for example, a farmer in Northern Ireland, or someone who runs a business close to the border, and suddenly you’re going to be faced by these tariffs. That is a real practical issue.

Suddenly you find that your milk or beef cannot be sold into the republic of Ireland because of the EU tariffs on various food products. It could be 10, 20 or 30 per cent.

Northern Ireland farmers face real practical issues on 1st November.

I just pulled up the map quickly. There is only one road going back and forth to Northern Ireland.

It was never designed to be a border. You know it’s not like having a river or a mountain range. It is just a randomly created border.

It’s a crazy border in many ways. This is why it is so problematic.

If you look at Brexit, then how would it change not only Europe but the world?

That is an interesting question. You could say Brexit is an example of the national populism and protectionism that’s coming to the surface in various parts of the world. That’s why it chimes with President Trump’s “America First” rhetoric and some of the Brexit rhetoric is similar. If you are a Brexit supporter in the U.K., you would say is that: “This opens up the U.K. to world trade. Britain will start trading with the rest of the world and will enter into deals with U.S., India and China and move away from the smaller, low-growth European market”. This is the kind of optimistic view held by Brexit supporters.

The opposite side of that coin comes from those who are concerned that Britain is leaving a European market of 500 million people. Britain will ultimately enter some form of trade arrangement with the European Union – but this could take years. 

The impact on world trade from an  optimistic Brexit view is that there will be increased opportunities for nations, in all parts of the world,  to enter into trade deals with the U.K.

But in practice, this feels like part of a dangerous trend, with more and more nations emphasising their own national interests and seeking only trade deals which fit with their own world view.  Globalisation of trade is replaced with “America First”, “U.K. First” etc.

So it’s quite a risky direction that world trade is moving in. Particularly if we look at current trade conflicts between the United States and China, or looking at recessionary pressures that exist even in European Union countries. Germany is concerned about its car industry. Brexit will mean that it’s harder to export cars from Germany to the U.K. For the French wine exporters it becomes more difficult to export into the U.K. because of tariffs. Much like in fact, the difficulty that French wine exporters already experience with Donald Trump, who is threatening to introduce higher taxes on imported wine from France.

So I think that it is possible to view Brexit as part of a broader trend and to see the impact on world trade as a negative one.

I believe it was last week when the Democrats in the U.S. were: it’s not a given that there will be an agreement with the U.K.

You’re correct. That is again where the optimists and, I would say, the realists separate. So we have Donald Trump saying it will be a top priority for the U.S. to enter into a trade arrangement with the U.K.  He is very supportive of Brexit and expresses a low opinion of the EU. But, any trade deal with the U.S. has to be approved by Congress.

Only last weekNancy Pelosi was commenting that Democrats will not support a U.S. – U.K. trade deal while there remained a possibility that a border could be re-established within Ireland. It’s all about assertions and rhetoric. There’s very little information on what kind of solid next steps are to be expected.

This trade deals that you’re talking about: Being in Europe prohibits you from making your own trade deals?

That’s correct. So as a member of the E.U. your trade deals are negotiated by the E.U. Take the American example; the E.U. has grave reservations about entering into a trade deal with the US. For instance, differences exist in areas such as food hygiene standards. There is a range of areas where it would be challenging for the E.U. to allow U.S. access into E.U. markets. One major reservation for the U.K. relates to the National Health Service, which provides UK citizens with free healthcare. There is a real danger that, under any trade deal with the U.S., American healthcare companies would be given the right to compete against the NHS for provision of services in the UK. This could have damaging effects on our current approach to healthcare.

Another much-quoted example is chlorinated chicken, which is legal in the U.S. but not in the European Union. Britain has to decide at what price they are ready to make a trade deal. Would we accept food products like chlorinated chicken? There are many examples like that.

However, getting back to your question. Yes, at the moment the U.K. cannot enter independent trade deals with other countries.  But from the 1st of November it can, and in theory, it will start doing so right away.

OK. How does this work with Norway that has the perks of being in the European Union but at the same time, not being a full member?

There are other forms of  trade arrangements that the European Union can enter into. The most recent one being Canada. It does not restrict Canada’s right to enter other trade deals and Canada is not subject to any EU laws or financial contributions. It would be crazy if it did. But while the deal gives Canada tariff-free access for goods into the European Union, it does provide free access for Canadian services.

An arrangement like that wouldn’t work for the U.K. because we’re mainly a service economy. But a wider arrangement, such as the U.K. retaining membership of the Customs Union, would again prevent the UK from entering independent trade deals with other parts of the world. In which case, the concept of Brexit and the whole pain of the last three years would seem to have been an unnecessarily painful process.

End of part one – Check out part two

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