British business accepts Brexit and many want to get on with exporting in new markets, and accepting the challenge of the government to expand our exports to £1 trillion by 2020.
But whilst business is doing its best to find new markets, the political focus remains on eliminating tariff barriers where, without agreements in place, import taxes are loaded onto exporting firms – which then hamper competition in favour of the domestic markets and producers. (In short, protectionism.)
Getting this right will help our companies get the job done by levelling the playing field by reducing trade duty taxes.
The impact of hidden trade barriers
But it is only half the story. The successful reduction of import/export tariffs can be rendered meaningless if the non-tariff barriers continue to hinder access to markets or significantly increase the cost of exports.
Even if we eliminate or reduce trade tariffs, exporting SMEs face a disproportionate amount of hidden barriers to getting their products sold, or services retained. And these can add huge extra costs, making the UK less competitive.
Take China for example. Before the 2007 crash, the-then EU Commissioner Peter Mandelson estimated that the non-tariff hidden barriers to China alone were costing the EU economy €21 billion.
A maze of hidden barriers
To be fair, hidden trade barriers are very complicated. In goods alone, the maze of differing national regulations create hurdles and costs bound to hinder exporters.
Products can, for example, be subject to independent testing for certification, or a requirement to produce special versions of products to comply with local regulations. The EU set out to eliminate these but has broadly failed, often because of conflicting member state interests.
The outcome for our exporting SMEs is that the cost of exporting goes up.
Faced with this, what potential new exporter will fancy their chances?
The Services Question
Even more challenging still is the services sector, where 85% of the UK economy is active.
The hidden barriers remain hard to detect, and removing them is often more complex than tariff trade barriers, as they are implemented through a large range of regulations and controls.
They come in forms such as nationality requirements, residency requirements, limits on foreign ownership, non-protection of intellectual property rights, possession of national qualifications, or even by means of a local ‘economic needs test’.
Before politics, I ran a live events company which I wanted to expand internationally, yet the biggest hurdle was not finding new business, but being able to do business in the first place.
A tough challenge – but a great reward if taken on successfully
Negotiators have the tough job of taking this challenge on. They will need to distinguish between regulations needed to protect say, the environment and national security, and the protectionist procedures that hold back growth.
Whilst the faltering negotiating steps taken by the larger, bureaucratic, multi-state trading blocs slow to a snail’s pace, on its own the UK can deftly respond to UK exporter needs to take on the hidden barriers to trade with flexible, fast-moving sets of negotiations.
There are enough barriers to exporting for a business, particularly for an SME, to consider when taking up the government’s challenge to sell abroad. Removing both the tariff and non-tariff barriers would add billions annually to the UK economy and that is definitely a prize worth negotiating for.
Fair competition cannot exist unless both the hidden barriers and trade tariffs are reduced hand-in-hand.
The means to do this and the prize awaiting the UK is, however, quite spectacular.
Measurement and evaluation