As for Brexit's final outcome, the only sure thing is uncertainty
 As Britain's exit from the European Union reaches its intermediate stage, all continue to ask the unanswerable question: Will Brexit, the UK's divorce from the EU, be good or bad for Britain and Europe. Partisans on both sides have their own answers based on their very different hopes and fears.
Even the intermediate stage has proven to be uncertain. It's still not clear what the UK's relationship with the European Union will look like after March 2019, when it is supposed to become independent, let alone in 2021 when the country severs its last vestiges of EU membership.
As always the answer to Europe's most frequently ask question will likely be "que sera sera" - whatever will be, will be. And more definitive answers will arise from post-Brexit experience, based conditions of day well after the divorce itself.
In terms of maritime matters, London's Drewry Maritime Research gathered opinions from shippers, ports and shipping people to provide an "informed preliminary assessment" of the impact of Brexit on cargo volume. Unsurprisingly, they conclude that in the short-term at least, there will probably be a decline because of uncertainty.
Agreeing, Peel Ports commercial director Patrick Walters said the bigger Brexit-related risk for UK container ports is the negative impact on box volumes caused by economic and political instability and a GDP slowdown.
Looking on the bright side, positives include opportunities to have new or improved bilateral trade agreements between the UK and countries such as India, the US, Canada (the latter with whom the UK shares a head of state) and South America. It is reasonably expected to be easier for the UK to make a deal with India without having to get 27 EU countries to sign off on it.
But before continuing the discussion on what happens after it gets out, Britain must first escape the ever-clutching EU, which plainly want it to remain. Simply put, the EU wants to continue to enforce protection of its citizens in the UK not only until March 2019, but until 2021, keeping the country a de facto EU member for another two years.
There are other hangover problems too. Beyond the citizens' rights dispute, the EU's draft position makes it clear that the arrangement “requires the UK's continued participation in the customs union and single market.”
But as hardline euro-sceptic and Tory MP Jacob Rees-Mogg, puts it, this would make Britain be a “colony” of the EU. The EU concern is the fate of all those who stream into Britain from poorer EU regions, notably Poland, and other lands in Africa having been unwilling or unable to settle in other European countries.
Much is at stake, Britain's container port sector derives 31 per cent of its total volume from trade with the rest of the EU, so any new tariffs on trade between the UK and the EU will pose of risk of slower intra-European maritime trade, but not for long if the outcome of any new retaliatory regime inconveniences continental players - as well it might.
It is widely agreed by those polled by Drewry that the significant ro-ro trade, mostly trucks and trailers on cross-Channel and Irish Sea ferries, is more exposed than ocean-going container traffic to the risk of new intra-Europe tariffs and red tape. EU ro-ro, making up 78 per cent of the entire traffic, which now includes traffic via EU ports to and from contiguous non-EU countries such as Turkey and now even China rail-fed trucks.
The British Shippers' Council has debated the impact of Brexit and concluded was too early to tell. Drewry agrees. Similarly, the British International Forwarders' Association (BIFA) said it is too soon to give a sensible prediction whether Brexit will have a positive or negative impact.
Some shippers see opportunities for more favourable trade agreements to be concluded on a bilateral basis between the UK and countries in Asia, Oceania and the Americas. Politicians in Australia, with whom UK also shares a head of state, have already said that they are happy to discuss a bilateral deal, keeping in mind that UK/Australia trade accounts for less than one per cent of UK volume.
But how about the depreciation of the UK currency since the Brexit vote? Sterling has lost ground against the dollar. Because the UK has a large merchandise trade deficit with the rest of the world and is a large importer of consumer goods, it would be reasonable to expect that more expensive imports will become less appealing to British consumers.
However, a comparison of the trends in the exchange rate and total UK port volume over a 10-year period shows only a weak link between exchange rates and total trade. This implies that a small change in the unit value of imports and exports has only a limited influence on total UK port volumes.
According to Drewry, British consumers will continue to buy large quantities from Asia and will not return to “made in the UK” sourcing regardless of exchange rates and tariffs as the difference in labour costs with Asia is too great. But what may be expected is a switch in sourcing to India, Bangladesh or South America if new deals can be made on more favourable terms.
What certainty there is tends to be legal and deeply technical. From a straight legal point of view, prominent maritime London law firm, Ince & Co, looked at the hard facts of the situation.
"The EU is made up of 28 member states and some of the world's largest container and passenger ports are situated in its territory including Rotterdam, Hamburg, Antwerp and Piraeus. Four of the world's five largest shipping companies are based in the EU," it said.
What's more, the EU is the UK's largest trading partner, accounting for 45 per cent of exports, and 53 per cent of imports, of goods and services. "Over three million jobs in the UK are linked, directly or indirectly, to exports to the EU," said the Ince & Co analysis.
Moreover, European Union law, in the form of Treaties, Regulations and Directives affects a wide number of commercial issues including trade, environmental regulation, international trade sanctions, competition law, employment, tax, immigration and infrastructure projects.
Considering what might change, Ince & Co, said British law of particular importance to the shipping industry affected by Brexit would be where EU institutions create laws that are automatically incorporated into UK law, such as Regulations, or where EU Treaties are transposed into UK law by the Parliament enacting implementing laws.
Indirectly, British law is impacted where the EU institutions issue Directives setting an objective aimed at creating harmonised EU-wide rules, but leaving it to member states to adopt national laws to achieve the objectives the EU sets.
Then there are EU Decisions and the rulings and opinions of the EU Courts. Laws of particular importance to the shipping industry are likely to those regarding trade, insurance, environmental regulation, international sanctions, contract terms, competition law, employment, dispute resolution and trade treaties with non-EU states.
In regards to competition law, EU rules apply to agreements and market conduct that affect trade between member states, and the EU Commission has primary jurisdiction to enforce them, including granting clearance to mergers and investigating cartel activity. Where the effects are confined to a single state, national laws apply.
Full Brexit, said Ince & Co, would likely lead to a separate competition regime applying to the UK and to competition enforcement in the remaining 27 member states, leading to the need for dual clearances in the case of mergers and exposure to regulatory investigation under two parallel, but distinct, regimes.
Brexit would likely mean that compliance with both UK and EU competition rules would become more complex and burdensome. Many shipping contract, voyage and time charters, provide for trading to certain countries or geographical regions, would result in uncertainty as to whether a contract signed pre-Brexit would continue to include Britain, said the law firm.
If existing contracts were drafted in a way that presumes the existence of an EU containing the UK, or makes a reference to the EU without specifically defining what that is, such contracts may result in disputes as to the meaning or ambit of the contract.
The rules by which the UK courts determine jurisdiction over, and the law applicable to, the majority of disputes arising between parties within the EU (both for contractual and tortious claims) are currently determined by EU Regulations.
In addition, parallel proceedings in the courts of more than one EU member state are prohibited where those proceedings involve the same or related issues, meaning that a defendant is protected from being sued in relation to the same dispute in two separate EU jurisdictions, said Ince & Co.
Brexit would leave companies unable to calculate with any degree of certainty their exposure to different legal systems should a dispute arise.
Such are the certainties that can be established at this intermediate negotiations of the Brexit talks. It is not a good time for Britain with last year's UK GDP growth falling from 1.8 per cent to 0.4%. Is this Britain's Dunkirk moment? Or as Churchill might say, it is not the beginning of the end, but rather the end of the beginning. |
