By Thomas Rossomondo, Manufacturing and Technology Advocate
I recently attended a forum on the implications of the United Kingdom exiting the European Union (aka “Brexit”) for American businesses held at Duquesne University, and led by Renee Barry from the International Trade Administration’s Office of Industry & Analysis at the Department of Commerce and Amanda Lawrence from the International Trade Commission. While at the forum, I was able to speak with small businesses that shared their thoughts on how United Kingdom’s exit from the European Union could potentially impact their business.
The EU is a political and economic union among 28 European nations that allows free trade and movement of people to live and work in any country within the EU. Since joining the EU in 1973, the UK has had a contentious relationship with the broader EU on a range of issues, never adopting the common currency of the EU even as it participated in many other EU programs. On June 23, 2016, the United Kingdom held a national referendum to exit the European Union. Following the vote the British Prime Minister invoked Article 50 of the Lisbon Treaty, which provides for a formal exit process from the EU, but had not previously been invoked. Article 50 allows two years for the EU and exiting state to agree on terms of exit. Brexit was due to commence on March 29, 2019 but has been delayed numerous times. Some of the issues delaying the exit include rights of EU citizens in the UK and rights of UK citizens in the EU, how much the UK will need to pay the EU for exiting, and a debate over a hard or soft border with Ireland.
Because the United States is the United Kingdom’s top trading partner, the possibility of Brexit has created a host of concerns for American businesses that do business with the UK. The uncertainty of Brexit presents regulatory concerns for these businesses that are trying to comply with both UK and EU regulations, especially since the extent to which the United Kingdom will continue EU regulatory policies is unclear. Further concerning is a question of whether American businesses with regulatory approvals in the EU will be grandfathered into the new UK regulatory scheme. Additionally, businesses expressed that protection of intellectual property was important to them, and the UK leaving the EU means that they will no longer be part of the central EU IP office, especially a concern for American businesses only doing business in the UK who relied on that for protection across the entire EU (since trademark protection relies on use of the mark). The e-commerce tax also creates an issue for sellers that will have to report and collect the tax, who will now have to deal with different taxing authorities and account for UK and EU trade separately.
By far, the biggest concern for small businesses is whether Brexit will create a hard or maintain a soft border with Northern Ireland. The borders of England, Scotland and Wales do not border any EU country, so their borders are a nonissue. However, Northern Ireland physically borders the Republic of Ireland, which is a part of the EU and is not planning to leave. Therefore, there have been major questions regarding potential future border check points, especially since such checkpoints could violate the provisions of the Good Friday Agreement which led to an end to violence in Northern Ireland. Neither side can agree on custom checks between the Northern Ireland and the Republic of Ireland, but there are some talks of a high-tech solution at the border for fuel, alcohol, and tobacco trade.
The next Brexit date has been scheduled for January 31, 2020, but if the trend continues, it could be delayed even further. With many issues still in discussion, it looks like small businesses trading with the EU and UK will be stuck with uncertainty for a while longer.
Tom Rossomando serves as the Manufacturing & Technology Advocate for the SBA Office of Advocacy, representing small businesses in the manufacturing and technology industry. Rossomando works with small business owners, state and local governments, and small business associations to bring the voice of the manufacturing and technology industry to Washington DC. He can be reached at Thomas.Rossomando@sba.gov.