A mere free trade agreement, as previously sought by Brussels and London, is “too little for companies,” said Joachim Lang, chief executive officer of the Federal Association of German Industry (BDI).
“From a political point of view, a trade agreement is much more realistic, “said Lang. “But you should not simply discard the idea of a customs union. For from an economic point of view, a free-commercial agreement is not far-reaching enough.”
Lang appealed to the EU Commission and the British Government. The Confederation of British Industry (CBI), the UK’s leading association of companies, is also calling for a customs union post-Brexit.
If there is a “hard” Brexit, companies in the EU and in the United Kingdom are threatened with direct additional costs of a total of 69 billion euros per year through customs duties and new regulatory barriers to trade, according to management consultant Oliver Wyman and the Clifford Chance law firm in London.
This is around 15 percent of the total goods trade between the EU and the UK. With 37 billion euros per annum, the costs for EU companies would be higher than for the UK economy, which would be burdened by 32 billion euros.
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In relative terms, however, the damage would be lower for the EU side because it is spread over 27 individual states.
The BDI predicts German firms will have to shoulder additional costs of nine billion euros a year if a hard Brexit happens – meaning that commerce with Great Britain will in future be based solely on the rules of the World Trade Organisation.
BDI CEO Lang said he was bitterly disappointed with the pace of the Brexit negotiations so far. “At the present time, much clearer ideas should have been on the table about how things would work after Brexit,” he said, adding that the time pressure now is “enormous.”
The BDI also warned that the transitional period sought by London and Brussels is not sufficient after Brexit next year. The EU wants the transition phase to be only until the end of 2020. Until then, a trade agreement with the British will be agreed to regulate the future rules of the game for exporters and importers.
“In purely economic terms, the transitional period currently envisaged is too short,” says Lang.