December 23, 2020
In our most recent article citing a rebound in global trade next year, protectionism and the negative impact on supply chains was prominent. It has been a recurring theme this year and stays in the news as we close out the year.
At the time of writing, one of the top two trade stories of the year, Brexit was coming down to the wire in its negotiations (US/China being the other one). Throughout last week the mood on both sides swung from positive to negative. And while most analysts believe that a deal will be struck (perhaps today), it will come down to the wire. There is potential for both sides to find a legal loophole that will allow them to extend negotiations into the new year.
The EU and the UK appear to have settled a number of contentious issues around ensuring a level playing field between the economies (yet to be formally confirmed), however fishing remains a sticking point. This is down to percentages of access to each other's waters.
Should a deal be negotiated, it will bring some relief for UK businesses that have had their time and resources focused on surviving the COVID pandemic. The current uncertainty is already causing supply chain disruption and this is unlikely to change in the months ahead. In recent weeks European suppliers to British businesses had already delayed or halted shipments because of the impending uncertainty. Rapid inflation on items such as food and drink from the EU bloc are almost certain. Welsh lamb farmers could see their businesses crumble as new tariffs could make their exports too expensive to ship. Scottish whiskey industry is likely to see its sales growth curtailed. And all this on top of the current disruption brought on by COVID border restrictions over the last couple of days.
Regardless of outcome, disruption in the supply chain brings opportunity, particularly for Canadian exporters. The most recent trade deal between Canada and the UK, plus Canada’s relative stability versus other countries will present opportunities. Canadian exporters should evaluate their options and potential for increased trade with the UK. (Kevin Fairs)