No-deal Brexit scenarios in Romania: tariffs could hit exports to the UK, restrictions to business travels

Sorin Melenciuc 19/02/2019 | 15:04

The Romanian Ministry for Business Environment has presented to the local entrepreneurs some of the scenarios in case of a no-deal Brexit next month, indicating that tariffs could hit exports to the United Kingdom, while restrictions to business travels should be considered.

The withdrawal of the UK from the European Union without agreement will mean returning to the provisions of multilateral trade agreements under the stipulations of the World Trade Organization (WTO).

As a result, most-favored nation clause tariffs will be applied. Although customs duties at the level of the WTO have been reduced to an average of 10.7 percent for agricultural products and 4.2 percent for industrial products, the level of these taxes varies largely, reaching even 30 percent for some products.

In addition to tariff barriers, trade between the EU and the UK will be influenced by non-tariffs: customs formalities characterized by burdensome procedures and controls that will particularly affect companies operating on a “just in time” delivery model.

In 2017, Romanian exports to the UK market amounted to EUR 2.55 billion, representing 5.4 percent of Romania’s total exports to EU member states.

Romania had a positive trade balance with the UK in 2017, of EUR 873 million, as imports from the UK amounted EUR 1.65 billion.

The Romanian authorities warn that travel restrictions could be expected.

“Business mobility for business purposes is a matter to be considered for companies whose employees are moving for business purposes in the UK, given that in the case of UK retirement from the EU without agreement, the mobility of people, even for business purposes, would be restricted,” the ministry said.

The National Bank of Romania (BNR) has recently made plans for a no-deal Brexit at the end of March and warned that the UK banks will be treated as third-country entities in this scenario and their activity on the local market will cease on March 30, 2019.

On 29 March 2017, the United Kingdom notified its intention to withdraw from the European Union pursuant to Article 50 of the Treaty on European Union, following the pro-Brexit vote.

This means that, in the absence of a UK-EU deal stipulating another date, all Union primary and secondary legislation, including in the field of banking and payment services, will cease to apply to the UK as of 30 March 2019, 00:00 (CET) – 01:00, Bucharest time.

The UK will since become a third country in relation to any of the EU Member States, including Romania.

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