British and European Union negotiators eased the pressure on the European steel industry as they signed a ‘no tariff, no quota’ Brexit deal on Christmas eve ensuring free trade of steel and steelmaking materials in Europe.
What’s the deal?
With the Brexit deal finalized, market breathe a sigh of relief. On Chirstmas Eve, the United Kingdom succeeded on securing a ‘Canada-style” free-trade agreement with the European Union. The £660bn deal ensures UK-based producers a zero-tariff, zero-quota access to the European single market but marks the end to free movement between the UK and European Union member states, without hard border in Ireland. Many aspects of the trade agreement will be negotiated over the next few months and years, which include foreign policy and defence. The deal fundamentally avoids a trade disruption dreaded by the industries and producers on either side of the English Channel.
Steelmakers in UK feared a ‘hard’ Brexit, wherein in the absence of a trade deal, WTO rules would apply to UK’s steel exports to EU and imports from the EU but in November the two sides agreed on no immediate tariffs on steel produced in UK post Brexit. A few yards feared ban on scrap exports/imports or tariffs on trade. With all this set aside on signing of the no tariff Brexit deal, it is almost status quo for UK-based steelmakers as they escape the threat of volume quotas for exports into the EU.
The shipping industry which is already struggling from the after effects of a trade disruption due to the pandemic had urged negotiators to reach to an agreement before Jan 1 when border controls will be reintroduced between UK and Europe. Imported goods will face regulatory checks and require additional documentation delaying transportation. A shortage of containers globally, and congestion at UK channel ports are expected to slow steel and ferrous scrap trade in Europe in the coming days.
European Union is the top export destination (54.8pc) for UK’s auto industry. European auto sector, in general, is severely impacted by the COVID-19 pandemic suffering a loss of around €100bn during the period, according to the Society of Motor Manufacturers and Traders (SMMT), UK. Automakers in the EU and UK had urged politicians to ensure that no tariffs are imposed post Jan 1. A ‘no deal’ Brexit would be have been ‘catastrophic’ for UK’s auto industry, according to SMMT. The association had estimated that tariff damage in the event of a ‘no deal’ Brexit could cut vehicle production in UK by 2mn units over the next five years.