Consequences for the Netherlands if there is no Brexit deal

Edition 30 August 2018, by Marla Thomson

With less than eight months before the United Kingdom leaves the European Union on the stroke of midnight, March 31, 2019, the Parliament of the UK and the leadership of the EU have yet to reach an agreement on what the post-Brexit economy of Europe will look like. This includes borders checks, customs clearances, the movement of capital and labor, the status of UK citizens living elsewhere in Europe and vice versa, and other aspects of the UKEU relationship. As the chances of reaching no deal, what some are calling a “hard Brexit”, are increasing, the effects on the remaining 27 member countries are under increasing scrutiny. Besides Ireland, the hardest hit country will likely be The Netherlands.

The International Monetary Fund estimates the Dutch economy will decline by 0.7% when the UK leaves the European free-trade bloc, and that this averages out to each Dutch citizen having 1,000 euros less in their bank accounts. While the government intends to help where it can, State Secretary of Economics Mona Keijzer says entrepreneurs will need to pull their share of load as well, and earlier this year Prime Minister Mark Rutte called for farmers to prepare themselves for a no-deal Brexit. The Netherlands and the UK have long been each other’s top trading partners and have a deep connection; not only via the North Sea, but the Netherlands was a strong proponent of the UK’s entry into the EU for many years, until its offi cial joining in 1973. It is not surprising that over 80,000 Dutch businesses trade with their North Sea neighbor, equating over 50 billion euros in goods and services traded between the two countries every year. A no-deal Brexit would lead to signifi cant roadblocks in the fl ow: it is predicted that will the cost for Dutch businesses of doing business with UK – trade licenses, tariffs, red tape – will increase by 400 to 600 million euros per year.

Some industries will be affected the most. “All the traditional fresh Dutch products – fl owers, fruit and food will be hardest hit,” the Confederation of Netherlands Industry and Employers reported. These goods must make it to market with a speed that only an open market, with open borders and customs, can facilitate. When the UK exits the EU, it will take with it the smooth fl ow of goods, services and capital, and replace it with border controls and customs clearances. These additional stops in the fl ow will prove detrimental to perishable goods such as food and fl owers – which today can be bought in the Netherlands and be on the shelves in Britain the next day.

Long queues at British ports of entry will make such speedy delivery impossible. For the Dutch fl ower industry, whose secondlargest purchaser is the United Kingdom, the increased delivery time will be problematic to fl owers that only hold their beauty for a short time. Food, particularly, beef, will also be affected by the growing delivery times. And all perishable goods will have added custom fees to ensure they can be sold in the UK. It is estimated that the meat processing industry could face upwards of 28 million euros and the cut fl ower segment over 5 million euros a year in added custom charges.

The Netherlands also faces the same strains that other European nations are feeling as a result of the new relationship with one of the largest economies in Europe and the world. Points of entry throughout the continent will be re-purposed to support the UK’s new category of nationality (European, but not EU or Eurozone). Where goods come in, particularly shipping ports, entirely new port operations must be built to support the new trading guidelines of post-Brexit UK and the EU. The Netherlands estimates it will need almost 1,000 new customs and border personnel to support the added checks and clearances. Fortunately, the Dutch government green-lighted the hiring and training of new customs offi cials earlier this year.

While preparation on this side of the North Sea is vital to ensure a smooth transition when the UK leaves the European Union, much of the burden lies with the British themselves. While the Dutch are losing one large trading partner, the UK is losing 27 of them. Whereas Dutch customs need about one thousand new people, the UK needs several thousand. From all accounts thus far, the UK government is behind in producing not only a workable deal for overall trade with the European Union, but also in its own internal plans to support the logistics of non-free market trade. This possible British unpreparedness might create a great deal of havoc.

Losing such a large and vital trading partner within the EU will have immediate negative impacts on the economy, on certain industries in particular, and on the fl ow of goods and services. Nevertheless, there are several silver linings to consider. If anything, Brexit is a wake-up call to the remaining 27 member nations to create a stronger European bond and to look past the parameters of the EU to other possible alliances and treaties.

While still advocating for a strong overall Union, Prime Minister Rutte helped form an intra-union alliance of seven smaller northern European countries – coined “The New Hanseatic League” or “Hansa”, as they call themselves – to help smaller countries compete with the huge French and German economies. The departure of the British gives such allianceswithin- alliance an opportunity to fi ll trading voids and, in the case of Hansa, has helped propel Rutte to the ranks of effective and strong European leaders including Merkel and Macron. Additionally, with the passing of a law – albeit controversial – on the abolishment of dividend tax earlier this year, the Netherlands has become an attractive place for the headquarters of dozens of international businesses, organizations and fi nancial entities that have chosen to depart the UK as a direct result of Brexit.