Brexit Should Not Weaken EU, Says VCI

29.03.2017 -

Brexit negotiations set to begin now that the UK has triggered Article 50 of the EU Treaty, regulating its exit, should not further weaken the European Union and put its achievements at stake says the German chemical industry association Verband der Chemischen Industrie (VCI).

The cohesion of the EU and the four freedoms have high priority for the chemical-pharmaceutical industry and must be maintained, the association’s director general, Utz Tillmann, stressed. Toward this goal, he said the negotiators should strive for a “comprehensive partnership, investment and trade agreement,” which in the industry’s view would achieve more than protectionism.

For German chemicals and pharmaceuticals producers, the impact of Brexit will depend what shape of trade relations take going forward, VCI noted. Should the British government impose chemical and pharmaceutical tariffs corresponding to existing EU external tariffs, Germany’s third largest industry would have to pay an additional €200 million in customs duties annually to supply its products to UK customers, it said.

In the association’s view, additional burdens for the chemical-pharmaceutical industry can be expected if future regulation in the EU 27 and the UK take divergent paths on matters such as regulation of chemicals (REACH), authorization of medicines, cosmetics and crop protection agents or the circular economy. Different legal requirements for classification, labeling and packaging of chemical products would mean bureaucratic obstacles for trade, it said.

The UK is the German chemical-pharmaceutical industry’s third largest trading partner in the EU single market, behind the Netherlands and France. In 2016 the industry exported goods worth €11.7 billion to the UK – around 6.6% of total exports – with specialty chemicals and pharmaceuticals accounting for the biggest share. In the same time frame, German chemical companies imported British goods worth €6.2 billion, for the most part pharmaceuticals and petrochemicals.

VCI pointed out also that the UK plays a major role as a production and distribution location for the chemical industry. Currently, 63 subsidiaries of German chemical companies are active in the UK, employing around 6,000 staff and transacting sales of €4.1 billion. Direct investments in the country total roughly €1.6 billion. British companies have invested more than €2 billion in the German chemical industry directly, according to VCI.