Issue link: https://maltatoday.uberflip.com/i/694236
maltatoday, SUNDAY, 19 JUNE 2016 13 News News END of the affair? Local businesses fear trade tariffs Brexit could bring PAUL COCKS THE ties between Malta and the UK make it impossible to ignore the possible implica- tions and effects on Malta and its economy should the UK vote in favour of leaving the EU in Thursday's referendum. In 2015, Malta exported a total of €2.31 bil- lion worth of goods, of which 6.9%, or €145.6 million were exports to the United Kingdom. Malta's top five export sectors to the UK were books, newspapers and printed ma- terial (€41.38m), vehicles and machinery (€36.85m), electronic equipment (€17.76m), pharmaceuticals (€16.1m) and iron and steel products (€7.64m). In the same period, Malta imported €5.15 billion worth, of which 7.5%, or €385 million, were spent on goods imported from the UK. The top five sectors of imports from the UK were boats and ships (€76.64m), pa- per and paper products (€36.59m), vehicles (€35.61m), pharmaceuticals (€23.27m) and machinery and equipment (€20m). So what happens to Malta's economy if the UK votes to leave the EU in the referendum this Thursday? First of all, Britain exiting the EU (or 'Brex- it'), could make it much harder for people from the two countries to work together, connect, and benefit from one another. There are many EU agreements currently in force that make this process of co-opera- tion much easier. In the case of a Brexit, Britain would have to renegotiate these agreements with the EU as a whole or with individual countries. This could be particularly tough for the Brits who want to live, work, use health ser- vices, study, or do business in Malta, and vice versa. But a Brexit vote would also have a con- siderable impact on trade and the Maltese economy. Economist Gordon Cordina told MaltaTo- day that he expected a Brexit vote to have a negative impact on the UK and its trading partners, including Malta. "I consider the referendum to effectively ask whether voters in the UK are ready to pay an economic cost to attain potentially increased political sovereignty on a number of issues including immigration," he said. "Economic implications are bound to ex- tend beyond the UK through various chan- nels, some directly economic and others more political." Being a member of the EU, he said, Malta would have to adhere to any agreements the EU makes with the UK following a British exit. Unless, that is, the UK decided to negotiate separate trade agreements with countries in- dividually rather than as a bloc – a prospect that appears to be highly unlikely. Or unless some obscure Commonwealth treaty was brought back to life to favour those countries with the closest links to the UK. Cordina said that Maltese exports to the UK could suffer, particularly if the UK en- tered a prolonged recession with a sharp weakening of the sterling (GBP). "But then, we may become competitive in attracting business which could leave Lon- don in the financial services sector, and at- tract short-haul tourism which would be discouraged from longer-haul destinations," he said. As to the effects on Malta's economy, Cor- dina said he could foresee tourism and man- ufacturing suffering as a result of a Brexit vote, at least in the short term. "But, overall, I expect effects to be miti- gated, just like the Maltese economy proved resilient to the worst of the global crises of 2008 and 2009, which had hit the UK in no small manner," he said. "In the long run, however, Malta would be negatively affected, along with other EU Member States, from a diminished European Union." Member states of the EU benefit from a single market of 400 million-plus consum- ers, whereas imports from outside the EU are treated differently. Within the EU single market, most goods are in free circulation, can be imported with minimal customs control and do not carry an import duty or VAT on import. But if the UK votes to leave the EU, once the separation from the bloc is finalised, the UK would also cease to form part of the sin- gle market. As is the case now with products imported from outside the EU, any imports from the UK to Malta would be subject to import duty and import VAT (plus VAT on the import duty). UK imports would also need to be de- clared at customs. Maltese companies and traders that cur- rently do business with the UK, importing or exporting goods from or to the UK, are avidly awaiting the outcome of the UK vote. One sector that could be seriously affected in the case of a Brexit vote is the importation of used vehicles from the UK. Unless the status quo between the UK and EU – with regard to import and export tariffs – is maintained even if the UK leaves the EU, prices of used cars imported from the UK could rise precipitously. Keith Grima of Ventur Auto Imports, a used car dealer, said that a Brexit vote would be detrimental for the business. "At Ventur, we import on average 15 cars per week from the UK," he said, "and the in- troduction of a new tariff, like an excise duty, on UK imports could see prices of second- hand cars rise by anywhere between 15% and 20%" Ciapella Motors specialises in the importa- tion of luxury used cars. "We are widely known as the dealer of choice for used Land Rover vehicles," said Richard Bezzina. "The introduction of a new duty on UK car imports would be very nega- tive for us." He said that many people were already choosing to buy new when choosing a pre- mium brand vehicle. "And new tariffs could see prices of luxury car imports from the UK rise by up to 50%," Bezzina warned. "Ultimately, I hope that the UK referendum result will be not to leave the EU." William Shaw of the Association of Car Im- porters Malta (ACIM), which represents the importers of new cars, said he did not fore- see any major price changes in new vehicle prices, even if the UK voted to leave the EU. Sunseeker is one of the most recognised brands in the recreational yachting industry. And it's British. So how would sales of Sun- seeker boats in Malta be affected by a Brexit vote? Cassidy Woods, Sunseeker Sales Director for Malta, Morocoo and Tunisia, said boat pricing would not be affected since they were in Sterling already. "And there will be no taxes/levies as Malta is a member of the Commonwealth," she said. "That is my understanding." Peter Borg of Bortex Fine Tailoring told MaltaToday it was hard to predict what ef- fects a Brexit vote would have on the Mal- tese economy, since it was not yet quite clear what kind of trade arrangements would re- place the ones currently in place between the UK and the EU. "Presumably the free trade arrangements would stay in place although of course we cannot be sure of this," he said. "If new tariffs are introduced it would defi- nitely have an impact on our exports to Brit- ain which is currently our largest market. "We also have a retail operation in Britain which might be affected too if any of the cur- rent trading arrangements change." Most of Bortex's trading with Britain in- volves export of ready-to-wear tailoring and other garments. "And in the event of tariffs being intro- duced, one would presume that the same rates would apply to both and in both direc- tions," Borg said. At present garments imported from outside the EU by any EU country attract an import duty of anywhere between eight and 12%. "I hope that Britain votes to stay in the EU, and not only from a commercial perspec- tive," Borg said. "But, of course, one must ultimately respect the will of the British peo- ple." A spokesperson for Baxter Malta, a leading hospital products and renal therapies equip- ment manufacturer, said the company had decided it would not issue any statements on the UK referendum. Malta Freeport would not comment either. Boris Johnson and David Cameron: the final countdown