Brexit and the International Supply Chain: The TTIP of the Iceberg

July 19, 2016 by FreightCenter Team
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The TTIP offers big opportunities for small and medium-sized businesses whose supply chains reach across the Atlantic, but Brexit threatens the success of the trade partnership.
You’ve probably already heard of the major effects Brexit has had on Britain: political unrest, social divide and a severe drop in the value of their currency (the pound). While its effects on the U.S. are slightly less dramatic, Britain’s exit from the European Union (EU) is just the tip of the iceberg in a much bigger supply chain matter: the Trans-Atlantic Trade and Investment Partnership (TTIP).

What is the TTIP? The TTIP is a companion agreement to the TPP currently being negotiated between the U.S. and the EU with the goal to remove, or at least reduce, barriers to commerce.

What’s the big deal? If passed, it will create the largest regional free-trade agreement in history covering close to half of the world GDP.

Why should businesses care? This is the first trade deal between the two unions that will answer challenges for the small and medium-sized business whose supply chains include international shipping to a European nation. Those challenges include the regulatory differences and contradictory registration requirements between the U.S. and EU.

So, why is Brexit a threat to the TTIP? There are two main reasons:

1. The UK’s advocacy for TTIP no longer stands.

  • The EU was the UK’s largest trading partner.
  • The EU’s treaties, regulations, and directives dealing with trade, environmental regulation, and international trade sanctions were highly influenced by the UK.
  • The UK is a strong advocate of TTIP, but with their leaving of the EU, their advocacy no longer holds meaning.

2. Time will be the death of the TTIP.

  • President Obama was a strong advocate of the TTIP, but neither of the presidential nominees are fans of the agreement.
  • With Britain out of the picture and increasing skepticism from French and German officials, it’s unlikely that a deal will be struck before President Obama leaves office in January.
  • The TTIP cannot move forward until the EU and UK clears up their commercial relationships – estimated to take up to two years.

TTIP aside, Brexit will complicate shipping into the EU regardless. Global supply chains will have to rebuild their distribution channels to match new trade maps and regulations. These complexities are already taking their toll on the US transportation and logistics industry. XPO Logistics who receives 12% of its revenue from the UK experienced a 14.9% drop in shares, and supply chain management provider, C.H. Robinson is reconsidering European expansion and acquisitions.

What other complications do you see arising in the wake of Brexit? Are you rooting for TTIP’s success or failure? Share your thoughts!

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