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Fears of trade chaos as Brexit deal rejected by UK parliament

January 16, 2019
By Alana House

British MPs have rejected Theresa May’s Brexit plan just 10 weeks before the country is due to leave the EU on March 29.

Prime Minister Teresa May said: “A vote against this deal is a vote for nothing more than uncertainty, division and the very real risk of No Deal or no Brexit at all,” she said.

Many questions hang in the air: Will the country leave the EU on March 29? On what terms? What will the consequences be? Will May or her government survive?

The rejected deal allowed for a transition period until December 2020 to ensure there is a period of stability immediately after Brexit day. This would have allowed the UK and EU to agree on a trade deal and decide the details of their future relationship, which also includes movement between the two and security issues.

It included a controversial backstop measure that will come into play if a new partnership is not signed by December 2020. It would lock the UK into a customs union with the EU allowing frictionless trade between the UK and EU, but preventing the UK from striking new trade deals of its own.

The PM has warned that the only alternatives to her agreement are a damaging “no-deal” exit from the EU or the overturning of Britain’s departure from the EU, despite it being what British voters decided in 2016.

Jean-Claude Juncker, the president of the European Commission, has called for Britain to decide quickly how it will avoid a “no deal Brexit”.

“I take note with regret of the outcome of the vote in the House of Commons this evening,” he tweeted. “I urge the UK to clarify its intentions as soon as possible. Time is almost up.”
Juncker said the EU will continue with plans to ratify the agreement they signed with May in November last year.

“On the EU side, the process of ratification of the Withdrawal Agreement continues,” he said.

“The Withdrawal Agreement is a fair compromise and the best possible deal. It reduces the damage caused by Brexit for citizens and businesses across Europe. It is the only way to ensure an orderly withdrawal of the United Kingdom from the European Union.

“The risk of a disorderly withdrawal of the United Kingdom has increased with this evening’s vote. While we do not want this to happen, the European Commission will continue its contingency work to help ensure the EU is fully prepared.”

What it means to Aussie winemakers

Casella Family Brands is stockpiling supplies in the UK and Europe as it braces for Brexit’s impact on Australian wine exporters.

The Australian Financial Review predicts “a no-deal Brexit, which looks an increasing possibility as British Prime Minister Theresa May struggles to get her EU withdrawal deal through parliament, could create a costly headache for Australian winemakers”.

Among the possible outcomes are a falling pound, significant delays at ports due to new customs procedures and a shortage of trucks as a result of restrictive new licensing conditions.

“We are raising our stock levels here in the UK and with our European distributors to cover any short-term challenges,” Simon Lawson, European general manager for Australian winemaker Casella Family Brands, told the AFR.

Complicating the situation is that Britain is the hub for Australia’s wine exports to Europe, with 80% of the 240 million litres Australia sends to Britain each year being shipped in bulk. It’s bottled at British plants, with 25% then re-exported to countries such as Norway, the Ukraine and Russia in bottled form.

Winemakers may need to decide whether to move their bottling operations to Europe or make the costly decision to bottle in Australia and then export it.

“For the longer term we have the option to supply Australian bottled [yellow tail] into Europe should we have issues with exporting bottled wine from the UK,” Lawson said.

Simon Stannard, European and international affairs director at Britain’s Wine and Spirit Trade Association (WSTA), told a parliamentary committee in London last week: “Business are looking very seriously at their business model that currently has the UK as a hub for their bottling operations, and to see what it’s going to be like post-Brexit, and whether or not actually they may be forced to move their operations from the UK.”

Stannard said Brexit could also mean winemakers face different standards and regulations in Britain and the EU.

There are hopes the Australia-EU Wine Agreement will be ‘rolled over’ so that it covers post-Brexit Britain.

“Without rolling over that agreement, some of the wine exports to the Britain would have to be re-labelled … and some of the wine-making practices that the agreement provides for will no longer be provided for,” he explained.

UK distributors stockpiling wine

WSTA has been advising members for over a year that they should increase their stock by 20% as a starting point in case of a no deal Brexit.

UK wine merchant The Wine Society has brought forward an extra 60,000 cases of wines to gives the society “extra breathing room” and to act as a buffer before and after the March 29 Brexit deadline.

Meanwhile specialist wine retailer Majestic has stockpiled around £5 – £8m worth of product in the run up to Brexit as it plans for “tough times” in the UK.

Direct Wines is bringing in an additional two million bottles on their usual stock, while Bibendum has developed a “robust Brexit plan” which will see it ordering “significant” extra wine to have ready in stock.

WSTA has urged the UK Government to temporarily suspend tariffs on wine bottles imported into the country in the case of a no-deal Brexit, following claims that leaving the EU without a deal would increase wine prices to an all-time high.

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